63222 Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 

1Claymore Exchange-Traded Fund Trust, et al., 

Investment Company Act Release Nos. 27469 (Aug. 

28, 2006) (notice) and 27483 (Sept. 18, 2006) 

(order), as amended by Investment Company Act 

Release Nos. 27982 (Sept. 26, 2007) (notice) and 

28019 (Oct. 23, 2007) (order). 

adviser to a Fund) will cause a Fund to 

purchase a security in an Affiliated 

Underwriting. 

7. The Board of the Fund, including 

a majority of the disinterested Board 

members, will adopt procedures 

reasonably designed to monitor any 

purchases of securities by the Fund in 

an Affiliated Underwriting, once an 

investment by an Investing Fund in the 

securities of the Fund exceeds the limit 

of section 12(d)(1)(A)(i) of the Act, 

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Investing Fund in the 

Fund. The Board will consider, among 

other things: (a) Whether the purchases 

were consistent with the investment 

objectives and policies of the Fund; (b) 

how the performance of securities 

purchased in an Affiliated Underwriting 

compares to the performance of 

comparable securities purchased during 

a comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (c) 

whether the amount of securities 

purchased by the Fund in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders. 

8. Each Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by an Investing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Fund in 

excess of the limit in section 

12(d)(1)(A), an Investing Fund will 

execute a FOF Participation Agreement 

with the Fund stating that their 

respective boards of directors or trustees 

and their investment advisers, or 

Trustee and Sponsor, as applicable, 

understand the terms and conditions of 

the order, and agree to fulfill their 

responsibilities under the order. At the 

time of its investment in shares of a 

Fund in excess of the limit in section 

12(d)(1)(A)(i), an Investing Fund will 

notify the Fund of the investment. At 

such time, the Investing Fund will also 

transmit to the Fund a list of the names 

of each Investing Fund Affiliate and 

Underwriting Affiliate. The Investing 

Fund will notify the Fund of any 

changes to the list as soon as reasonably 

practicable after a change occurs. The 

Fund and the Investing Fund will 

maintain and preserve a copy of the 

order, the FOF Participation Agreement, 

and the list with any updated 

information for the duration of the 

investment and for a period of not less 

than six years thereafter, the first two 

years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

recorded fully in the minute books of 

the appropriate Investing Management 

Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of an 

Investing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Fund will acquire securities of 

any investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by exemptive 

relief from the Commission permitting a 

Fund to purchase shares of a money 

market fund for short-term cash 

management purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25866 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29458; 812–13657] 

Claymore Exchange-Traded Fund 

Trust, et al.; Notice of Application 

October 7, 2010. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application to amend 

a prior order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘Act’’) granting an exemption from 

sections 2(a)(32), 5(a)(1), 22(d), 22(e) 

and 24(d) of the Act and rule 22c–1 

under the Act, under sections 6(c) and 

17(b) of the Act granting an exemption 

from sections 17(a)(1) and (a)(2) of the 

Act, and under section 12(d)(1)(J) 

granting an exemption from sections 

12(d)(1)(A) and (B) of the Act (‘‘Prior 

Order’’).1

SUMMARY OF APPLICATION: The Prior 

Order permits: (a) Open-end 

management investment companies, 

whose series are based on certain equity 

or fixed-income securities indexes 

(each, an ‘‘Underlying Index’’), to issue 

shares of limited redeemability; (b) 

secondary market transactions in the 

shares of the series to occur at 

negotiated prices; (c) dealers to sell 

shares to purchasers in the secondary 

market unaccompanied by a prospectus 

when prospectus delivery is not 

required by the Securities Act of 1933 

(‘‘Securities Act’’); (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of 

aggregations of the series’ shares; (e) 

under certain circumstances, certain 

series to pay redemption proceeds more 

than seven days after the tender of 

shares; and (f) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire shares of the series. 

Applicants seek to amend the Prior 

Order to: (a) Permit certain Funds (as 

defined below) to track an Underlying 

Index that is created, compiled, 

sponsored, or maintained by an index 

provider (‘‘Index Provider’’) that is an 

affiliated person, or an affiliated person 

of an affiliated person, of the Fund, its 

investment adviser, distributor, 

promoter, or any sub-adviser to the 


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Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 63223 

2AlphaShares is the Index Provider for 

Guggenheim China Real Estate ETF, Guggenheim 

China Small Cap ETF, Guggenheim China All-Cap 

ETF, and Guggenheim China Technology ETF. Delta 

Global is the Index Provider for Guggenheim 

Shipping ETF. 

3Applicants request that the requested order 

apply to any future series of the Trusts or other 

registered investment company advised by the 

Adviser or a person controlling, controlled by, or 

under common control with the Adviser that 

operates as an ETF (a ‘‘Future Fund’’) for which the 

Index Provider also serves as Sub-Adviser to 

another Fund or Future Fund or other registered 

investment company advised by the Adviser, or a 

person controlling, controlled by, or under common 

control with the Adviser (collectively ‘‘Subadvised 

Funds’’). 

4Claymore Exchange-Traded Fund Trust 3, et al., 

Investment Company Act Release No. 29256 (Apr. 

23, 2010) (notice) and 29271 (May 18, 2010) (order). 

Fund; (b) delete the relief granted from 

the requirements of section 24(d) of the 

Act in the Prior Order and revise the 

applications on which the Prior Order 

was issued (‘‘Prior Applications’’) to 

reflect such deletion; (c) modify the 

80%/90% investment requirement in 

the Prior Applications; (d) revise the 

discussion of depositary receipts 

(‘‘Depositary Receipts’’) in the Prior 

Applications; and (e) permit the 

personnel of the Adviser (as defined 

below) or any sub-adviser who are 

responsible for the designation and 

dissemination of the securities to be 

used for creations (‘‘Deposit Securities’’) 

or redemptions (‘‘Fund Securities’’) to 

also select securities for purchase or sale 

by actively-managed accounts of the 

Adviser or any sub-adviser. 

APPLICANTS: Claymore Exchange-Traded 

Fund Trust, Claymore Exchange-Traded 

Fund Trust 2, Claymore ExchangeTraded Fund Trust 3 (each, a ‘‘Trust’’ 

and together, the ‘‘Trusts’’), Guggenheim 

Funds Investment Advisors, LLC 

(‘‘Adviser’’), and Guggenheim Funds 

Distributors, Inc. (‘‘Distributor’’). 

FILING DATES: The application was filed 

on May 5, 2009, and amended on 

November 23, 2009, September 3, 2010, 

and October 1, 2010. Applicants have 

agreed to file an amendment during the 

notice period, the substance of which is 

reflected in the notice. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on November 1, 2010, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F 

Street, NE., Washington, DC 20549– 

1090. Applicants, 2455 Corporate West 

Drive, Lisle, IL 60532. 

FOR FURTHER INFORMATION CONTACT: 

Courtney S. Thornton, Senior Counsel, 

at (202) 551–6812, or Mary Kay Frech, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or for an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm, or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. Each Trust is organized as a 

Delaware statutory trust and is 

registered under the Act as an open-end 

management investment company. Each 

Trust offers one or more series (each a 

‘‘Fund’’), each of which operates as an 

exchange-traded fund (‘‘ETF’’). The 

Adviser, a Delaware limited liability 

company, is registered as an investment 

adviser under the Investment Advisers 

Act of 1940 (the ‘‘Advisers Act’’). The 

Adviser serves as investment adviser to 

each of the Funds and may retain subadvisers (‘‘Sub-Advisers’’) to manage the 

assets of one or more of the Funds. Any 

Sub-Adviser will be registered under the 

Advisers Act. The Distributor, a brokerdealer registered under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’), 

serves as principal underwriter and 

distributor for each of the Funds. 

2. Applicants currently are permitted 

to offer Funds that operate in reliance 

on the Prior Order and seek to track the 

performance of Underlying Indexes 

from Index Providers that are not 

‘‘affiliated persons’’ (as such term is 

defined in section 2(a)(3) of the Act), or 

affiliated persons of affiliated persons, 

of a Trust, the Adviser, any Sub-Adviser 

to a Fund, the Distributor or a promoter 

of a Fund. Certain Funds rely on the 

Prior Order and track an Underlying 

Index provided by either AlphaShares, 

LLC (‘‘AlphaShares’’) or Delta Global 

Indices, LLC (‘‘Delta Global’’) 

(collectively, the ‘‘Affected Funds’’).2

Currently, neither AlphaShares nor 

Delta Global is an affiliated person, nor 

an affiliated person of an affiliated 

person, of a Trust, the Adviser, or any 

Sub-Adviser to a Fund, the Distributor 

or promoter of a Fund. 

3. Applicants seek to amend the Prior 

Order to permit an Affected Fund to 

track an Underlying Index that is 

created, compiled, sponsored, or 

maintained by an Index Provider that is 

an affiliated person, as defined in 

section 2(a)(3) of the Act, or an affiliated 

person of an affiliated person, of a Trust, 

the Adviser, the Distributor, promoter, 

or any Sub-Adviser to the Affected Fund 

solely because the Index Provider serves 

as a Sub-Adviser to a Subadvised Fund 

(as defined below).3 The Adviser 

proposes to offer a closed-end fund 

(‘‘Closed-End Fund’’) for which 

AlphaShares would serve as SubAdviser. In reliance on an order granting 

relief with respect to the offering of 

actively managed Future Funds,4 the 

Adviser and Claymore Exchange-Traded 

Fund Trust 3 propose to offer three 

actively managed ETFs for which Delta 

Global would serve as Sub-Adviser. 

Because the Adviser serves or will serve 

as investment adviser to each, the 

Affected Funds and each Subadvised 

Fund could be deemed to be under 

common control for purposes of section 

2(a)(3). In addition, section 2(a)(3)(E) 

provides that any investment adviser to 

an investment company is deemed to be 

an affiliated person of such company. 

Accordingly, by serving as Sub-Adviser 

to a Subadvised Fund, each of 

AlphaShares and Delta Global could be 

deemed to be an affiliated person of an 

affiliated person of the Adviser and/or 

the Fund(s) for which it serves as Index 

Provider. As a result, applicants would 

not be permitted to retain either 

AlphaShares or Delta Global as SubAdviser to a Subadvised Fund, absent 

further exemptive relief. 

4. Applicants state that the conflicts 

of interest that could result if an Index 

Provider has a proscribed relationship 

with a Trust, the Adviser, any SubAdviser, the Distributor, or promoter of 

a Fund include the ability of an 

affiliated person to manipulate the 

Underlying Index to the benefit or 

detriment of the Fund, as well as 

conflicts that may also arise with 

respect to the personal trading activity 

of personnel of the affiliated person who 

may have access to, or knowledge of, 

changes to an Underlying Index’s 

composition methodology or the 

constituent securities in an Underlying 

Index prior to the time that information 

is publicly disseminated. Applicants 

believe that these conflicts of interest 

are not applicable to the Affected Funds 

because the Adviser is not part of the 


jlentini on DSKJ8SOYB1PROD with NOTICES
63224 Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Notices 

5The ‘‘Calculation Agent’’ is the entity that will 

implement the Index Composition Methodology, 

calculate and maintain the Applicable Underlying 

Indexes, and calculate and disseminate the 

Applicable Underlying Index values. The 

Calculation Agent is not and will not be an 

affiliated person within the meaning of section 

2(a)(3) of the Act, or an affiliated person of an 

affiliated person, of a Trust, the Adviser, any SubAdviser, the Distributor, or a promoter of a Fund. 

The Calculation Agent will be instructed not to 

communicate any non-public information about the 

Applicable Underlying Indexes to anyone, but 

specifically not to the personnel of the Adviser with 

responsibility for the portfolio management of the 

Affected Funds. The Calculation Agent will be 

instructed to disseminate information about the 

daily constituents of the Applicable Underlying 

Indexes to the Adviser (on behalf of the Affected 

Funds) and the public at the same time. 

6 Investment Company Act Release No. 28584 

(Jan. 13, 2009) (the ‘‘Summary Prospectus Rule’’). 

7Condition 5 states: Before a Fund may rely on 

the order, the Commission will have approved, 

pursuant to rule 19b–4 under the Exchange Act, an 

Exchange rule requiring Exchange members and 

member organizations effecting transactions in 

Fund Shares to deliver a Product Description to 

purchasers of Fund Shares. 

same organization as either Index 

Provider. Accordingly, the Adviser will 

not be informed of any additions to or 

deletions from an Underlying Index 

tracked by an Affected Fund (each, an 

‘‘Applicable Underlying Index’’) prior to 

other market participants or the general 

public. Applicants state that the Adviser 

therefore will not have any ability to 

manipulate the components of the 

Applicable Underlying Indexes for its 

own benefit, nor will it have an 

informational advantage over other 

market participants with regard to 

additions to or deletions from the 

Applicable Underlying Indexes. 

Applicants further state that the Adviser 

will not have any role in the (a) 

modification of an Applicable 

Underlying Index’s methodology, (b) 

selection of an Applicable Underlying 

Index’s constituents, or (c) calculation 

or dissemination of an Applicable 

Underlying Index’s value, and shall 

have no access to the information 

involved with items (a)–(c) or any 

changes thereto prior to their public 

dissemination in advance of the 

rebalancing of an Applicable 

Underlying Index or any interim 

modification arising from any corporate 

action. 

5. Applicants also state that the 

Adviser and the Index Providers have 

adopted policies and procedures 

designed to prevent the dissemination 

and improper use of non-public 

information in a manner similar to 

firewalls. Each of the Adviser, 

AlphaShares, and Delta Global has 

adopted written policies and procedures 

in accordance with rule 206(4)–7 under 

the Advisers Act, that contains: (a) A 

section that sets forth the applicable 

entity’s insider trading policy and that 

includes the applicable entity’s 

procedures to prevent and detect the 

misuse of material non-public 

information; and (b) the applicable 

entity’s code of ethics which was 

adopted pursuant to rule 17j–1 under 

the Act and rule 204A–1 under the 

Advisers Act, which contains provisions 

reasonably necessary to prevent Access 

Persons (as defined in rule 17j–1) of the 

applicable entity from trading on the 

basis of, improperly disseminating or 

otherwise engaging in any improper use 

of nonpublic information. 

6. Applicants further state that they 

will adopt, and will require 

AlphaShares and Delta Global to adopt, 

policies and procedures that require the 

Applicable Underlying Indexes to be 

transparent. Each of AlphaShares and 

Delta Global will maintain a publicly 

available Web site on which it will 

publish the basic concept of each 

Applicable Underlying Index and 

disclose (a) the composition 

methodology for each such Applicable 

Underlying Index (‘‘Index Composition 

Methodology’’) and (b) the components 

and weightings of the components of 

each Applicable Underlying Index (as of 

each rebalancing or interim 

modification arising from a corporate 

action). Applicants note that the 

identity and weightings of the 

component securities of the Applicable 

Underlying Index will be readily 

ascertainable by a third party because 

the Index Composition Methodology 

will be publicly available. Although 

each of AlphaShares and Delta Global 

reserves the right to modify its Index 

Composition Methodology in the future, 

such modifications would not take 

effect until the applicable Index 

Provider has given the Calculation 

Agent (as defined below) and the 

investing public at least 60 days’ prior 

written notice, disclosed on the publicly 

available Web site of such Index 

Provider, that such changes are being 

planned to take effect.5 Each Underlying 

Index will be reconstituted or 

rebalanced no more frequently than on 

a monthly basis. 

7. Applicants represent that any Index 

Provider to an existing Fund or a Future 

Fund that enters into a similar 

arrangement to serve as Sub-Adviser to 

a Subadvised Fund will be subject to the 

same policies and procedures as 

proposed herein with respect to 

AlphaShares and Delta Global. 

Applicants further represent that any 

relief granted pursuant to the 

application will only apply to an Index 

Provider whose affiliation with a Trust, 

the Adviser or any Sub-Adviser to a 

Fund, Distributor or promoter of a Fund 

arises from relationships such as those 

described in the application. Applicants 

acknowledge that Index Providers 

whose affiliation arises from 

relationships other than those described 

in the application may not serve as 

Index Provider to a Fund without 

additional exemptive relief. 

Additional Changes to Prior Order 

1. Applicants seek to amend the Prior 

Order to delete the relief granted from 

section 24(d) of the Act. Applicants 

believe that the deletion of the 

exemption from section 24(d) is 

warranted because the adoption of the 

summary prospectus should supplant 

any need by a Fund to use a product 

description (‘‘Product Description’’).6

The deletion of the relief granted with 

respect to section 24(d) of the Act from 

the Prior Order will also result in the 

deletion of related discussions in the 

Prior Applications, revision of the Prior 

Applications to delete references to 

Product Descriptions, including in the 

conditions, and the deletion of 

condition 5 to the Prior Order.7

2. The Prior Applications state that a 

Fund will hold, in the aggregate, at least 

80 percent or 90 percent of its total 

assets in the securities that comprise the 

relevant Underlying Index (‘‘Component 

Securities’’), and investments that have 

economic characteristics that are 

substantially identical to the economic 

characteristics of the Component 

Securities of its Underlying Index. 

Applicants seek to amend the Prior 

Order to require a Fund to hold at least 

80 percent of its total assets in 

Component Securities of its Underlying 

Index or in Depositary Receipts or to-beannounced transactions (‘‘TBAs’’) 

representing Component Securities (or 

underlying securities representing 

Depositary Receipts, if Depositary 

Receipts are themselves Component 

Securities). 

3. Applicants wish to amend the Prior 

Order to revise certain representations 

regarding a Fund’s ability to invest in 

Depositary Receipts. The Prior 

Applications state, among other things, 

that a Fund will invest only in 

Depositary Receipts listed on a national 

securities exchange as defined in 

section 2(a)(26) of the Act and that all 

Depositary Receipts in which a Fund 

invests will be sponsored by the issuers 

of the underlying security, except in 

certain circumstances. Applicants seek 

to amend the Prior Applications to state 

that Depositary Receipts include 

American Depositary Receipts (‘‘ADRs’’) 

and Global Depositary Receipts 

(‘‘GDRs’’). With respect to ADRs, the 

depositary is typically a U.S. financial 

institution, and the underlying 


jlentini on DSKJ8SOYB1PROD with NOTICES
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8As noted above, all representations and 

conditions contained in the application and the 

Prior Applications that require a Fund to disclose 

particular information in the Fund’s prospectus 

and/or annual report shall remain effective with 

respect to the Fund until the time that the Fund 

complies with the disclosure requirements adopted 

by the Commission in the Summary Prospectus 

Rule. 

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

2 17 CFR 240.19b–4. 

securities are issued by a foreign issuer. 

The ADR is registered under the 

Securities Act on Form F–6. ADR trades 

occur either on an Exchange or offexchange. Rule 6620 of the Financial 

Industry Regulatory Authority 

(‘‘FINRA’’) requires all off-exchange 

transactions in ADRs to be reported 

within 90 seconds and ADR trade 

reports to be disseminated on a realtime basis. With respect to GDRs, the 

depositary may be foreign or a U.S. 

entity, and the underlying securities 

may have a foreign or a U.S. issuer. All 

GDRs are sponsored and trade on a 

foreign exchange. No affiliated persons 

of applicants will serve as the 

depositary for any Depositary Receipts 

held by a Fund. A Fund will not invest 

in any Depositary Receipts that the 

Adviser deems to be illiquid or for 

which pricing information is not readily 

available. 

4. Applicants also seek to amend the 

terms and conditions of the Prior 

Applications to provide that all 

representations and conditions 

contained in the Prior Applications that 

require a Fund to disclose particular 

information in the Fund’s prospectus 

and/or annual report shall remain 

effective with respect to the Fund until 

the time the Fund complies with the 

disclosure requirements adopted by the 

Commission in the Summary Prospectus 

Rule. Applicants believe that the 

proposal to supersede the 

representations and conditions 

requiring certain disclosures in the Prior 

Applications is warranted because the 

Commission’s amendments to Form N– 

1A with respect to ETFs as part of the 

Summary Prospectus Rule reflect the 

Commission’s view with respect to the 

appropriate types of prospectus and 

annual report disclosures for an ETF. 

5. Applicants also wish to amend the 

Prior Order to permit the personnel of 

the Adviser or any Sub-Adviser who are 

responsible for the designation and 

dissemination of Deposit Securities or 

Fund Securities to also select securities 

for purchase or sale by activelymanaged accounts of the Adviser or 

Sub-Adviser. The Prior Applications 

currently state that such personnel will 

have no responsibilities for the selection 

of securities for purchase or sale by any 

actively-managed accounts of the 

Adviser or Sub-Adviser. Applicants 

state that the Codes of Ethics adopted by 

the Adviser and Distributor, among 

other procedures, adequately address 

any conflicts of interest. Applicants also 

note that the Commission more recently 

has granted exemptive relief with 

respect to index-based ETFs that does 

not contain the prohibition on adviser 

personnel designating securities for a 

creation or redemption with respect to 

such ETFs and also managing activelymanaged accounts for the adviser. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the same conditions as those 

imposed by the Prior Order, except for 

condition 5 to the Prior Order, which 

will be deleted.8

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25819 Filed 10–13–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63050; File No. SR–Phlx– 

2010–137] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Regarding 

Anti-Internalization Functionality for 

NASDAQ OMX PSX 

October 6, 2010. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on 

September 30, 2010, NASDAQ OMX 

PHLX LLC (‘‘Phlx’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Phlx Rule 3307 to provide an optional 

anti-internalization functionality on 

NASDAQ OMX PSX (‘‘PSX’’). The text of 

the proposed rule change is available 

from the Exchange’s Web site at 

http:// 

nasdaqomxphlx.cchwallstreet.com, at 

the Exchange’s principal office, and at 

the Commission’s Public Reference 

Room. 

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 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item IV below, 

and is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to provide 

a voluntary anti-internalization function 

for the PSX System. Under the proposal, 

market participants entering orders 

under a specific market participant 

identifier (‘‘MPID’’) may voluntarily 

direct that they not execute against 

other orders entered into the System 

under the same MPID. 

Under the proposal, the System, if 

requested, will not execute orders 

entered under the same MPID against 

each other. Instead, the System will 

execute against all eligible trading 

interest of other market participants, in 

accordance with PSX’s price-size 

execution priority, up to the point 

where an incoming order would interact 

with a resting order having the same 

MPID. In such a case, share amounts 

equal to the size of the portion of an 

incoming order that is designated by the 

order execution algorithm to interact 

with an order already in the System 

with the same MPID will be 

decremented from each order. 

For example, if market participant 

ABCD had an order to sell 1,000 shares 

at $10 on the book, entered an order to 

buy 1,000 shares at $10, and the System 

allocated 100 shares of the incoming 

order to the resting ABCD order and 900 

shares to other market participants’ 

orders, the System would execute the 

900 shares allocated to other market 

participants and would decrement, 

without execution, the remaining 100 

shares of the incoming order as well as 

100 shares from ABCD’s resting order. 

Similarly, if ABCD had a resting order 

to sell 2,000 shares at $10, entered an 

order to buy 500 shares at $10, and the 

System allocated all 500 shares to the 

resting ABCD order, the System would 

cancel the incoming order and 


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