[Federal Register Volume 77, Number 70 (Wednesday, April 11, 2012)]
[Notices]
[Pages 21827-21833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-8717]



[[Page 21827]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66753; File No. SR-NYSEArca-2012-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of the 
WisdomTree Brazil Bond Fund Under NYSE Arca Equities Rule 8.600

 April 6, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that, on March 23, 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, II, 
and III below, which Items have been substantially 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 shares (``Shares'') of the 
following fund of the WisdomTree Trust (``Trust'') under NYSE Arca 
Equities Rule 8.600 (``Managed Fund Shares''): WisdomTree Brazil Bond 
Fund (``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 Shares of the WisdomTree 
Brazil Bond Fund under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares on the Exchange.\3\ The Fund 
will be an actively managed exchange-traded fund.\4\ The Shares will be 
offered by the Trust, which was established as a Delaware statutory 
trust on December 15, 2005. The Trust is registered with the Commission 
as an 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 listing and trading 
on the Exchange of a number of 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); 58564 (September 17, 2008), 73 FR 
55194 (September 24, 2008) (SR-NYSEArca-2008-86) (order approving 
Exchange listing and trading of WisdomTree Dreyfus Emerging Currency 
Fund); 62604 (July 30, 2010), 75 FR 47323 (August 5, 2010) (SR-
NYSEArca-2010-49) (order approving listing and trading of WisdomTree 
Emerging Markets Local Debt Fund); 63919 (February 16, 2011), 76 FR 
10073 (February 23, 2011) (SR-NYSEArca-2010-116) (order approving 
listing and trading of WisdomTree Asia Local Debt Fund); 64643 (June 
10, 2011), 76 FR 35062 (June 15, 2011) (SR-NYSEArca-2011-21) (order 
approving listing and trading of WisdomTree Global Real Return 
Fund); 65458 (September 30, 2011), 76 FR 62112 (October 6, 2011) 
(SR-NYSEArca-2011-54) (order approving listing and trading of 
WisdomTree Dreyfus Australia and New Zealand Debt Fund); 66342 
(February 7, 2012), 77 FR 7623 (February 13, 2012) (SR-NYSEArca-
2011-82) (order approving listing and trading of WisdomTree Emerging 
Markets Inflation Protection Bond Fund); and 66489 (February 29, 
2012), 77 FR 13379 (March 6, 2012) (SR-NYSEArca-2012-004) (order 
approving listing and trading of WisdomTree Emerging Markets 
Corporate Bond Fund). The Exchange believes the proposed rule change 
raises no significant issues not previously addressed in those prior 
Commission orders.
    \5\ See registration statement on Form N-1A for the Trust under 
the Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act, 
dated October 8, 2010 (File Nos. 333-132380 and 811-21864) 
(``Registration Statement''). The descriptions of the Fund and the 
Shares contained herein are based, in part, on information in the 
Registration Statement.
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Description of the Shares and the Fund
    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser (``Adviser'') to the Fund.\6\ WisdomTree 
Asset Management is not affiliated with any broker-dealer. Western 
Asset Management Company serves as sub-adviser for the Fund (``Sub-
Adviser'').\7\ The Bank of New York Mellon is the administrator, 
custodian, and transfer agent for the Trust. ALPS Distributors, Inc. 
serves as the distributor for the Trust.\8\
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    \6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \7\ The Sub-Adviser will be responsible for day-to-day 
management of the Fund and, as such, typically will make all 
decisions with respect to portfolio holdings. The Adviser will have 
ongoing oversight responsibility.
    \8\ The Commission has issued an order granting certain 
exemptive relief (``Exemptive Order'') to the Trust under the 1940 
Act. See Investment Company Act Release No. 28171 (October 27, 2008) 
(File No. 812-13458). In compliance with Commentary .05 to NYSE Arca 
Equities Rule 8.600, which applies to Managed Fund Shares based on 
an international or global portfolio, the Trust's application for 
exemptive relief under the 1940 Act states that the Fund will comply 
with the federal securities laws in accepting securities for 
deposits and satisfying redemptions with redemption securities, 
including that the securities accepted for deposits and the 
securities used to satisfy redemption requests are sold in 
transactions that would be exempt from registration under the 
Securities Act of 1933 (15 U.S.C. 77a).
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    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.\9\ 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 non-public 
information

[[Page 21828]]

regarding the open-end fund's portfolio. Commentary .06 to Rule 8.600 
is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 
5.2(j)(3); however, Commentary .06 in connection with the establishment 
of a ``fire wall'' between the investment adviser and the broker-dealer 
reflects the applicable open-end fund's portfolio, not an underlying 
benchmark index, as is the case with index-based funds. The Sub-Adviser 
is affiliated with multiple broker-dealers and has implemented a ``fire 
wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. In addition, Sub-Adviser personnel who make decisions 
regarding the Fund's portfolio are subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the Fund's portfolio. In the event (a) the Adviser or the 
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.
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    \9\ 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 Sub-Adviser and their 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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WisdomTree Brazil Bond Fund
    According to the Registration Statement, the Fund will seek to 
provide investors with a high level of total return consisting of both 
income and capital appreciation. The Fund will be designed to provide 
exposure to a broad range of Brazilian government and corporate bonds 
through investment in both local currency (i.e., Brazilian real) and 
U.S. dollar-denominated Fixed Income Securities. For purposes of this 
proposed rule change, Fixed Income Securities will include bonds, 
notes, or other debt obligations, including loan participation notes 
(``LPNs''),\10\ inflation-linked debt, and debt securities issued by 
``supranational issuers,'' such as the European Investment Bank, 
International Bank for Reconstruction and Development, and the 
International Finance Corporation, as well as development agencies 
supported by other national governments. The Fund may invest to a 
lesser extent in Money Market Securities and derivative instruments, as 
described below.
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    \10\ The Fund may invest in LPNs with a minimum outstanding 
principal amount of $200 million that the Adviser or Sub-Adviser 
deems to be liquid. The Adviser represents that the Fund will invest 
a limited percentage of its assets in LPNs.
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    The Fund will be designed to provide broad exposure to Brazilian 
government and corporate bonds and will invest in a range of 
instruments with varying credit risk and duration. The Fund intends to 
invest in bonds and debt instruments issued by the government of Brazil 
and its agencies and instrumentalities and bonds and other debt 
instruments issued by corporations organized in Brazil.\11\ The Fund 
also may invest in bonds and debt instruments denominated in Brazilian 
real and issued by supranational issuers, as described above. The Fund 
intends to invest at least 70% of its net assets in Fixed Income 
Securities. The Fund will invest only in corporate bonds that the 
Adviser or Sub-Adviser deems to be sufficiently liquid. Generally a 
corporate bond must have $200 million or more par amount outstanding 
and significant par value traded to be considered as an eligible 
investment.\12\ Economic and other conditions in Brazil may, from time 
to time, lead to a decrease in the average par amount outstanding of 
bond issuances. Therefore, although the Fund does not intend to do so, 
the Fund may invest up to 20% of its net assets in corporate bonds with 
less than $200 million par amount outstanding, including up to 5% of 
its assets in corporate bonds with less than $100 million par amount 
outstanding, if (i) The Adviser or Sub-Adviser deems such security to 
be sufficiently liquid based on its analysis of the market for such 
security (based on, for example, broker-dealer quotations or its 
analysis of the trading history of the security or the trading history 
of other securities issued by the issuer), (ii) such investment is 
consistent with the Fund's goal of providing exposure to a broad range 
of Brazilian government and corporate bonds, and (iii) such investment 
is deemed by the Adviser or Sub-Adviser to be in the best interest of 
the Fund.
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    \11\ The category of ``Brazilian debt'' includes both U.S. 
dollar-denominated debt and non-U.S. or ``local'' currency debt. The 
market for Brazilian local currency debt is larger and more actively 
traded than the market for Brazilian U.S. dollar-denominated debt. 
According to the Emerging Markets Traders Association, the global 
dollar amount of emerging market debt instruments traded in the 
first two quarters of 2011 was $3.443 trillion, of which Brazil 
represented over $358 billion. This pace seems largely similar to 
the annual amounts traded in 2010 whereby $6.765 trillion globally 
and $958 billion in Brazilian debt traded between market 
participants. This marked a 52% increase globally and a 28% increase 
in Brazilian debt over the total volumes of each traded in 2009 
($4.4445 trillion globally, $747 billion in Brazilian debt). Global 
turnover in local currency debt instruments in 2009 was $2.870 
trillion, of which Brazilian debt represented $548 billion. (Source: 
Emerging Markets Traders Association Survey: Full Year 2010 Emerging 
Markets Debt Trading, Emerging Markets Traders Association, March 
22, 2011; Emerging Markets Traders Association 2009 Annual Debt 
Trading Volume Survey, March 8, 2010. Additional information 
relating to emerging market corporate bonds is available at: 
www.emta.org. See Form 19b-4 at 7, n.10. The Adviser represents that 
Brazilian sovereign debt is issued in large par size and tends to be 
very liquid. Real-denominated Brazilian debt issued by supranational 
entities is also actively traded. Intra-day, executable price 
quotations on such instruments are available from major broker-
dealer firms. Intra-day price information is available through 
subscription services, such as Bloomberg and Thomson Reuters, which 
can be accessed by authorized participants and other investors.
    \12\ The Adviser represents that the size and liquidity of the 
market for emerging market bonds, including Brazilian corporate 
bonds, generally has been increasing in recent years. Through the 
first three quarters of 2011, emerging market corporate bonds traded 
approximately $652 billion. The aggregate dollar amount of emerging 
market corporate bonds traded in 2010 was $841 billion. This 
constituted a 63% increase over the $514 billion traded in 2009. As 
of January 31, 2012, the market for Brazilian corporate bonds 
represented 22.48% ($95.83 billion) of the JPMorgan Corporate 
Emerging Market Bond Index Broad, the industry standard benchmark 
for emerging market corporate debt. Brazilian corporate debt 
represents the single largest country exposure of the index. 
Turnover in emerging market corporate debt accounted for 12% of the 
overall volume of emerging market debt of $4.445 trillion in 2009, 
an increase over the 9% share in 2008. Trading in Brazilian 
corporate debt accounted for approximately 8% of the overall trading 
in Brazilian debt in 2009, an increase over the approximately 6% 
share in 2008. (Source: JPMorgan, January 31, 2012; Emerging Markets 
Traders Association Press Releases, March 8, 2010, August 22, 2011, 
December 15, 2011.) Additional information relating to emerging 
market corporate bonds is available at: www.emta.org.
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    According to the Registration Statement, the Fund typically will 
maintain aggregate portfolio duration of between two and ten years. 
Aggregate portfolio duration is a measure of the portfolio's 
sensitivity to changes in the level of interest rates. The Fund's 
actual portfolio duration may be longer or shorter depending upon 
market conditions.
    The universe of Brazilian Fixed Income Securities currently 
includes securities that are rated ``investment grade'' as well as 
``non-investment grade'' securities. The Fund is designed to provide a 
broad-based, representative exposure to Brazilian government and 
corporate bonds and therefore will invest in both investment grade and 
non-investment grade securities in a manner designed to provide this 
exposure. The Fund currently expects that it will have 65% or more of 
its assets invested in investment grade securities, and no more than 
35% of its assets invested in non-investment grade securities. Because 
the Fund is designed to provide exposure to a broad range of Brazilian 
government and corporate bonds, and because the debt ratings of the 
Brazilian government and those corporate issuers will change from time 
to time, the exact percentage of the Fund's investments in investment 
grade and non-investment grade securities will change from time to time 
in response to economic events and

[[Page 21829]]

changes to the credit ratings of the Brazilian government and corporate 
issuers.\13\ Within the non-investment grade category, some issuers and 
instruments are considered to be of lower credit quality and at higher 
risk of default. In order to limit its exposure to these more 
speculative credits, the Fund will not invest more than 15% of its 
assets in securities rated B or below by Moody's, or equivalently rated 
by S&P or Fitch. The Fund does not intend to invest in unrated 
securities. However, it may do so to a limited extent, such as where a 
rated security becomes unrated, if such security is determined by the 
Adviser and Sub-Adviser to be of comparable quality. In determining 
whether a security is of ``comparable quality,'' the Adviser and Sub-
Adviser will consider, for example, whether the issuer of the security 
has issued other rated securities.
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    \13\ As of January 31, 2012, Brazilian government debt was rated 
investment grade by S&P, Moody's, and Fitch. See http://brasilstocks.com/bonds. See Form 19b-4 at 8, n.12.
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    The Fund will hold Fixed Income Securities of at least 13 non-
affiliated issuers. The Fund will not concentrate 25% or more of the 
value of its total assets (taken at market value at the time of each 
investment) in any one industry, as that term is used in the 1940 Act 
(except that this restriction does not apply to obligations issued by 
the U.S. government or its agencies and instrumentalities or 
government-sponsored enterprises).\14\
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    \14\ 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).
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    The Fund intends to qualify each year as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended.\15\ The Fund will invest its assets, and otherwise 
conduct its operations, in a manner that is intended to satisfy the 
qualifying income, diversification, and distribution requirements 
necessary to establish and maintain RIC qualification under Subchapter 
M. The Subchapter M diversification tests generally require that (i) 
the Fund invest no more than 25% of its total assets in securities 
(other than securities of the U.S. government or other RICs) of any one 
issuer or two or more issuers that are controlled by the Fund and that 
are engaged in the same, similar, or related trades or businesses, and 
(ii) at least 50% of the Fund's total assets consist of cash and cash 
items, U.S. government securities, securities of other RICs, and other 
securities, with investments in such other securities limited in 
respect of any one issuer 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.
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    \15\ 26 U.S.C. 851.
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    In addition to satisfying the above referenced RIC diversification 
requirements, no portfolio security held by the Fund (other than U.S. 
government securities) will represent more than 30% of the weight of 
the portfolio, and the five highest weighted portfolio securities of 
the Fund (other than U.S. government securities) will not in the 
aggregate account for more than 65% of the weight of the portfolio. For 
these purposes, the Fund may treat repurchase agreements collateralized 
by U.S. government securities as U.S. government securities.
Money Market Securities
    The Fund intends to invest in Money Market Securities (as described 
below) in a manner consistent with its investment objective in order to 
help manage cash flows in and out of the Fund, such as in connection 
with payment of dividends or expenses and to satisfy margin 
requirements, to provide collateral, or to otherwise back investments 
in derivative instruments. For these purposes, Money Market Securities 
include: short-term, high-quality obligations issued or guaranteed by 
the U.S. Treasury or the agencies or instrumentalities of the U.S. 
government; short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies, and instrumentalities; repurchase 
agreements backed by U.S. government securities; money market mutual 
funds; and deposits and other obligations of U.S. and non-U.S. banks 
and financial institutions. All Money Market Securities acquired by the 
Fund will be rated investment grade. The Fund does not intend to invest 
in any unrated money market securities. However, it may do so, to a 
limited extent, such as where a rated Money Market Security becomes 
unrated, if such Money Market Security is determined by the Adviser or 
the Sub-Adviser to be of comparable quality.
Derivative Instruments
    Consistent with the Exemptive Order, the Fund may use derivative 
instruments as part of its investment strategies. Examples of 
derivative instruments include listed futures contracts,\16\ forward 
currency contracts, non-deliverable forward currency contracts,\17\ 
currency swaps (e.g., Brazilian real vs. U.S. dollar), interest rate 
swaps,\18\ total return swaps,\19\ currency options, options on futures 
contracts, and credit-linked notes. \20\ The Fund's use of derivative 
instruments (other than credit-linked notes) will be collateralized or 
otherwise backed by investments in short term, high-quality U.S. money 
market securities and other liquid fixed income securities. The Fund 
expects that no more than 30% of the value of the Fund's net assets 
will be invested in derivative instruments. Such investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage.
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    \16\ The listed futures contracts in which the Fund may invest 
will be listed on exchanges either in the U.S. or in Brazil. 
Brazil's primary financial markets regulator, the Comissao de 
Valores Mobiliarios, is a signatory to the International 
Organization of Securities Commissions (``IOSCO'') Multilateral 
Memorandum of Understanding (``MMOU''), which is a multi-party 
information sharing arrangement among major financial regulators. 
Both the Commission and the Commodity Futures Trading Commission are 
signatories to the IOSCO MMOU.
    \17\ A forward currency contract is an agreement to buy or sell 
a specific currency on a future date at a price set at the time of 
the contract.
    \18\ An interest rate swap involves the exchange of a floating 
interest rate payment for a fixed interest rate payment.
    \19\ A total return swap is an agreement between two parties in 
which one party agrees to make payments of the total return of a 
reference asset in return for payments equal to a rate of interest 
on another reference asset.
    \20\ The Fund may invest in credit-linked notes. A credit linked 
note is a type of structured note whose value is linked to an 
underlying reference asset. Credit linked notes typically provide 
periodic payments of interest as well as payment of principal upon 
maturity. The value of the periodic payments and the principal 
amount payable upon maturity are tied (positively or negatively) to 
a reference asset such as an index, government bond, interest rate, 
or currency exchange rate. The ongoing payments and principal upon 
maturity typically will increase or decrease depending on increases 
or decreases in the value of the reference asset. The Fund's 
investments in credit-linked notes will be limited to notes 
providing exposure to Brazilian Fixed Income Securities. The Fund's 
overall investment in credit-linked notes will not exceed 25% of the 
Fund's assets.
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    With respect to certain kinds of derivative transactions entered 
into by the Fund that involve obligations to make future payments to 
third parties, including, but not limited to, futures, forward 
contracts, swap contracts, the purchase of securities on a when-issued 
or delayed delivery basis, or reverse repurchase agreements, under 
applicable federal securities laws, rules, and interpretations thereof, 
the Fund must ``set aside'' liquid assets or engage in other measures 
to ``cover'' open positions with respect to such transactions.\21\
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    \21\ See 15 U.S.C. 80a-18; Investment Company Act Release No. 
10666 (April 18, 1979), 44 FR 21258 (April 27, 1979); Dreyfus 
Strategic Investing, Commission No-Action Letter (June 22, 1987); 
Merrill Lynch Asset Management, L.P., Commission No-Action Letter 
(July 2, 1996).

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[[Page 21830]]

    The Fund may engage in foreign currency transactions, and may 
invest directly in foreign currencies in the form of bank and financial 
institution deposits, certificates of deposit, and bankers acceptances 
denominated in a specified non-U.S. currency. The Fund may enter into 
forward currency contracts in order to ``lock in'' the exchange rate 
between the currency it will deliver and the currency it will receive 
for the duration of the contract.\22\
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    \22\ The Fund will invest only in currencies, and instruments 
that provide exposure to such currencies, that have significant 
foreign exchange turnover and are included in the Bank for 
International Settlements, Triennial Central Bank Survey, Report on 
Global Foreign Exchange Market Activity in 2010 December 2010 (``BIS 
Survey''). The Fund may invest in currencies, and instruments that 
provide exposure to such currencies, selected from the top 40 
currencies (as measured by percentage share of average daily 
turnover for the applicable month and year) included in the BIS 
Survey.
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    The Fund may enter into repurchase agreements with counterparties 
that are deemed to present acceptable credit risks, and may enter into 
reverse repurchase agreements, which involve the sale of securities 
held by the Fund subject to its agreement to repurchase the securities 
at an agreed upon date or upon demand and at a price reflecting a 
market rate of interest.
    The Fund may invest in the securities of other investment companies 
(including money market funds and exchange-traded funds). The Fund may 
hold up to an aggregate amount of 15% of its net assets in (1) Illiquid 
securities, (2) Rule 144A securities, and (3) loan interests (such as 
loan participations and assignments, but not including LPNs).\23\ 
Illiquid securities include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets.
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    \23\ 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 fund. 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 of 1933).
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    The Fund will not invest in non-U.S. equity securities.
The Shares
    The Fund will issue and redeem Shares on a continuous basis at net 
asset value (``NAV'') \24\ only in large blocks of Shares (``Creation 
Units'') in transactions with authorized participants. Currently, a 
Creation Unit consists of 100,000 Shares. The Fund will issue and 
redeem Creation Units in exchange for a portfolio of Fixed Income 
Securities closely approximating the holdings of the Fund and/or an 
amount of cash in U.S. dollars. Once created, Shares of the Fund will 
trade on the secondary market in amounts less than a Creation Unit.
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    \24\ 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, generally 4 p.m., Eastern time 
(``NAV Calculation Time''). NAV per Share is calculated by dividing 
a Fund's net assets by the number of Fund Shares outstanding. For 
more information regarding the valuation of Fund investments in 
calculating a Fund's NAV, see the Registration Statement.
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    Creations and redemptions must be made by an authorized participant 
or through a firm that is either a member of the National Securities 
Clearing Corporation or a Depository Trust Company participant, and in 
each case, must have executed an agreement with the Distributor with 
respect to creations and redemptions of Creation Units. Creation and 
redemption orders must be entered by 4 p.m., Eastern time.
    Additional information regarding the Shares and the Fund, including 
investment strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, distributions, and taxes is 
included in the Registration Statement.
Availability of Information
    The Fund's Web site (www.wisdomtree.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 Web site 
will include additional quantitative information updated on a daily 
basis, including, for the Fund: (1) The prior business day's reported 
NAV, 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 
\26\ on the Exchange, the Trust will disclose on its Web site the 
identities and quantities of the portfolio of securities and other 
assets (``Disclosed Portfolio'') held by the Fund that will form the 
basis for the Fund's calculation of NAV at the end of the business 
day.\27\ The Disclosed Portfolio will include, as applicable, the 
names, quantity, percentage weighting, and market value of Fixed Income 
Securities and other assets held by the Fund and the characteristics of 
such assets. The Web site and information will be publicly available at 
no charge.
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    \25\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of such Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \26\ The Core Trading Session is 9:30 a.m. to 4 p.m., Eastern 
time.
    \27\ 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''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
NAV on such business day. 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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    In addition, for the Fund, an estimated value, defined in Rule 
8.600 as the Portfolio Indicative Value (``PIV'') that reflects an 
estimated intra-day value of the Fund's portfolio, will be 
disseminated. The PIV will be based upon the current value for the 
components of the Disclosed Portfolio and will be updated and widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session on the Exchange.\28\ In 
addition, during hours when the markets for Fixed Income Securities in 
the Fund's portfolio are closed, the PIV will be updated at least every 
15 seconds during the Core Trading Session to reflect currency exchange 
fluctuations.
---------------------------------------------------------------------------

    \28\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
published via the Consolidated Tape Association (``CTA'') or other 
data feeds.
---------------------------------------------------------------------------

    The dissemination of the PIV, 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.
    Information regarding market price and volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers'

[[Page 21831]]

computer screens and other electronic services. The previous day's 
closing price and trading volume information will be published daily in 
the financial section of newspapers. Quotation and last-sale 
information for the Shares will be available via the CTA high-speed 
line.
    Intra-day and end-of-day prices are readily available through major 
market data providers and broker-dealers for the Fixed Income 
Securities, Money Market Securities, and derivative instruments held by 
the Fund.
Initial and Continued Listing
    The Shares will be subject to Rule 8.600, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 under the 
Exchange Act,\29\ 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 NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \29\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading 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 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 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., Eastern time 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 includes 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 Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\30\
---------------------------------------------------------------------------

    \30\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. See note 16, supra.
---------------------------------------------------------------------------

    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 
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 
PIV will not be calculated or publicly disseminated; (4) how 
information regarding the PIV 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 p.m., Eastern time 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) \31\ 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 open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \31\ 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. The Sub-Adviser is affiliated with multiple broker-dealers 
and has implemented a ``fire wall'' with respect to such broker-dealers 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio. In addition, Sub-Adviser personnel who 
make decisions regarding the Fund's portfolio are subject to procedures 
designed to prevent the use and dissemination of

[[Page 21832]]

material nonpublic information regarding the Fund's portfolio. The Fund 
intends to invest at least 70% of its net assets in Fixed Income 
Securities. The Fund will invest only in corporate bonds that the 
Adviser or Sub-Adviser deems to be sufficiently liquid. Generally a 
corporate bond must have $200 million or more par amount outstanding 
and significant par value traded to be considered as an eligible 
investment. The Fund currently expects that it will have 65% or more of 
its assets invested in investment grade securities, and no more than 
35% of its assets invested in non-investment grade securities. Money 
Market Securities acquired by the Fund will generally be rated 
investment grade, except, to a limited extent, such as where a rated 
Money Market Security becomes unrated, if such Money Market Security is 
determined by the Adviser or the Sub-Adviser to be of comparable 
quality. The Fund expects that no more than 30% of the value of the 
Fund's net assets will be invested in derivative instruments. The Fund 
may hold up to an aggregate amount of 15% of its net assets in (1) 
Illiquid securities, (2) Rule 144A securities, and (3) loan interests 
(such as loan participations and assignments, but not including LPNs). 
Such investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage. The Fund will not 
invest in any non-U.S. equity securities.
    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. Moreover, the PIV 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 its 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 Web site for the Fund 
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 PIV, 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 PIV, 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 Exchange 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 the 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 Exchange 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#c9bbbca5ace4aaa6a4a4aca7bdba89baacaae7aea6bf"><span class="__cf_email__" data-cfemail="6113140d044c020e0c0c040f1512211204024f060e17">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2012-25 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.

All submissions should refer to File Number SR-NYSEArca-2012-25. 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

[[Page 21833]]

business days between 10 a.m. and 3 p.m. Copies of the filing will also 
be available for inspection and copying at the Exchange's principal 
office and on its Internet Web site at www.nyse.com. 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-2012-25 and should 
be submitted on or before May 2, 2012.
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8717 Filed 4-10-12; 8:45 am]
BILLING CODE 8011-01-P


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