Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 9281 

12For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

13 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as 

an open-end investment company or similar entity 

that invests in a portfolio of securities selected by 

its investment adviser consistent with its 

investment objectives and policies. In contrast, an 

open-end investment company that issues 

Investment Company Units, listed and traded on 

the Exchange under NYSE Arca Equities Rule 

5.2(j)(3), seeks to provide investment results that 

correspond generally to the price and yield 

performance of a specific foreign or domestic stock 

index, fixed income securities index or combination 

thereof. 

4The Commission has previously approved the 

listing and trading on the Exchange of other actively 

managed funds under Rule 8.600. See, e.g., 

Securities Exchange Act Release Nos. 57801 (May 

8, 2008), 73 FR 27878 (May 14, 2008) (SR– 

NYSEArca–2008–31) (order approving Exchange 

listing and trading of twelve actively-managed 

funds of the WisdomTree Trust); 60460 (August 7, 

2009), 74 FR 41468 (August 17, 2009) (SR– 

NYSEArca–2009–55) (order approving Exchange 

listing and trading of AdvisorShares Dent Tactical 

ETF); 60981 (November 10, 2009), 74 FR 59594 

(November 18, 2009) (SR–NYSEArca–2009–79) 

(order approving Exchange listing and trading of 

five fixed income funds of the PIMCO ETF Trust); 

61365 (January 15, 2010), 75 FR 4124 (January 26, 

2010) (SR–NYSEArca–2009–114) (order approving 

Exchange listing and trading of Grail McDonnell 

Fixed Income ETFs). 

5The Trust is registered under the 1940 Act. On 

February 14, 2011, the Trust filed with the 

Commission Post-Effective Amendment No. 25 

under the Securities Act of 1933 (15 U.S.C. 77a) 

(‘‘Securities Act’’) and Amendment No. 27 under 

Continued 

designates the proposed rule change to 

be operative upon filing with the 

Commission.12

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–BATS–2012–009 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BATS–2012–009. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BATS– 

2012–009 and should be submitted on 

or before March 8, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3609 Filed 2–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66381; File No. SR– 

NYSEArca–2012–09] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to the Listing 

and Trading of the PIMCO Global 

Advantage Inflation-Linked Bond 

Strategy Fund Under NYSE Arca 

Equities Rule 8.600 

February 10, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that, 

on January 27, 2012, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade the following under NYSE Arca 

Equities Rule 8.600 (‘‘Managed Fund 

Shares’’): PIMCO Global Advantage 

Inflation-Linked Bond Strategy Fund. 

The text of the proposed rule change is 

available at the Exchange, the 

Commission’s Public Reference Room, 

and www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the following Managed Fund 

Shares 3 (‘‘Shares’’) under NYSE Arca 

Equities Rule 8.600: PIMCO Global 

Advantage Inflation-Linked Bond 

Strategy Fund (‘‘Fund’’).4 The Shares 

will be offered by PIMCO ETF Trust 

(‘‘Trust’’), a statutory trust organized 

under the laws of the State of Delaware 

and registered with the Commission as 

an open-end management investment 

company.5


srobinson on DSK4SPTVN1PROD with NOTICES
9282 Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 

the 1940 Act to the Trust’s registration statement on 

Form N–1A relating to the Fund. On October 28, 

2011, the Trust filed with the Commission PostEffective Amendment No. 43 under the Securities 

Act and Amendment No. 45 under the 1940 Act to 

the Trust’s registration statement on Form N–1A 

relating to the Fund (File Nos. 333–155395 and 

811–22250) (‘‘Registration Statement’’). The 

description of the operation of the Trust and the 

Fund herein is based, in part, on the Registration 

Statement. In addition, the Commission has issued 

an order granting certain exemptive relief to the 

Trust under the 1940 Act. See Investment Company 

Act Release No. 28993 (November 10, 2009) (File 

No. 812–13571) (‘‘Exemptive Order’’). 

6An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940 (‘‘Advisers Act’’). As a result, 

the Adviser and its related personnel are subject to 

the provisions of Rule 204A–1 under the Advisers 

Act relating to codes of ethics. This Rule requires 

investment advisers to adopt a code of ethics that 

reflects the fiduciary nature of the relationship to 

clients as well as compliance with other applicable 

securities laws. Accordingly, procedures designed 

to prevent the communication and misuse of nonpublic information by an investment adviser must 

be consistent with Rule 204A–1 under the Advisers 

Act. In addition, Rule 206(4)–7 under the Advisers 

Act makes it unlawful for an investment adviser to 

provide investment advice to clients unless such 

investment adviser has (i) adopted and 

implemented written policies and procedures 

reasonably designed to prevent violation, by the 

investment adviser and its supervised persons, of 

the Advisers Act and the Commission rules adopted 

thereunder; (ii) implemented, at a minimum, an 

annual review regarding the adequacy of the 

policies and procedures established pursuant to 

subparagraph (i) above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

7The term ‘‘under normal circumstances’’ 

includes, but is not limited to, the absence of 

extreme volatility or trading halts in the fixed 

income markets or the financial markets generally; 

operational issues causing dissemination of 

inaccurate market information; or force majeure 

type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption or any similar 

intervening circumstance. 

8As disclosed in the Trust’s Registration 

Statement, PIMCO generally considers an 

instrument to be economically tied to a non-U.S. 

country if the issuer is a foreign government (or any 

political subdivision, agency, authority or 

instrumentality of such government), or if the issuer 

is organized under the laws of a non-U.S. country. 

In the case of certain money market instruments, 

such instruments will be considered economically 

tied to a non-U.S. country if either the issuer or the 

guarantor of such money market instrument is 

organized under the laws of a non-U.S. country. 

9Each country’s approximate weighting within 

the global inflation-linked bond market, as reflected 

by the approximate weighting of the Barclays 

Capital Universal Government Inflation-Linked 

Bond Index (the Fund’s primary benchmark), as of 

January 31, 2011, is as follows: U.S. 32%, U.K. 

19%, France 11%, Brazil 10%, Italy 7%, Canada 

2%, Germany 3%, Japan 3%, Mexico 2%, Sweden 

2%, Turkey 2%, Argentina 1%, Australia 1%, 

Greece 1%, South Africa 1%, Chile <1%, Poland 

<1%, Colombia <1% and South Korea <1%. Each 

country’s approximate value of outstanding 

inflation-linked bonds also as of January 31, 2011, 

is as follows (in $ billions): U.S. $642.7, U.K. 

$392.2, France $222.0, Brazil $209.6, Italy $143.2, 

Canada $49.9, Germany $60.9, Japan $57.0, Mexico 

$45.7, Sweden $39.1, Turkey $45.9, Argentina 

$20.0, Australia $17.7, Greece $11.8, South Africa 

$26.4, Chile $8.2, Poland $5.5, Colombia $2.7 and 

South Korea $3.4. 

10The term ‘‘Fixed Income Instruments’’ 

includes: securities issued or guaranteed by the U.S. 

Government, its agencies or government-sponsored 

enterprises (‘‘U.S. Government Securities’’); 

corporate debt securities of U.S. and non-U.S. 

issuers, including convertible securities and 

corporate commercial paper; mortgage-backed and 

other asset-backed securities; inflation-indexed 

bonds issued both by governments and 

corporations; structured notes, including hybrid or 

‘‘indexed’’ securities and event-linked bonds; bank 

capital and trust preferred securities; loan 

participations and assignments; delayed funding 

loans and revolving credit facilities; bank 

certificates of deposit, fixed time deposits and 

bankers’ acceptances; repurchase agreements on 

Fixed Income Instruments and reverse repurchase 

agreements on Fixed Income Instruments; debt 

securities issued by states or local governments and 

their agencies, authorities and other governmentsponsored enterprises; obligations of non-U.S. 

governments or their subdivisions, agencies and 

government-sponsored enterprises; and obligations 

of international agencies or supranational entities. 

Securities issued by U.S. Government agencies or 

government-sponsored enterprises may not be 

guaranteed by the U.S. Treasury. 

The investment manager to the Fund 

is Pacific Investment Management 

Company LLC (‘‘PIMCO’’ or ‘‘Adviser’’). 

PIMCO Investments LLC serves as the 

distributor for the Fund (‘‘Distributor’’). 

State Street Bank & Trust Co. serves as 

the custodian and transfer agent for the 

Fund (‘‘Custodian’’ or ‘‘Transfer 

Agent’’). 

Commentary .06 to Rule 8.600 

provides that, if the investment adviser 

to the investment company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

shall erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such investment 

company portfolio.6 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

The Adviser is affiliated with a brokerdealer and has implemented a ‘‘fire 

wall’’ with respect to such broker-dealer 

regarding access to information 

concerning the composition and/or 

changes to the Fund’s portfolio. If 

PIMCO elects to hire a sub-adviser for 

the Fund that is also affiliated with a 

broker-dealer, such sub-adviser will 

implement a fire wall with respect to 

such broker-dealer regarding access to 

information concerning the composition 

and/or changes to the portfolio. In the 

event (a) the Adviser or any sub-adviser 

becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser becomes affiliated with a brokerdealer, it will implement a fire wall 

with respect to such broker-dealer 

regarding access to information 

concerning the composition and/or 

changes to the portfolio, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding such portfolio. 

According to the Registration 

Statement, the Fund seeks total return 

which exceeds that of its benchmark 

indexes, consistent with prudent 

investment management. The Fund’s 

primary benchmark index is the 

Barclays Capital Universal Government 

Inflation-Linked Bond Index. The 

Fund’s secondary benchmark index is 

the PIMCO Global Advantage InflationLinked Bond Index. 

The Fund seeks to achieve its 

investment objective by investing under 

normal circumstances 7 at least 80% of 

its assets in a portfolio of inflationlinked bonds that is economically tied 

to at least three developed and/or 

emerging market countries (one of 

which may be the United States). The 

Fund’s holdings may include bonds 

issued by issuers in both developed 

and/or emerging market countries and 

the Fund is expected to hold bonds of 

issuers that are economically tied 8 to 

many of the countries represented in the 

Fund’s primary benchmark index.9

Assets not invested in inflation-linked 

bonds may be invested in other types of 

Fixed Income Instruments.10

According to the Registration 

Statement, inflation-linked bonds are 

government-issued fixed income 

securities that are structured to provide 

protection against inflation. The value 

of the bond’s principal or the interest 

income paid on the bond is adjusted to 

track changes in an official inflation 

measure. The effective duration of the 

Fund’s portfolio normally varies within 

two years (plus or minus) of the 

effective duration of the PIMCO Global 

Advantage Inflation-Linked Bond Index 

which, as of September 30, 2011, as 

converted, was 4.53 years. Duration is a 

measure used to determine the 

sensitivity of a security’s price to 

changes in interest rates. The longer a 

security’s duration, the more sensitive it 

will be to changes in interest rates. 

Effective duration takes into account 

that, for certain bonds, expected cash 

flows will fluctuate as interest rates 

change and will be defined in nominal 

yield terms, which is market convention 

for most bond investors and managers. 

Because market convention for bonds is 

to use nominal yields to measure 

duration, duration for inflation-linked 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 9283 

11According to the Registration Statement, the 

value of inflation-linked bonds is expected to 

change in response to changes in real interest rates. 

Real interest rates are tied to the relationship 

between nominal interest rates and the rate of 

inflation. If nominal interest rates increase at a 

faster rate than inflation, real interest rates may rise, 

leading to a decrease in value of inflation-linked 

bonds. 

12The value of the global inflation-linked bond 

market is calculated based on the total outstanding 

value of issues included in the Barclays Capital 

Universal Government Inflation-Linked Bond Index 

that are not expiring in less than one year. 

13The Adviser represents that, in selecting 

securities for the Fund, PIMCO will develop an 

outlook for interest rates, currency exchange rates 

and the economy, analyze credit and call risks, and 

use other security selection techniques. The 

proportion of the Fund’s assets committed to 

investment in securities with particular 

characteristics (such as quality, sector, interest rate 

or maturity) will vary based on PIMCO’s outlook for 

the U.S. economy and the economies of other 

countries in the world, the financial markets and 

other factors. Sophisticated proprietary software 

will assist in evaluating sectors, pricing and rating 

specific securities. Once investment opportunities 

are identified, PIMCO will shift assets among 

sectors and securities depending upon changes in 

relative valuations and credit spreads in a manner 

consistent with the Fund’s objective and strategies. 

To the extent the Fund invests in unrated securities 

that PIMCO determines to be of comparable quality 

to rated securities that the Fund may purchase, the 

Fund’s ability to achieve its objective may depend 

more heavily on PIMCO’s creditworthiness analysis 

than if the Fund invested exclusively in rated 

securities. 

14The Fund may engage in these transactions 

primarily to: (1) Protect against uncertainty in the 

level of future foreign exchange rates in the 

purchase and sale of securities; or (2) lower 

currency deviations relative to the Fund’s 

benchmark indexes. 

15The Commission has stated that long-standing 

Commission guidelines have required open-end 

funds to hold no more than 15% of their net assets 

in illiquid securities and other illiquid assets. See 

Investment Company Act Release No. 28193 (March 

11, 2008), 73 FR 14617 (March 18, 2008), footnote 

34. See also Investment Company Act Release No. 

5847 (October 21, 1969), 35 FR 19989 (December 

31, 1970) (Statement Regarding ‘‘Restricted 

Securities’’); Investment Company Act Release No. 

18612 (March 12, 1992), 57 FR 9828 (March 20, 

1992) (Revisions of Guidelines to Form N–1A). A 

fund’s portfolio security is illiquid if it cannot be 

disposed of in the ordinary course of business 

within seven days at approximately the value 

ascribed to it by the ETF. See Investment Company 

Act Release No. 14983 (March 12, 1986), 51 FR 

9773 (March 21, 1986) (adopting amendments to 

Rule 2a–7 under the 1940 Act); Investment 

Company Act Release No. 17452 (April 23, 1990), 

55 FR 17933 (April 30, 1990) (adopting Rule 144A 

under the Securities Act). 

16See note 29, infra. 

17See Form N–1A, Item 9. The Commission has 

taken the position that a fund is concentrated if it 

invests more than 25% of the value of its total 

assets in any one industry. See, e.g., Investment 

Company Act Release No. 9011 (October 30, 1975), 

40 FR 54241 (November 21, 1975). 

18The Fund’s policy with respect to the 

concentration of investments in a particular 

industry is disclosed in the Trust’s Registration 

Statement. 

19A ‘‘non-diversified company’’, as defined in 

Section 5(b)(2) of the 1940 Act, means any 

management company other than a diversified 

company (as defined in Section 5(b)(1) of the 1940 

Act). 

20The minimum number of inflation-linked 

bonds and other Fixed Income Instruments and 

issuers in which the Fund may invest at any one 

time depends in part upon the number of securities 

or issuers comprising the Fund’s benchmark 

indexes. In seeking to achieve its investment 

objective, the Fund’s portfolio will consist of at 

least twenty-five (25) inflation-linked bonds and 

other Fixed Income Instruments on any given day, 

but the Fund may regularly invest in fifty (50) or 

more inflation-linked bonds and other Fixed 

Income Instruments at a time in seeking to achieve 

Continued 

bonds, which are based on real yields, 

are converted to nominal durations 

through a conversion factor. The 

resulting nominal duration typically can 

range from 20% to 90% of the 

respective real duration. All security 

holdings will be measured in effective 

(nominal) duration terms. Similarly, the 

effective duration of the PIMCO Global 

Advantage Inflation-Linked Bond Index 

will be calculated using the same 

conversion factors. 

The Fund will invest under normal 

circumstances at least 80% of its assets 

in inflation-linked bonds issued by U.S. 

or foreign governments (or any political 

subdivision, agency, authority or 

instrumentality of such government).11

The secondary benchmark includes a 

liquidity screen to remove inflationlinked bonds issued by governments of 

countries with cumulative inflationlinked bond issuances below $7 billion 

local currency equivalent, in addition to 

liquidity screens at the issue level. The 

global inflation-linked bond market 

exceeded $2.25 trillion as of December 

31, 2011.12

The Fund primarily will invest in 

debt securities rated Baa or higher by 

Moody’s Investors Service, Inc., or 

equivalently rated by Standard & Poor’s 

Ratings Services or Fitch, Inc., or, if 

unrated, determined by PIMCO to be of 

comparable quality.13 The Fund may 

obtain foreign currency exposure (from 

non-U.S. dollar denominated debt 

securities or currencies) without 

limitation. The Fund may purchase and 

sell debt securities on a when-issued, 

delayed delivery or forward 

commitment basis. The Fund may, 

without limitation, seek to obtain 

market exposure to the securities in 

which it primarily invests by entering 

into a series of purchase and sale 

contracts or by using other investment 

techniques (such as buy backs or dollar 

rolls). The Fund may invest, without 

limitation, in debt securities and 

instruments of foreign government 

issuers, including debt securities and 

instruments economically tied to 

emerging market countries. 

Other Portfolio Holdings 

The Fund’s portfolio holdings will be 

disclosed on the Trust’s Web site 

(www.pimcoetfs.com) daily after the 

close of trading on the Exchange and 

prior to the opening of trading on the 

Exchange the following day. 

As disclosed in the Trust’s 

Registration Statement, if PIMCO 

believes that economic or market 

conditions are unfavorable to investors, 

PIMCO may temporarily invest up to 

100% of the Fund’s assets in certain 

defensive strategies, including holding a 

substantial portion of the Fund’s assets 

in cash, cash equivalents or other highly 

rated short-term securities, including 

securities issued or guaranteed by the 

U.S. government, its agencies or 

instrumentalities and affiliated money 

market and/or short-term bond funds. 

The Fund may invest in, to the extent 

permitted by Section 12(d)(1) of the 

1940 Act and rules thereunder, other 

affiliated and unaffiliated funds, such as 

open-end or closed-end management 

investment companies, including other 

exchange traded funds. 

The Fund may enter into foreign 

currency transactions (such as currency 

forwards).14

The Fund may hold in the aggregate 

up to 15% of its net assets in: (1) Illiquid 

securities,15 which include delayed 

funding loans, revolving credit facilities, 

fixed- and floating-rate loans and loan 

participations and assignments, and (2) 

Rule 144A securities. Certain illiquid 

securities may require pricing at fair 

value as determined in good faith under 

the supervision of the Fund’s Board of 

Trustees. The term ‘‘illiquid securities’’ 

for this purpose means securities that 

cannot be disposed of within seven days 

in the ordinary course of business at 

approximately the amount at which the 

Fund has valued the securities. 

With respect to its equity securities 

investments, the Fund will invest only 

in U.S.-registered equity securities and 

non-U.S.-registered equity securities 

that trade in markets that are members 

of the Intermarket Surveillance Group 

(‘‘ISG’’) or are parties to a 

comprehensive surveillance sharing 

agreement with the Exchange.16

Investment Limitations 

The Fund is subject to the following 

investment limitations: 

The Fund may not concentrate its 

investments in a particular industry, as 

that term is used in the 1940 Act,17 and 

as interpreted, modified, or otherwise 

permitted by regulatory authority 

having jurisdiction from time to time.18

The Fund will be non-diversified,19

which means that it may invest its 

assets in a smaller number of issuers 

than a diversified fund.20


srobinson on DSK4SPTVN1PROD with NOTICES
9284 Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 

its investment objective. The Fund’s portfolio will 

hold issues of at least 13 non-affiliated issuers. 

21 26 U.S.C. 851. To qualify as a regulated 

investment company, the Fund generally must, 

among other things, (a) derive in each taxable year 

at least 90% of its gross income from dividends, 

interest, payments with respect to securities loans, 

and gains from the sale or other disposition of 

stock, securities or foreign currencies, net income 

from certain ‘‘qualified publicly traded 

partnerships,’’ or other income derived with respect 

to its business of investing in such stock, securities 

or currencies (‘‘Qualifying Income Test’’); (b) 

diversify its holdings so that, at the end of each 

quarter of the taxable year, (i) at least 50% of the 

market value of the Fund’s assets is represented by 

cash, U.S. Government securities, the securities of 

other regulated investment companies and other 

securities, with such other securities of any one 

issuer limited for the purposes of this calculation 

to an amount not greater than 5% of the value of 

the Fund’s total assets and 10% of the outstanding 

voting securities of such issuer, and (ii) not more 

than 25% of the value of its total assets is invested 

in the securities of any one issuer (other than U.S. 

Government securities or the securities of other 

regulated investment companies), the securities of 

certain controlled issuers in the same or similar 

trades or businesses, or the securities of one or more 

‘‘qualified publicly traded partnerships’’; and (c) 

distribute each taxable year the sum of (i) at least 

90% of its investment company taxable income 

(which includes dividends, interest and net shortterm capital gains in excess of any net long-term 

capital losses) and (ii) 90% of its tax exempt 

interest, net of expenses allocable thereto. 

22 17 CFR 240.10A–3. 

23The NAV of the Fund’s Shares generally will 

be calculated once daily Monday through Friday as 

of the close of regular trading on the New York 

Stock Exchange (‘‘NYSE’’), generally 4 p.m. Eastern 

time (‘‘E.T.’’) (‘‘NAV Calculation Time’’) on any 

business day. NAV per Share will be calculated by 

dividing the Fund’s net assets by the number of 

Fund Shares outstanding. For more information 

regarding the valuation of Fund investments in 

calculating the Fund’s NAV, see the Registration 

Statement. 

24The Deposit Securities and Cash Component or, 

alternatively, the Cash Deposit, constitute the 

‘‘Fund Deposit,’’ which represents the investment 

amount for a Creation Unit of the Fund. 

25The Bid/Ask Price of the Fund is determined 

using the midpoint of the highest bid and the 

lowest offer on the Exchange as of the time of 

calculation of the Fund’s NAV. The records relating 

to Bid/Ask Prices will be retained by the Fund and 

its service providers. 

26Under accounting procedures followed by the 

Fund, trades made on the prior business day (‘‘T’’) 

will be booked and reflected in NAV on the current 

business day (‘‘T+1’’). Accordingly, the Fund will 

be able to disclose at the beginning of the business 

day the portfolio that will form the basis for the 

NAV calculation at the end of the business day. 

The Fund intends to qualify annually 

and elect to be treated as a regulated 

investment company under Subchapter 

M of the Internal Revenue Code.21

Consistent with the Exemptive Order, 

the Fund will not invest in options 

contracts, futures contracts or swap 

agreements. 

The Fund’s investments will be 

consistent with the Fund’s investment 

objective and will not be used to 

enhance leverage. That is, while the 

Fund will be permitted to borrow as 

permitted under the 1940 Act, the 

Fund’s investments will not be used to 

seek performance that is the multiple or 

inverse multiple (i.e., 2Xs and 3Xs) of 

the Fund’s primary broad-based 

securities benchmark index (as defined 

in Form N–1A) (i.e., the Barclays Capital 

Universal Government Inflation-Linked 

Bond Index). 

The Shares will conform to the initial 

and continued listing criteria under 

NYSE Arca Equities Rule 8.600. The 

Exchange represents that, for initial 

and/or continued listing, the Fund will 

be in compliance with Rule 10A–3 

under the Exchange Act,22 as provided 

by NYSE Arca Equities Rule 5.3. A 

minimum of 100,000 Shares will be 

outstanding at the commencement of 

trading on the Exchange. The Exchange 

will obtain a representation from the 

issuer of the Shares that the net asset 

value (‘‘NAV’’) per Share will be 

calculated daily and that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Creations and Redemptions of Shares 

According to the Registration 

Statement, Shares of the Fund that trade 

in the secondary market will be 

‘‘created’’ at NAV 23 by Authorized 

Participants only in block-size Creation 

Units of 100,000 Shares or multiples 

thereof. The Fund will offer and issue 

Shares at their NAV per Share generally 

in exchange for a basket of debt 

securities held by the Fund (‘‘Deposit 

Securities’’) together with a deposit of a 

specified cash payment (‘‘Cash 

Component’’). Alternatively, the Fund 

may issue Creation Units in exchange 

for a specified all-cash payment (‘‘Cash 

Deposit’’). Similarly, Shares can be 

redeemed only in Creation Units, 

generally in-kind for a portfolio of debt 

securities held by the Fund and/or for 

a specified amount of cash. 

Except when aggregated in Creation 

Units, Shares will not be redeemable by 

the Fund. The prices at which creations 

and redemptions occur will be based on 

the next calculation of NAV after an 

order is received. Requirements as to the 

timing and form of orders are described 

in the Authorized Participant 

agreement. PIMCO will make available 

on each business day via the National 

Securities Clearing Corporation 

(‘‘NSCC’’) or other method of public 

dissemination, prior to the opening of 

business (subject to amendments) on the 

Exchange (currently 9:30 a.m. E.T.), the 

identity and the required amount of 

each Deposit Security and the amount of 

the Cash Component (or Cash Deposit) 

to be included in the current Fund 

Deposit 24 (based on information at the 

end of the previous business day). 

Creations and redemptions must be 

made by an Authorized Participant or 

through a firm that is either a 

participant in the Continuous Net 

Settlement System of the NSCC or a 

DTC participant, and in each case, must 

have executed an agreement with the 

Distributor and Transfer Agent with 

respect to creations and redemptions of 

Creation Unit aggregations. 

Additional information regarding the 

Trust and the Shares, including 

investment strategies, risks, creation and 

redemption procedures, fees, portfolio 

holdings, disclosure policies, 

distributions and taxes is included in 

the Registration Statement. All terms 

relating to the Fund that are referred to 

but not defined in this proposed rule 

change are defined in the Registration 

Statement. 

Availability of Information 

The Trust’s Web site 

(www.pimcoetfs.com), which will be 

publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for the Fund that may 

be downloaded. The Trust’s Web site 

will include additional quantitative 

information updated on a daily basis, 

including, for the Fund, (1) daily trading 

volume, the prior business day’s 

reported closing price, NAV and midpoint of the bid/ask spread at the time 

of calculation of such NAV (‘‘Bid/Ask 

Price’’),25 and a calculation of the 

premium and discount of the Bid/Ask 

Price against the NAV, and (2) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. On each business day, before 

commencement of trading in Shares in 

the Core Trading Session (9:30 a.m. E.T. 

to 4:00 p.m. E.T.) on the Exchange, the 

Fund will disclose on the Trust’s Web 

site the Disclosed Portfolio as defined in 

NYSE Arca Equities Rule 8.600(c)(2) 

that will form the basis for the Fund’s 

calculation of NAV at the end of the 

business day.26

On a daily basis, the Adviser will 

disclose for each portfolio security or 

other financial instrument of the Fund 

the following information: Ticker 

symbol (if applicable), name of security 

or financial instrument, number of 

shares or dollar value of financial 

instruments held in the portfolio, and 

percentage weighting of the security or 

financial instrument in the portfolio. 

The Web site information will be 

publicly available at no charge. In 

addition, price information for the debt 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 9285 

27Currently, it is the Exchange’s understanding 

that several major market data vendors display and/ 

or make widely available Portfolio Indicative 

Values published on CTA or other data feeds. 

28See NYSE Arca Equities Rule 7.12, 

Commentary .04. 

29For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Disclosed Portfolio for the Fund 

may trade on markets that are members of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 

30 15 U.S.C. 78f(b)(5). 

securities held by the Fund will be 

available through major market data 

vendors. 

In addition, a basket composition file, 

which will include the security names 

and share quantities, if applicable, 

required to be delivered in exchange for 

Fund Shares, together with estimates 

and actual cash components, will be 

publicly disseminated daily prior to the 

opening of the NYSE via the NSCC. The 

basket represents one Creation Unit of 

the Fund. The NAV of the Fund will 

normally be determined as of the close 

of the regular trading session on the 

NYSE (ordinarily 4 p.m. E.T.) on each 

business day. Authorized Participants 

may refer to the basket composition file 

for information regarding Fixed Income 

Instruments, inflation-linked bonds and 

any other instrument that may comprise 

the Fund’s basket on a given day. 

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), the Fund’s Shareholder 

Reports, and its Form N–CSR and Form 

N–SAR, filed twice a year. The Trust’s 

SAI and Shareholder Reports are 

available free upon request from the 

Trust, and those documents and the 

Form N–CSR and Form N–SAR may be 

viewed on-screen or downloaded from 

the Commission’s Web site at 

www.sec.gov. Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services. Information 

regarding the previous day’s closing 

price and trading volume information 

for the Shares will be published daily in 

the financial section of newspapers. 

Quotation and last sale information for 

the Shares will be available via the 

Consolidated Tape Association (‘‘CTA’’) 

high-speed line. In addition, the 

Portfolio Indicative Value, as defined in 

NYSE Arca Equities Rule 8.600(c)(3), 

will be widely disseminated by one or 

more major market data vendors at least 

every 15 seconds during the Core 

Trading Session.27 The dissemination of 

the Portfolio Indicative Value, together 

with the Disclosed Portfolio, will allow 

investors to determine the value of the 

underlying portfolio of the Fund on a 

daily basis and to provide a close 

estimate of that value throughout the 

trading day. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Fund.28 Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Equities Rule 

7.12 have been reached. Trading also 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. These may 

include: (1) The extent to which trading 

is not occurring in the securities and/or 

the financial instruments comprising 

the Disclosed Portfolio of the Fund; or 

(2) whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth circumstances under which Shares 

of the Fund may be halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4 a.m. 

to 8 p.m. E.T. in accordance with NYSE 

Arca Equities Rule 7.34 (Opening, Core, 

and Late Trading Sessions). The 

Exchange has appropriate rules to 

facilitate transactions in the Shares 

during all trading sessions. As provided 

in NYSE Arca Equities Rule 7.6, 

Commentary .03, the minimum price 

variation (‘‘MPV’’) for quoting and entry 

of orders in equity securities traded on 

the NYSE Arca Marketplace is $0.01, 

with the exception of securities that are 

priced less than $1.00 for which the 

MPV for order entry is $0.0001. 

Surveillance 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products (which 

include Managed Fund Shares) to 

monitor trading in the Shares. The 

Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

The Exchange’s current trading 

surveillance focuses on detecting 

securities trading outside their normal 

patterns. When such situations are 

detected, surveillance analysis follows 

and investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

The Exchange may obtain information 

via the ISG from other exchanges that 

are members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement.29

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit (‘‘ETP’’) Holders 

in an Information Bulletin (‘‘Bulletin’’) 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Bulletin will discuss 

the following: (1) The procedures for 

purchases and redemptions of Shares in 

Creation Unit aggregations (and that 

Shares are not individually redeemable); 

(2) NYSE Arca Equities Rule 9.2(a), 

which imposes a duty of due diligence 

on its ETP Holders to learn the essential 

facts relating to every customer prior to 

trading the Shares; (3) the risks involved 

in trading the Shares during the 

Opening and Late Trading Sessions 

when an updated Portfolio Indicative 

Value will not be calculated or publicly 

disseminated; (4) how information 

regarding the Portfolio Indicative Value 

is disseminated; (5) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (6) 

trading information. 

In addition, the Bulletin will 

reference that the Fund is subject to 

various fees and expenses described in 

the Registration Statement. The Bulletin 

will discuss any exemptive, no-action, 

and interpretive relief granted by the 

Commission from any rules under the 

Exchange Act. The Bulletin will also 

disclose that the NAV for the Shares 

will be calculated after 4:00 p.m. E.T. 

each trading day. 

2. Statutory Basis 

The basis under the Exchange Act for 

this proposed rule change is the 

requirement under Section 6(b)(5) 30

that an exchange have rules that are 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of a free and 


srobinson on DSK4SPTVN1PROD with NOTICES
9286 Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 

open market and, in general, to protect 

investors and the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Equities 

Rule 8.600. The Exchange has in place 

surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. The Exchange may obtain 

information via ISG from other 

exchanges that are members of ISG or 

with which the Exchange has entered 

into a comprehensive surveillance 

sharing agreement. According to the 

Registration Statement, the Fund will 

invest under normal circumstances at 

least 80% of its assets in inflationlinked bonds issued by U.S. or foreign 

governments, screened for minimum 

liquidity levels. The Fund primarily 

will invest in debt securities rated Baa 

or higher by Moody’s Investors Service, 

Inc., or equivalently rated by Standard 

& Poor’s Ratings Services or Fitch, Inc., 

or, if unrated, determined by PIMCO to 

be of comparable quality. The Adviser is 

affiliated with a broker-dealer and has 

implemented a ‘‘fire wall’’ with respect 

to such broker-dealer regarding access to 

information concerning the composition 

and/or changes to the Fund’s portfolio. 

In addition, the Fund will implement 

and maintain, or be subject to, 

procedures designed to prevent the use 

and dissemination of material nonpublic information regarding the Fund’s 

portfolio holdings. Consistent with the 

Exemptive Order, the Fund will not 

invest in options contracts, futures 

contracts or swap agreements. The 

Fund’s investments will be consistent 

with the Fund’s investment objective 

and will not be used to enhance 

leverage. That is, while the Fund will be 

permitted to borrow as permitted under 

the 1940 Act, the Fund’s investments 

will not be used to seek performance 

that is the multiple or inverse multiple 

(i.e., 2Xs and 3Xs) of the Fund’s primary 

broad-based securities benchmark index 

(as defined in Form N–1A) (i.e., the 

Barclays Capital Universal Government 

Inflation-Linked Bond Index). 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that the Exchange will 

obtain a representation from the issuer 

of the Shares that the NAV per Share 

will be calculated daily and that the 

NAV and the Disclosed Portfolio will be 

made available to all market 

participants at the same time. In 

addition, a large amount of information 

is publicly available regarding the Fund 

and the Shares, thereby promoting 

market transparency. The Fund’s 

portfolio holdings will be disclosed on 

the Trust’s Web site daily after the close 

of trading on the Exchange and prior to 

the opening of trading on the Exchange 

the following day. Moreover, the 

Portfolio Indicative Value will be 

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Exchange’s Core 

Trading Session. On each business day, 

before commencement of trading in 

Shares in the Core Trading Session on 

the Exchange, the Fund will disclose on 

the Trust’s Web site the Disclosed 

Portfolio that will form the basis for the 

Fund’s calculation of NAV at the end of 

the business day. Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services, and quotation and 

last sale information will be available 

via the CTA high-speed line. The Trust’s 

Web site will include a form of the 

prospectus for the Fund and additional 

data relating to NAV and other 

applicable quantitative information. 

Moreover, prior to the commencement 

of trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

of the special characteristics and risks 

associated with trading the Shares. 

Trading in Shares of the Fund will be 

halted if the circuit breaker parameters 

in NYSE Arca Equities Rule 7.12 have 

been reached or because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable, and trading in 

the Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth circumstances under which Shares 

of the Fund may be halted. In addition, 

as noted above, investors will have 

ready access to information regarding 

the Fund’s holdings, the Portfolio 

Indicative Value, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of activelymanaged exchange-traded product that 

will enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares and may obtain information via 

ISG from other exchanges that are 

members of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement. In addition, as noted above, 

investors will have ready access to 

information regarding the Fund’s 

holdings, the Portfolio Indicative Value, 

the Disclosed Portfolio, and quotation 

and last sale information for the Shares. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2012–09 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 32 / Thursday, February 16, 2012 / Notices 9287 

31 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 66043 

(December 23, 2011), 76 FR 82329 (‘‘Notice’’). 

4The UTP Pilot Program is scheduled to expire 

on the earlier of Commission approval to make such 

pilot permanent or July 31, 2012. See Securities 

Exchange Act Release No. 66040 (December 23, 

2011), 76 FR 82324 (December 30, 2011). 

5These obligations are also included within 

current NYSE Amex Equities Rule 504. 

6Under NYSE Amex Equities Rule 103B(II)(C), 

‘‘more active’’ securities are those with a 

consolidated average daily volume equal to or 

greater than one million shares per calendar month. 

7The Exchange proposed to make conforming 

changes to NYSE Amex Equities Rule 504(b)(1)(A), 

which contains a requirement similar to NYSE 

Amex Equities Rule 509(a)(1) requiring DMM Units 

to quote at the NBBO on average at least 10% of 

the trading day. 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

10 In approving the proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

11 15 U.S.C. 78l(f). 

All submissions should refer to File 

Number SR–NYSEArca–2012–09. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of the filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2012–09 and should be 

submitted on or before March 8, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3610 Filed 2–15–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66371; File No. SR– 

NYSEAmex–2011–101] 

Self-Regulatory Organizations; NYSE 

Amex LLC.; Order Granting Approval 

of Proposed Rule Change Amending 

NYSE Amex Equities Rules 504 and 

509 To Modify the Quoting 

Requirements Applicable to 

Designated Market Maker Units 

Registered in Nasdaq Stock Market 

Securities Traded on the Exchange 

Subject to the Unlisted Trading 

Privileges Pilot Program 

February 10, 2012. 

I. Introduction 

On December 15, 2011, NYSE Amex 

LLC (‘‘NYSE Amex’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to modify the quoting 

requirements applicable to Designated 

Market Maker (‘‘DMM’’) units registered 

in Nasdaq Stock Market securities 

traded on the Exchange pursuant to a 

grant of unlisted trading privileges 

(‘‘UTP’’). The proposed rule change was 

published for comment in the Federal 

Register on December 30, 2011.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

Certain securities listed on Nasdaq 

may be traded on NYSE Amex pursuant 

to a grant of unlisted trading privileges 

as part of a pilot program on the 

Exchange (‘‘UTP Pilot Program’’).4

NYSE Amex’s proposal seeks to modify 

the UTP Pilot Program’s obligations 

imposed on DMM units who quote in 

such securities. 

Currently, under NYSE Amex Equities 

Rule 509(a)(1), DMM units who are 

registered in securities subject to the 

UTP Pilot Program must maintain 

continuous two-sided quotes at the 

National Best Bid or Offer (‘‘NBBO’’) 

with reasonable size for each such 

security for at least 10% of the time 

during the regular business hours of the 

Exchange for each calendar month.5 The 

proposal would amend NYSE Amex 

Equities Rule 509(a)(1) to lower a DMM 

unit’s quoting obligations for ‘‘more 

active’’ 6 securities in the UTP Pilot 

Program from at least 10% of the time 

during the regular trading day to at least 

5% of the time during the regular 

trading day.7 The proposed quoting 

obligations would continue to apply on 

a security-by-security basis. The current 

quoting obligation for ‘‘less active’’ 

securities, i.e., those with a consolidated 

average daily volume of less than one 

million shares per calendar month, 

would remain unchanged at 10% of the 

time during the regular trading day. 

The Exchange also proposes to delete 

from NYSE Amex Equities Rule 

504(b)(1)(A) the text that references 

NYSE Amex Equities Rule 103B(II), 

which provides for security allocation 

eligibility. The Exchange represented 

that this reference is not necessary 

within Rule 504(b)(1)(A), and that, 

despite the proposed deletion, DMM 

units would remain subject to NYSE 

Amex Equities Rule 103B(II) with 

respect to security allocation eligibility. 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder that are applicable to a 

national securities exchange, and, in 

particular, with the requirements of 

Section 6(b) of the Act.8 In particular, 

the proposed change is consistent with 

Section 6(b)(5) of the Act,9 because it 

would promote just and equitable 

principles of trade, and, in general, 

protect investors and the public 

interest.10 The Commission also finds 

that the proposed rule change is 

consistent with Section 12(f) of the 

Act,11 because it furthers the goals of 

maintaining fair and orderly markets, 

and protecting investors and the public 


srobinson on DSK4SPTVN1PROD with NOTICES