Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 78533 

14See note 7 supra. 

15 15 U.S.C. 78s(b)(3)(A). 

16 17 CFR 240.19b–4(f)(6). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 73556 

(Nov. 7, 2014), 79 FR 68330 (‘‘Notice’’). 

trade to a separate, stand-alone rule 

protects investors by eliminating 

confusion and making the provision 

more clear. Because options trades are 

used to hedge transactions in other 

markets, including securities and 

futures, many market participants 

would rather adjust prices of executions 

rather than nullify the transactions and, 

thus, lose a hedge altogether. As such, 

the Exchange believes it is in the best 

interest of investors to allow for price 

adjustments as well as nullifications. In 

addition, the Exchange believes it is in 

the nature of a fair and orderly market 

to allow for price adjustments rather 

than only cancellations because an 

adjustment would result in the least 

amount of disruption to the overall 

market. Further, the Exchange believes 

that, harmonizing its nullification and 

adjustment rules with other options 

markets would promote just and 

equitable principles of trade by better 

allowing the market participants to be 

treated similarly across exchanges. The 

Exchange also believes that the other 

administrative changes would remove 

impediments to and perfect the 

mechanism of a fair and orderly market 

as they are merely trying to create more 

transparency in the Exchange’s rules. 

Finally, the Exchange does not believe 

that the proposed changes are unfairly 

discriminatory because they will be 

applied to all ATP Holders equally. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is not designed to 

address any aspect of competition, 

whether between the Exchange and its 

competitors, or among market 

participants. Instead, the proposed rule 

change is designed to adopt the 

nullification and adjustment of trades 

on similar terms to that of other options 

exchanges.14

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 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 15 and Rule 19b– 

4(f)(6) thereunder.16

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEMKT–2014–102 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEMKT–2014–102. 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 

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

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– 

NYSEMKT–2014–102, and should be 

submitted on or before January 20, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–30441 Filed 12–29–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73908; File No. SR–

NYSEArca–2014–85] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change Relating to the 

Listing and Trading of Shares of the 

PIMCO Low Duration Investment Grade 

Corporate Bond Active ExchangeTraded Fund Under NYSE Arca 

Equities Rule 8.600 

December 22, 2014. 

I. Introduction 

On October 23, 2014, NYSE Arca, Inc. 

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

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’ or 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

list and trade shares (‘‘Shares’’) of the 

PIMCO Low Duration Investment Grade 

Corporate Bond Active ExchangeTraded Fund (‘‘Fund’’) under NYSE 

Arca Equities Rule 8.600. The proposed 

rule change was published for comment 

in the Federal Register on November 14, 

2014.3 The Commission received no 

comments on the proposal. This order 

grants approval of the proposed rule 

change. 

mstockstill on DSK4VPTVN1PROD with NOTICES

78534 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 

4The Trust is registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’). The Exchange 

represents that, on June 17, 2014, the Trust filed an 

amendment to its registration statement on Form N– 

1A under the Securities Act of 1933 (‘‘1933 Act’’) 

and the 1940 Act relating to the Fund (File Nos. 

333–155395 and 811–22250) (‘‘Registration 

Statement’’). In addition, the Exchange represents 

that the Trust has obtained from the Commission 

certain exemptive relief under the 1940 Act. See 

Investment Company Act Release No. 28993 

(November 10, 2009) (File No. 812–13571). 

5The Exchange represents that the Adviser is not 

registered as a broker-dealer, but is affiliated with 

a broker-dealer, and will implement a ‘‘fire wall’’ 

with respect to its broker-dealer affiliate regarding 

access to information concerning the composition 

or changes to the Fund’s portfolio. The Exchange 

further represents that, if PIMCO elects to hire a 

sub-adviser for the Fund that is registered as a 

broker-dealer or is affiliated with a broker-dealer, 

such sub-adviser will implement a fire wall with 

respect to its relevant personnel or its broker-dealer 

affiliate, as applicable, regarding access to 

information concerning the composition 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. In the event (a) the Adviser becomes 

registered as a broker-dealer or newly affiliated with 

a broker-dealer, or (b) any new adviser or subadviser is a registered broker-dealer or becomes 

affiliated with a broker-dealer, the Adviser or any 

new adviser or sub-adviser, as the case may be, will 

implement a fire wall with respect to its relevant 

personnel or broker-dealer affiliate, as applicable, 

regarding access to information concerning the 

composition or changes to the portfolio, and will be 

subject to procedures designed to prevent the use 

and dissemination of material, non-public 

information regarding the portfolio. 

6The Commission notes that additional 

information regarding the Fund, the Trust, and the 

Shares, including investment strategies, risks, 

creation and redemption procedures, fees, portfolio 

holdings disclosure policies, calculation of net asset 

value (‘‘NAV’’), distributions, and taxes, among 

other things, can be found in the Notice and the 

Registration Statement, as applicable. See Notice 

and Registration Statement, supra notes 3 and 4, 

respectively. 

7With respect to the Fund, 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 manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption, or any similar 

intervening circumstance. 

8The Exchange represents that, with respect to 

the Fund, while non-emerging markets corporate 

debt securities (excluding commercial paper) 

generally must have $100 million or more par 

amount outstanding and significant par value 

traded to be considered as an eligible investment for 

the Fund, at least 80% of issues of such securities 

held by the Fund must have $100 million or more 

par amount outstanding at the time of investment. 

See also infra note 30 (regarding emerging market 

corporate debt securities). 

9 Inflation-indexed bonds (other than municipal 

inflation-indexed bonds and certain corporate 

inflation-indexed bonds) are fixed income securities 

whose principal value is periodically adjusted 

according to the rate of inflation (e.g., Treasury 

Inflation Protected Securities). Municipal inflationindexed securities are municipal bonds that pay 

coupons based on a fixed rate plus the Consumer 

Price Index for All Urban Consumers. With regard 

to municipal inflation-indexed bonds and certain 

corporate inflation-indexed bonds, the inflation 

adjustment is reflected in the semi-annual coupon 

payment. 

10There are two common types of bank capital: 

Tier I and Tier II. Bank capital is generally, but not 

always, of investment grade quality. Tier I securities 

are typically exchange-traded and often take the 

form of trust preferred securities. Tier II securities 

are commonly thought of as hybrids of debt and 

preferred stock. Tier II securities are typically 

traded over-the-counter, are often perpetual (with 

no maturity date), callable and, under certain 

conditions, allow for the issuer bank to withhold 

payment of interest until a later date. However, 

such deferred interest payments generally earn 

interest. 

11According to the Exchange, the Fund may 

invest in fixed- and floating-rate loans, which 

investments generally will be in the form of loan 

participations and assignments of portions of such 

loans. 

12 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. 

13The Fund may make short sales of securities to 

offset potential declines in long positions in similar 

securities and increase the flexibility of the Fund, 

as well as for investment return, and as part of a 

risk arbitrage strategy. 

14A dollar roll is similar except that the 

counterparty is not obligated to return the same 

securities as those originally sold by the Fund but 

only securities that are ‘‘substantially identical.’’ 

II. Description of the Proposal 

NYSE Arca proposes to list and trade 

Shares of the Fund under NYSE Arca 

Equities 8.600, which governs the listing 

and trading of Managed Fund Shares on 

the Exchange. 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.4 Pacific Investment 

Management Company LLC will be the 

investment manager to the Fund 

(‘‘PIMCO’’ or ‘‘Adviser),5 and PIMCO 

Investments LLC will serve as the 

distributor for the Fund. State Street 

Bank & Trust Co. will serve as the 

custodian and transfer agent for the 

Fund. 

The Exchange has made the following 

representations and statements in 

describing the Fund and its investment 

strategy, including other portfolio 

holdings and investment restrictions.6

A. Principal Investments of the Fund 

The Fund will seek to maximize total 

return, consistent with prudent 

investment management, by investing 

under normal circumstances 7 at least 

80% of its assets in a diversified 

portfolio of investment grade corporate 

‘‘Fixed Income Instruments’’ (as 

described in more detail below) of 

varying maturities, which may be 

represented by certain derivative 

instruments, as described in more detail 

below (‘‘80% Policy’’). Corporate Fixed 

Income Instruments will be: Corporate 

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

issuers, including convertible securities 

and corporate commercial paper; 8

inflation-indexed bonds; 9 bank capital 

securities; 10 trust preferred securities; 

and loan participations and 

assignments.11

The average portfolio duration of the 

Fund normally will vary from zero to 4 

years based on PIMCO’s forecast for 

interest rates.12 In furtherance of the 

Fund’s 80% Policy, or with respect to 

the Fund’s other investments, the 

Exchange represents that the Fund may 

invest in derivative instruments, subject 

to applicable law and any other 

restrictions described herein. 

According to the Exchange, the Fund 

may purchase or sell securities on a 

when-issued, delayed delivery or 

forward commitment basis and may 

engage in short sales.13 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).14

In selecting investments 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 investment 

selection techniques. The proportion of 

the Fund’s assets committed to 

investments 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. 

According to the Exchange, in seeking 

to identify undervalued currencies, 

PIMCO may consider many factors, with 

respect to the Fund, including but not 

limited to, longer-term analysis of 

relative interest rates, inflation rates, 

real exchange rates, purchasing power 

parity, trade account balances, and 

current account balances, as well as 

other factors that influence exchange 

rates such as flows, market technical 

trends, and government policies. With 

respect to fixed income investing, 

PIMCO will attempt to identify areas of 

the bond market that are undervalued 

relative to the rest of the market. PIMCO 

will identify these areas by grouping 

fixed income investments into sectors 

such as money markets, governments, 

corporates, mortgages, asset-backed, and 

international. Sophisticated proprietary 

software will then assist in evaluating 

sectors and pricing specific investments. 

Once investment opportunities are 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 78535 

15According to the Exchange, mortgage-related 

and other asset-backed securities include 

collateralized mortgage obligations (‘‘CMOs’’), 

commercial mortgage-backed securities, mortgage 

dollar rolls, CMO residuals, stripped mortgagebacked securities, and other securities that directly 

or indirectly represent a participation in, or are 

secured by and payable from, mortgage loans on 

real property. A to-be-announced (‘‘TBA’’) 

transaction is a method of trading mortgage-backed 

securities. In a TBA transaction, the buyer and 

seller agree upon general trade parameters such as 

agency, settlement date, par amount, and price. The 

actual pools delivered generally are determined two 

days prior to the settlement date. 

16 The Exchange represents that the Fund may 

obtain event-linked exposure by investing in 

‘‘event-linked bonds’’ or ‘‘event-linked swaps’’ or 

by implementing ‘‘event-linked strategies.’’ Eventlinked exposure results in gains or losses that 

typically are contingent, or formulaically related to 

defined trigger events, which include hurricanes, 

earthquakes, weather-related phenomena, or 

statistics relating to such events. Some event-linked 

bonds are commonly referred to as ‘‘catastrophe 

bonds.’’ If a trigger event occurs, the Fund may lose 

a portion or its entire principal invested in the bond 

or notional amount on a swap. 

17Real estate-linked derivatives are derivative 

instruments that are tied to real estate, such as 

derivatives (e.g., swaps or options) on real-estate 

related indices or specific real-estate related 

companies. The value and risks associated with real 

estate-linked derivative instruments are generally 

similar to those associated with direct ownership of 

real estate. 

18See infra note 23 and accompanying text. 

19Trade claims are non-securitized rights of 

payment arising from obligations that typically arise 

when vendors and suppliers extend credit to a 

company by offering payment terms for products 

and services. If the company files for bankruptcy, 

payments on these trade claims stop and the claims 

are subject to compromise along with the other 

debts of the company. Trade claims may be 

purchased directly from the creditor or through 

brokers. 

20The Fund invest in structured products, 

including instruments such as credit-linked 

securities. For example, a structured product may 

combine a traditional stock, bond, or commodity 

with an option or forward contract. Generally, the 

principal amount, amount payable upon maturity or 

redemption, or interest rate of a structured product 

is tied (positively or negatively) to the price of some 

commodity, currency, or securities index or another 

interest rate or some other economic factor. The 

interest rate or (unlike most fixed income securities) 

the principal amount payable at maturity of a 

structured product may be increased or decreased, 

depending on changes in the value of the 

benchmark. An example of exchange-traded 

structured products would be exchange-traded 

notes or ETNs, such as those listed and traded 

under NYSE Arca Equities Rule 5.2(j)(6). 

21Credit-linked securities are generally a basket 

of derivative instruments, such as credit default 

swaps or interest rate swaps. Like an investment in 

a bond, investments in credit-linked securities 

represent the right to receive periodic income 

payments (in the form of distributions) and 

payment of principal at the end of the term of the 

security. However, these payments are conditioned 

on the trust’s receipt of payments from, and the 

trust’s potential obligations to, the counterparties to 

the derivative instruments and other securities in 

which the trust invests. 

22With respect to the Fund, a reverse repurchase 

agreement involves the sale of a security by the 

Fund and its agreement to repurchase the 

instrument at a specified time and price. 

23Convertible securities are generally preferred 

stocks and other securities (including fixed income 

securities and warrants) that are convertible into or 

exercisable for common stock at a stated price or 

rate. Equity-related investments may include 

investments in small-capitalization (‘‘small-cap’’), 

mid-capitalization (‘‘mid-cap’’) and largecapitalization (‘‘large-cap’’) companies. According 

to the Exchange, with respect to the Fund, a smallcap company will be defined as a company with a 

market capitalization of up to $1.5 billion, a midcap company will be defined as a company with a 

market capitalization of between $1.5 billion and 

$10 billion and a large-cap company will be defined 

as a company with a market capitalization above 

$10 billion. Not more than 10% of the net assets 

of the Fund in the aggregate invested in equity 

securities (other than non-exchange-traded 

investment company securities) shall consist of 

equity securities, including stocks into which a 

convertible security is converted, whose principal 

market is not a member of the Intermarket 

Surveillance Group (‘‘ISG’’) or is a market with 

which the Exchange does not have a comprehensive 

surveillance sharing agreement (‘‘CSSA’’). 

Furthermore, not more than 10% of the net assets 

of the Fund in the aggregate invested in futures 

contracts or exchange-traded options contracts shall 

consist of futures contracts or exchange-traded 

options contracts whose principal market is not a 

member of ISG or is a market with which the 

Exchange does not have a CSSA. 

identified, PIMCO will shift assets 

among sectors depending upon changes 

in relative valuations, credit spreads, 

and other factors. 

B. Other (Non-Principal) Investments of 

the Fund 

The Exchange represents that the nonprincipal investments listed below 

would consist of investments that are 

not included in the Fund’s 80% Policy. 

Such assets may be invested in the 

Fixed Income Instruments and other 

instruments, as described below. 

According to the Exchange, with 

respect to the Fund’s investments, Fixed 

Income Instruments will include any 

one or more of the following: securities 

issued or guaranteed by the U.S. 

Government, its agencies or 

government-sponsored enterprises 

(‘‘U.S. Government Securities’’); 

mortgage-backed and other asset-backed 

securities; 15 structured notes, including 

hybrid or ‘‘indexed’’ securities and 

event-linked bonds; 16 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; 

obligations of international agencies or 

supranational entities. 

According to the Exchange, the Fund 

may gain exposure to the real estate 

sector by investing in over-the-counter 

(‘‘OTC’’) real estate-linked derivatives,17

exchange-traded and OTC real estate 

investment trusts (‘‘REITs’’), and 

exchange traded common, exchangetraded and OTC preferred, and 

exchange-traded and OTC convertible 

securities of issuers in real estate-related 

industries.18

The Fund may invest in variable and 

floating rate securities that are not 

corporate Fixed Income Instruments. 

The Fund may invest in floaters and 

inverse floaters that are not corporate 

Fixed Income Instruments. 

The Fund may invest in trade 

claims,19 privately placed and 

unregistered securities, and exchangetraded and OTC-traded structured 

products,20 including credit-linked 

securities 21 and commodity-linked 

notes. The Fund also may invest in 

Brady Bonds. 

The Exchange represents that the 

Fund may enter into repurchase 

agreements on instruments other than 

corporate Fixed Income Instruments, in 

addition to repurchase agreements on 

corporate Fixed Income Instruments 

mentioned above, in which the Fund 

purchases a security from a bank or 

broker-dealer, which agrees to purchase 

the security at the Fund’s cost plus 

interest within a specified time. 

Repurchase agreements maturing in 

more than seven days and which may 

not be terminated within seven days at 

approximately the amount at which the 

Fund has valued the agreements will be 

considered illiquid securities. The Fund 

may enter into reverse repurchase 

agreements on instruments other than 

corporate Fixed Income Instruments, in 

addition to reverse repurchase 

agreements on corporate Fixed Income 

Instruments mentioned above, subject to 

the Fund’s limitations on borrowings.22

The Fund will segregate or ‘‘earmark’’ 

assets determined to be liquid by 

PIMCO in accordance with procedures 

established by the Board to cover its 

obligations under reverse repurchase 

agreements. 

The Exchange represents that the 

Fund may invest only up to 10% of its 

total assets in preferred stocks, 

convertible securities, common stocks, 

and other equity-related securities, and 

that this limitation will not include real 

estate-related investments, such as 

REITs or investments in common, 

preferred, or convertible securities of 

issuers in real estate-related 

industries.23

The Exchange represents that the 

Fund may invest up to 20% of its total 

assets in structured notes, including 

hybrid or ‘‘indexed’’ securities and 

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78536 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 

24With respect to the Fund, securities rated Ba or 

lower by Moody’s, or equivalently rated by S&P or 

Fitch, are sometimes referred to as ‘‘high yield 

securities’’ or ‘‘junk bonds,’’ while securities rated 

Baa or higher are referred to as ‘‘investment grade.’’ 

Unrated securities may be less liquid than 

comparable rated securities and involve the risk 

that the Fund’s portfolio manager may not 

accurately evaluate the security’s comparative 

credit rating. To the extent that the Fund invests in 

unrated securities, the Fund’s success in achieving 

its investment objective may depend more heavily 

on the portfolio manager’s creditworthiness 

analysis than if the Fund invested exclusively in 

rated securities. In determining whether a security 

is of comparable quality, the Adviser will consider, 

for example, whether the issuer of the security has 

issued other rated securities; whether the 

obligations under the security are guaranteed by 

another entity and the rating of such guarantor (if 

any); whether and (if applicable) how the security 

is collateralized; other forms of credit enhancement 

(if any); the security’s maturity date; liquidity 

features (if any); relevant cash flow(s); valuation 

features; other structural analysis; macroeconomic 

analysis; and sector or industry analysis. 

25Forwards are contracts to purchase or sell 

securities for a fixed price at a future date beyond 

normal settlement time (forward commitments). 

26The Exchange represents that in the future, in 

the event that there are exchange-traded options on 

swaps, the Fund may invest in these instruments. 

27According to the Exchange, the Fund will seek, 

where possible, to use counterparties whose 

financial status is such that the risk of default is 

reduced; however, the risk of losses resulting from 

default is still possible. PIMCO’s Counterparty Risk 

Committee evaluates the creditworthiness of 

counterparties on an ongoing basis. In addition to 

information provided by credit agencies, PIMCO 

credit analysts evaluate each approved counterparty 

using various methods of analysis, including 

company visits, earnings updates, the brokerdealer’s reputation, PIMCO’s past experience with 

the broker-dealer, market levels for the 

counterparty’s debt and equity, the counterparty’s 

liquidity, and its share of market participation. 

28To mitigate leveraging risk, the Adviser will 

segregate or ‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise to such 

risk. 

29The Exchange represents that the Fund will 

limit its investments in currencies to those 

currencies with a minimum average daily foreign 

exchange turnover of USD $1 billion as determined 

by the Bank for International Settlements (‘‘BIS’’) 

Triennial Central Bank Survey. As of the most 

recent BIS Triennial Central Bank Survey, at least 

52 separate currencies had minimum average daily 

foreign exchange turnover of USD $1 billion. For a 

list of eligible currencies, see www.bis.org. 

30According to the Exchange, PIMCO will 

generally consider an instrument to be 

economically tied to an emerging market country if 

the security’s ‘‘country of exposure’’ is an emerging 

market country, as determined by the criteria set 

forth in the Registration Statement. Alternatively, 

such as when a ‘‘country of exposure’’ is not 

available or when PIMCO believes the following 

tests more accurately reflect which country the 

security is economically tied to, PIMCO may 

consider an instrument to be economically tied to 

an emerging market country if the issuer or 

guarantor is a government of an emerging market 

event-linked bonds. Additionally, the 

Fund may invest up to 15% of its total 

assets in high yield securities (‘‘junk 

bonds’’) rated below BBB¥ (with a 

minimum level of B¥ at purchase) by 

Standard & Poor’s Ratings Services 

(‘‘S&P’’), or equivalently rated by 

Moody’s Investors Service, Inc. 

(‘‘Moody’s’’) or Fitch, Inc. (‘‘Fitch’’), or, 

if unrated, determined by PIMCO to be 

of comparable quality (except that 

within such limitation, the Fund may 

invest in mortgage-related securities 

rated below B¥).24

C. Investments in Derivative Instruments 

With respect to the Fund, the 

Exchange represents that derivative 

instruments will include forwards; 25

exchange-traded and OTC options 

contracts; exchange-traded futures 

contracts; exchange-traded and OTC 

swap agreements; exchange-traded 

options on futures contracts; and OTC 

options on swap agreements.26 The 

Fund may, but is not required to, use 

derivative instruments for risk 

management purposes or as part of its 

investment strategies.27

According to the Exchange, the Fund 

will typically use derivative instruments 

as a substitute for taking a position in 

the underlying asset and as part of a 

strategy designed to reduce exposure to 

other risks, such as interest rate or 

currency risk. The Fund may also use 

derivative instruments to enhance 

returns. To limit the potential risk 

associated with such transactions, the 

Fund will segregate or ‘‘earmark’’ assets 

determined to be liquid by PIMCO in 

accordance with procedures established 

by the Trust’s Board of Trustees 

(‘‘Board’’) and in accordance with the 

1940 Act (or, as permitted by applicable 

regulation, enter into certain offsetting 

positions) to cover its obligations under 

derivative instruments. In addition, the 

Exchange represents that the Fund will 

include appropriate risk disclosure in 

its offering documents, including 

leveraging risk. Leveraging risk is the 

risk that certain transactions of the 

Fund, including the Fund’s use of 

derivatives, may give rise to leverage, 

causing the Fund to be more volatile 

than if it had not been leveraged.28

According to the Exchange, the Fund 

also can use derivatives to increase or 

decrease credit exposure. Index credit 

default swaps (CDX) can be used to gain 

exposure to a basket of credit risk by 

‘‘selling protection’’ against default or 

other credit events, or to hedge broad 

market credit risk by ‘‘buying 

protection.’’ Single name credit default 

swaps (CDS) can be used to allow the 

Fund to increase or decrease exposure 

to specific issuers, saving investor 

capital through lower trading costs. The 

Fund can use total return swap 

contracts to obtain the total return of a 

reference asset or index in exchange for 

paying a financing cost. A total return 

swap may be much more efficient than 

buying underlying securities of an 

index, potentially lowering transaction 

costs. 

D. Investment Restrictions 

According to the Exchange, if PIMCO 

believes that economic or market 

conditions are unfavorable to investors 

or that market conditions are not 

normal, 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. As noted 

above, the Fund may invest without 

limit, for temporary or defensive 

purposes, in such instruments if PIMCO 

deems it appropriate to do so. 

The Exchange represents that the 

Fund may invest in, to the extent 

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

1940 Act, other affiliated and 

unaffiliated funds, such as open-end or 

closed-end management investment 

companies, including other exchangetraded funds, provided that the Fund’s 

investment in units or shares of 

investment companies and other openend collective investment vehicles will 

not exceed 10% of the Fund’s total 

assets. The Fund may invest its 

securities lending collateral in one or 

more money market funds to the extent 

permitted by Rule 12d1–1 under the 

1940 Act, including series of PIMCO 

Funds. 

The Exchange represents that the 

Fund may invest up to 20% of its total 

assets in mortgage-related and other 

asset backed securities, although this 

20% limitation will not apply to 

securities issued or guaranteed by 

Federal agencies and/or U.S. 

government sponsored 

instrumentalities. The Fund may invest 

up to 20% of its total assets in securities 

denominated in foreign currencies, and 

may invest beyond this limit in U.S. 

dollar denominated securities of foreign 

issuers. The Fund will normally limit its 

foreign currency exposure (from nonU.S. dollar-denominated securities or 

currencies) to 10% of its total assets.29

The Fund may engage in foreign 

currency transactions either on a spot 

(cash) basis at the rate prevailing in the 

currency exchange market at the time or 

through forward currency contracts. The 

Exchange represents that the Fund may 

invest up to 20% of its total assets in 

securities and instruments of issuers 

economically tied to emerging market 

countries.30

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country (or any political subdivision, agency, 

authority or instrumentality of such government), if 

the issuer or guarantor is organized under the laws 

of an emerging market country, or if the currency 

of settlement of the security is a currency of an 

emerging market country. With respect to derivative 

instruments, PIMCO will generally consider such 

instruments to be economically tied to emerging 

market countries if the underlying assets are 

currencies of emerging market countries (or baskets 

or indices of such currencies), or instruments or 

securities that are issued or guaranteed by 

governments of emerging market countries or by 

entities organized under the laws of emerging 

market countries. While emerging markets 

corporate debt securities (excluding commercial 

paper) generally must have $200 million or more 

par amount outstanding and significant par value 

traded to be considered as an eligible investment for 

the Fund, at least 80% of issues of such securities 

held by the Fund must have $200 million or more 

par amount outstanding at the time of investment. 

31According to the Exchange, in reaching 

liquidity decisions, the Adviser may consider the 

following factors: the frequency of trades and 

quotes for the security; the number of dealers 

willing to purchase or sell the security and the 

number of other potential purchasers; dealer 

undertakings to make a market in the security; and 

the nature of the security and the nature of the 

marketplace trades (e.g., the time needed to dispose 

of the security, the method of soliciting offers, and 

the mechanics of transfer). 

32 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

33 15 U.S.C. 78f(b)(5). 

34 15 U.S.C. 78k–1(a)(1)(C)(iii). 

35The Exchange states that several major market 

data vendors display or make widely available 

Portfolio Indicative Values taken from the CTA or 

other data feeds. 

36On a daily basis, the Fund will disclose the 

following information regarding each portfolio 

holding, as applicable to the type of holding: Ticker 

symbol, CUSIP number or other identifier, if any; 

a description of the holding (including the type of 

holding, such as the type of swap); the identity of 

the security, commodity, index or other asset or 

instrument underlying the holding, if any; for 

options, the option strike price; quantity held (as 

measured by, for example, par value, notional value 

or number of shares, contracts or units); maturity 

date, if any; coupon rate, if any; effective date, if 

any; market value of the holding; and the 

percentage weighting of the holding in the Fund’s 

portfolio. The Web site information will be publicly 

available at no charge. 

37The NAV per Share of the Fund will be 

determined by dividing the total value of the Fund’s 

portfolio investments and other assets, less any 

liabilities, by the total number of Shares 

outstanding. According to the Exchange, portfolio 

securities and other assets for which market quotes 

are readily available will be valued at market value. 

Market value will generally be determined on the 

basis of last reported sales prices, or if no sales are 

reported, based on quotes obtained from a quotation 

reporting system, established market makers, or 

pricing services. Fixed Income Instruments, 

including those to be purchased under firm 

commitment agreements/delayed delivery basis, 

will generally be valued on the basis of quotes 

obtained from brokers and dealers or independent 

pricing services. Domestic and foreign fixed income 

securities will generally be valued on the basis of 

quotes obtained from brokers and dealers or pricing 

services using data reflecting the earlier closing of 

the principal markets for those assets. Short-term 

debt instruments having a remaining maturity of 60 

days or less will generally be valued at amortized 

cost. Derivatives will generally be valued on the 

basis of quotes obtained from brokers and dealers 

or pricing services using data reflecting the earlier 

closing of the principal markets for those assets. 

Local closing prices will be used for all instrument 

valuation purposes. Foreign currency-denominated 

derivatives will generally be valued as of the 

respective local region’s market close. With respect 

to specific derivatives: Currency spot and forward 

rates from major market data vendors will generally 

be determined as of the NYSE Close; exchangetraded futures will generally be valued at the 

settlement price of the relevant exchange; a total 

return swap on an index will be valued at the 

publicly available index price; equity total return 

swaps will generally be valued using the actual 

underlying equity at local market closing, while 

Continued 

The Exchange represents that the 

Fund’s investments, including 

investments in derivative instruments, 

will be subject to all of the restrictions 

under the 1940 Act, including 

restrictions with respect to illiquid 

assets. The Fund may hold up to an 

aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment), including Rule 

144A securities deemed illiquid by the 

Adviser, consistent with Commission 

guidance.31 The Exchange represents 

that the Fund will monitor its respective 

portfolio liquidity on an ongoing basis 

to determine whether, in light of current 

circumstances, an adequate level of 

liquidity is being maintained, and will 

consider taking appropriate steps in 

order to maintain adequate liquidity if, 

through a change in values, net assets, 

or other circumstances, more than 15% 

of the Fund’s net assets are held in 

illiquid assets. Illiquid assets include 

securities subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance. 

The Exchange represents that the 

Fund will be diversified within the 

meaning of the 1940 Act. In addition, 

the Fund intends to qualify annually 

and elect to be treated as a regulated 

investment company under Subchapter 

M of the Internal Revenue Code. The 

Fund will not concentrate its 

investments in a particular industry, as 

that term is used in the 1940 Act, and 

as interpreted, modified, or otherwise 

permitted by a regulatory authority 

having jurisdiction from time to time. 

The Exchange further represents that 

the Fund’s investments, including 

derivatives, will be consistent with the 

Fund’s investment objective and the 

Fund’s use of derivatives may be used 

to enhance leverage. However, 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 broad-based securities 

market index (as defined in Form N– 

1A). 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the Exchange’s proposal to list 

and trade the Shares is consistent with 

the Exchange Act and the rules and 

regulations thereunder applicable to a 

national securities exchange.32 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Exchange 

Act,33 which requires, among other 

things, that the Exchange’s rules be 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

The Commission finds that the 

proposal to list and trade the Shares on 

the Exchange is consistent with Section 

11A(a)(1)(C)(iii) of the Exchange Act,34

which sets forth Congress’ finding that 

it is in the public interest and 

appropriate for the protection of 

investors and the maintenance of fair 

and orderly markets to assure the 

availability to brokers, dealers, and 

investors of information with respect to 

quotations for and transactions in 

securities. 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 

of the Fund, 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.35 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 

(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.36 In addition, 

a basket composition file, which 

includes the security names and share 

quantities (as applicable) required to be 

delivered in exchange for the Fund’s 

Shares, together with estimates and 

actual cash components, will be 

publicly disseminated daily prior to the 

opening of the Exchange via the 

National Securities Clearing 

Corporation. The NAV of the Fund’s 

Shares will normally be determined as 

of the close of the regular trading 

session on the Exchange (ordinarily 4:00 

p.m. Eastern time) on each business 

day.37 Information regarding market 

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bank loan total return swaps will generally be 

valued using the evaluated underlying bank loan 

price minus the strike price of the loan; exchangetraded non-equity options, index options, and 

options on futures will generally be valued at the 

official settlement price determined by the relevant 

exchange, if available; OTC and exchange-traded 

equity options will generally be valued on a basis 

of quotes obtained from a quotation reporting 

system, established market makers, or pricing 

services or at the settlement price of the applicable 

exchange; OTC FX options will generally be valued 

by pricing vendors; all other swaps such as interest 

rate swaps, inflation swaps, swaptions, credit 

default swaps, and CDX/CDS will generally be 

valued by pricing services. Investment company 

securities that are not exchange-traded will be 

valued at NAV. Equity securities traded OTC will 

be valued based on price quotations obtained from 

a broker-dealer who makes markets in such 

securities or other equivalent indications of value 

provided by a third-party pricing service. Money 

market instruments, trade claims, OTC REITs, 

privately placed and unregistered securities, OTC 

structured products, OTC real-estate linked 

derivatives, credit-linked securities, commoditylinked notes, Brady Bonds, variable and floating 

rate securities that are not corporate Fixed Income 

Instruments; floaters and inverse floaters that are 

not corporate Fixed Income Instruments and other 

types of debt securities will generally be valued on 

the basis of independent pricing services or quotes 

obtained from brokers and dealers. Securities and 

other assets for which market quotes are not readily 

available will be valued at fair value as determined 

in good faith by the Board or persons acting at their 

direction. The Board has adopted methods for 

valuing securities and other assets in circumstances 

where market quotes are not readily available, and 

has delegated to PIMCO the responsibility for 

applying the valuation methods. 

38These reasons may include: (1) The extent to 

which trading is not occurring in the securities and 

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. 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. 

39See supra note 5. The Exchange states that 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. 

40The Exchange states that FINRA surveils 

trading on the Exchange pursuant to a regulatory 

services agreement and that the Exchange is 

responsible for FINRA’s performance under this 

regulatory services agreement. 

price and trading volume of the Shares 

will be continually available on a realtime 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. 

Intra-day and closing price 

information regarding exchange-traded 

equity securities, including common 

stocks, preferred stocks, securities 

convertible into stocks, closed-end 

funds, exchange-traded funds, 

exchange-traded structured products 

(including ETNs), exchange-traded 

REITs, and other equity-related 

securities, will be available from the 

exchange on which such securities are 

traded. Intra-day and closing price 

information regarding exchange-traded 

options (including options on futures) 

and futures will be available from the 

exchange on which such instruments 

are traded. Intra-day and closing price 

information regarding Fixed Income 

Instruments and other forms of debt 

securities also will be available from 

major market data vendors. Pricing 

information relating to forwards, spot 

currency, OTC options and swaps will 

be available from major market data 

vendors. Pricing information regarding 

money market instruments, OTC REITs, 

private activity bonds, trade claims, 

privately placed and unregistered 

securities, OTC real estate-linked 

derivatives, OTC structured products, 

credit-linked securities, commoditylinked notes, Brady Bonds, variable and 

floating rate securities that are not 

corporate Fixed Income Instruments and 

floaters and inverse floaters that are not 

corporate Fixed Income Instruments 

will be available from major market data 

vendors. Pricing information regarding 

other investment company securities 

will be available from on-line 

information services and from the Web 

site for the applicable investment 

company security. Exchange-traded 

options quotation and last-sale 

information for options cleared via the 

Options Clearing Corporation is 

available via the Options Price 

Reporting Authority. Pricing 

information relating to equity securities 

traded OTC will be available from major 

market data vendors. 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. 

The Commission further believes that 

the proposal to list and trade the Shares 

is reasonably designed to promote fair 

disclosure of information that may be 

necessary to price the Shares 

appropriately and to prevent trading 

when a reasonable degree of 

transparency cannot be assured. The 

Exchange will obtain a representation 

from the issuer of the Shares of the 

Fund 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. Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Equities Rule 

7.12 have been reached. In addition, 

trading in the Shares of the Fund may 

be halted because of other market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable.38 Trading in the 

Shares also will be subject to NYSE 

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

sets forth additional circumstances 

under which trading in Shares of the 

Fund may be halted. 

The Exchange represents that it has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Consistent with NYSE Arca Equities 

Rule 8.600(d)(2)(B)(ii), the Fund’s 

‘‘Reporting Authority’’ must implement 

and maintain, or be subject to, 

procedures designed to prevent the use 

and dissemination of material, nonpublic information regarding the actual 

components of the Fund’s portfolio. The 

Exchange represents that the Adviser is 

not registered as a broker-dealer, but is 

affiliated with a broker-dealer, and will 

implement a ‘‘fire wall’’ with respect to 

such broker-dealer affiliate regarding 

access to information concerning the 

composition or changes to the Fund’s 

portfolio.39 Prior to the commencement 

of trading, the Exchange states that it 

will inform its Equity Trading Permit 

Holders in an Information Bulletin of 

the special characteristics and risks 

associated with trading the Shares. The 

Exchange further represents that trading 

in the Shares will be subject to the 

existing trading surveillances, 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws.40

The Exchange represents that it deems 

the Shares to be equity securities, thus 

rendering the trading of the Shares 

subject to the Exchange’s existing rules 

governing the trading of equity 

securities. In support of this proposal, 

the Exchange has made representations, 

including: 

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Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 78539 

41For 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 CSSA. 42 17 CFR 240.10A–3. 

(1) The Shares will conform to the 

initial and continued listing criteria 

under NYSE Arca Equities Rule 8.600. 

(2) The Exchange has appropriate 

rules to facilitate transactions in the 

Shares during all trading sessions. 

(3) Trading in the Shares will be 

subject to the existing trading 

surveillances, administered by FINRA 

on behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws, and 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 

federal securities laws applicable to 

trading on the Exchange. 

(4) FINRA, on behalf of the Exchange, 

will communicate as needed regarding 

trading in the exchange-traded options, 

exchange-traded equities (including 

common stocks, exchange-traded 

investment companies, exchangetraded convertibles and preferred 

securities, exchange-traded REITs, and 

exchange-traded structured products, 

including ETNs), futures, and options 

on futures with other markets or other 

entities that are members of the ISG, and 

FINRA may obtain trading information 

regarding trading in the Shares, 

exchange-traded options, exchangetraded equities, futures, and options on 

futures from such markets or entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares, exchange-traded options, 

exchange-traded equities, futures, and 

options on futures from markets or other 

entities that are members of ISG or with 

which the Exchange has in place a 

CSSA.41 The Exchange states that 

FINRA, on behalf of the Exchange, is 

able to access, as needed, trade 

information for certain fixed income 

securities held by the Fund that is 

reported to FINRA’s Trade Reporting 

and Compliance Engine, and that 

FINRA also can access data obtained 

from the Municipal Securities 

Rulemaking Board relating to municipal 

bond trading activity for surveillance 

purposes in connection with trading in 

the Shares. 

(5) Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares. Specifically, the 

Information Bulletin will discuss the 

following: (a) The procedures for 

purchases and redemptions of Shares in 

creation unit aggregations (and that 

Shares are not individually redeemable); 

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

which imposes a duty of due diligence 

on its Equity Trading Permit Holders to 

learn the essential facts relating to every 

customer prior to trading the Shares; (c) 

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; (d) how 

information regarding the Portfolio 

Indicative Value is disseminated; (e) the 

requirement that Equity Trading Permit 

Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (f) 

trading information. 

(6) For initial and continued listing, 

the Fund will be in compliance with 

Rule 10A–3 under the Exchange Act,42

as provided by NYSE Arca Equities Rule 

5.3. 

(7) 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 broad-based 

securities market index (as defined in 

Form N–1A). 

(8) The Fund may hold up to an 

aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment), including Rule 

144A Securities deemed illiquid by the 

Advisor or Sub-Advisor, in accordance 

with Commission guidance. 

(9) The Fund will seek, where 

possible, to use counterparties whose 

financial status is such that the risk of 

default is reduced. PIMCO’s 

Counterparty Risk Committee evaluates 

the creditworthiness of counterparties 

on an ongoing basis. In addition to 

information provided by credit agencies, 

PIMCO credit analysts evaluate each 

approved counterparty using various 

methods of analysis, including company 

visits, earnings updates, the brokerdealer’s reputation, PIMCO’s past 

experience with the broker-dealer, 

market levels for the counterparty’s debt 

and equity, the counterparty’s liquidity, 

and its share of market participation. 

(10) The Fund may invest only up to 

10% of its total assets in preferred 

stocks, convertible securities, common 

stocks, and other equity-related 

securities; such limit will not include 

real-estate related investments, such as 

REITs or investments in common, 

preferred, or convertible securities of 

issuers in real estate-related industries. 

(11) Not more than 10% of the net 

assets of the Fund in the aggregate 

invested in equity securities (other than 

non-exchange-traded investment 

company securities) shall consist of 

equity securities, including stocks into 

which a convertible security is 

converted, whose principal market is 

not a member of the ISG or is a market 

with which the Exchange does not have 

a CSSA. 

(12) Not more than 10% of the net 

assets of the Fund in the aggregate 

invested in futures contracts or 

exchange-traded options contracts shall 

consist of futures contracts or exchangetraded options contracts whose 

principal market is not a member of ISG 

or is a market with which the Exchange 

does not have a CSSA. 

(13) The Fund shall invest at least 

80% of its assets in corporate debt 

securities of U.S. and non-U.S. issuers 

(which may be represented by certain 

derivatives), including convertible 

securities and corporate commercial 

paper; inflation-indexed bonds; bank 

capital securities; trust preferred 

securities; and loan participations and 

assignments. 

(14) The Fund may invest up to 20% 

of its total assets in mortgage-related 

and other asset backed securities (not 

including securities issued or 

guaranteed by Federal agencies and U.S. 

government sponsored 

instrumentalities). 

(15) The Fund may invest up to 20% 

of its total assets in structured notes, 

including hybrid or ‘‘indexed’’ 

securities and event-linked bonds. 

(16) The Fund may invest up to 15% 

of its total assets in high yield securities 

rated below BBB¥ (with a minimum 

level of B¥ at purchase) by S&P, or 

equivalently rated by Moody’s or Fitch, 

or, if unrated, determined by PIMCO to 

be of comparable quality (except that 

within such limitation, the Fund may 

invest in mortgage-related securities 

rated below B¥). 

(17) The Fund may invest up to 20% 

of its total assets in securities and 

instruments of issuers economically tied 

to emerging market countries. 

(18) While non-emerging markets 

corporate debt securities (excluding 

commercial paper) generally must have 

$100 million or more par amount 

outstanding and significant par value 

traded to be considered as an eligible 

investment for the Fund, at least 80% of 

issues of such securities held by the 

Fund must have $100 million or more 

par amount outstanding at the time of 

investment. In addition, while emerging 

markets corporate debt securities 

(excluding commercial paper) generally 

must have $200 million or more par 

amount outstanding and significant par 

value traded to be considered as an 

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78540 Federal Register / Vol. 79, No. 249 / Tuesday, December 30, 2014 / Notices 

43 15 U.S.C. 78f(b)(5). 

44 15 U.S.C. 78s(b)(2). 

45 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Listing Rule 5101 and IM–5101–1. 

4While Nasdaq has always allowed a company to 

withdraw its application at any time, the proposed 

rule change will add this to the rules. 

5Listing Rule 5815(a)(1). A Company that has 

appealed a written denial may also withdraw its 

application (and appeal) while the appeal is 

pending. 

eligible investment for the Fund, at least 

80% of issues of such securities held by 

the Fund must have $200 million or 

more par amount outstanding at the 

time of investment. 

(19) To mitigate leveraging risk as 

result of certain transactions of the 

Fund, including transactions in 

derivative instruments, the Adviser will 

segregate or ‘‘earmark’’ liquid assets or 

otherwise cover the transactions that 

may give rise to such risk. 

(20) A minimum of 100,000 Shares 

will be outstanding at the 

commencement of trading on the 

Exchange. 

This approval order is based on all of 

the Exchange’s representations, 

including those set forth above and in 

the Notice, and the Exchange’s 

description of the Fund. The 

Commission notes that the Fund and the 

Shares must comply with the 

requirements of NYSE Arca Equities 

Rule 8.600 to be listed and traded on the 

Exchange. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act 43 and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,44

that the proposed rule change (SR– 

NYSEArca–2014–85) be, and it hereby 

is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.45

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–30444 Filed 12–29–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73912; File No. SR–

NASDAQ–2014–102] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change to 

Require That a Company Publicly 

Disclose the Denial of a Listing 

Application 

December 22, 2014. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

11, 2014, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III, 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 require that 

companies publicly disclose the denial 

of a listing application. 

The text of the proposed rule change 

is below; proposed new language is in 

italics. There are no proposed deletions. 

* * * * * 

5205. The Applications and 

Qualifications Process 

(a)—(h) No change. 

(i) (1) A Company may withdraw its 

application for initial listing at any 

time. 

(2) A Company that receives a written 

determination denying its application 

for listing must, within four business 

days, make a public announcement in a 

press release or other Regulation FD 

compliant manner about the receipt of 

the determination and the Rule(s) upon 

which the determination is based, 

describing each specific basis and 

concern identified by Nasdaq in 

reaching its determination. If the public 

announcement is not made by the 

Company within the time allotted or 

does not include all of the required 

information, Nasdaq will make a public 

announcement with the required 

information and, if the Company 

appeals the determination as set forth in 

Rule 5815, the Hearings Panel will 

consider the Company’s failure to make 

the public announcement in considering 

whether to list the Company. 

* * * * * 

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 and discussed 

any comments it received on the 

proposed rule change. The text of these 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq processes between 200 and 

300 applications each year from 

companies seeking to list securities on 

Nasdaq. While most applicants meet the 

listing requirements, or are prepared to 

take action to meet those requirements 

before listing, in some cases a company 

does not meet the requirements and is 

not willing, or able, to comply. In other, 

rare instances, Nasdaq may determine to 

deny an application based on public 

interest concerns even though the 

company meets all initial listing 

requirements.3 In either of these cases, 

the company is informed of the outcome 

and can withdraw its application before 

the application is formally denied.4 If 

the company does not withdraw the 

application, the Nasdaq Listing 

Qualifications Department will issue a 

written denial, which the company can 

appeal to a Listing Qualifications 

Hearings Panel.5

The procedures for such an appeal are 

similar to an appeal from a delisting 

determination. However, while the rules 

provide transparency to a delisting 

event by requiring the company to 

disclose a delisting determination, there 

is no comparable requirement for 

disclosure of an initial listing denial. 

Just as a delisting determination may 

be considered a material event to the 

investing public, Nasdaq believes that a 

denial of initial listing is equally so, 

particularly in the context of a company 

that previously publicly announced its 

intention to seek a listing, which is 

often the case. Investors view such an 

announcement to list as a positive 

development and such announcements 

often attract investor interest. Nasdaq 

believes that the public is therefore 

equally interested in the outcome of 

such an application and proposes to 

adopt a rule that would require a listing 

applicant that has been denied listing to 

publicly disclose the receipt of the 

determination and the circumstances on 

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