[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Notices]
[Pages 9281-9287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3610]


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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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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\
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    \3\ A 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.
    \4\ The 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).
    \5\ The 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 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 Post-Effective 
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'').

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[[Page 9282]]

    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 broker-dealer 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 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. 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 broker-dealer, or (b) any new adviser or sub-adviser becomes 
affiliated with a broker-dealer, 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.
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    \6\ An 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 non-public 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.
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    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 
Inflation-Linked 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 inflation-linked 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\
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    \7\ The 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 man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \8\ As 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.
    \9\ Each 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.
    \10\ The 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 government-sponsored 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.
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    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

[[Page 9283]]

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 inflation-linked bonds issued by governments of 
countries with cumulative inflation-linked 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\
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    \11\ According 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.
    \12\ The 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.
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    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.
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    \13\ The 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.
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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\
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    \14\ The 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.
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    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.
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    \15\ The 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).
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    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\
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    \16\ See note 29, infra.
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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\
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    \17\ See 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).
    \18\ The Fund's policy with respect to the concentration of 
investments in a particular industry is disclosed in the Trust's 
Registration Statement.
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    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\
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    \19\ A ``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).
    \20\ The 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 its investment 
objective. The Fund's portfolio will hold issues of at least 13 non-
affiliated issuers.

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[[Page 9284]]

    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\
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    \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 short-term capital gains 
in excess of any net long-term capital losses) and (ii) 90% of its 
tax exempt interest, net of expenses allocable thereto.
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    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.
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    \22\ 17 CFR 240.10A-3.
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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.
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    \23\ The 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.
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    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.
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    \24\ The 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.
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    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 mid-point 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\
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    \25\ The 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.
    \26\ Under 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.
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    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

[[Page 9285]]

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.
---------------------------------------------------------------------------

    \27\ Currently, 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \29\ For 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.
---------------------------------------------------------------------------

    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

[[Page 9286]]

open market and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

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

    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 
inflation-linked 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 non-public 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 actively-managed 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2f5d5a434a024c4042424a415b5c6f5c4a4c01484059"><span class="__cf_email__" data-cfemail="4a383f262f67292527272f243e390a392f29642d253c">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2012-09 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.


[[Page 9287]]


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\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3610 Filed 2-15-12; 8:45 am]
BILLING CODE 8011-01-P


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