Document ID: SEC-2009-1629-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change
Posted Date: 2009-11-18T05:00Z

[Federal Register: November 18, 2009 (Volume 74, Number 221)]
[Notices]               
[Page 59594-59596]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no09-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60981; File No. SR-NYSEArca-2009-79]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating 
to Listing of Five Fixed Income Funds of the PIMCO ETF Trust

November 10, 2009.
    On August 27, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the following funds of the PIMCO ETF Trust (``Trust'') 
under NYSE Arca Equities Rule 8.600 (Managed Fund Shares): PIMCO 
Enhanced Short Maturity Strategy Fund; PIMCO Government Limited 
Maturity Strategy Fund; PIMCO Intermediate Municipal Bond Strategy 
Fund; PIMCO Prime Limited Maturity Strategy Fund; and PIMCO Short Term 
Municipal Bond Strategy Fund (each a ``Fund'' and, collectively, the 
``Funds''). The proposed rule change was published in the Federal 
Register on September 11, 2009.\3\ The Commission received no comments 
on the proposal. On November 10, 2009, the Exchange filed Amendment No. 
1 to the proposed rule change.\4\ This order provides notice of the 
filing of Amendment No. 1, and approves the proposed rule change, as 
modified by Amendment No. 1 thereto, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60619 (September 3, 
2009), 74 FR 46820 (``Notice'').
    \4\ Amendment No. 1 reflects the following changes to the 
proposed rule change: (a) On November 3, 2009, the Trust filed a 
Registration Statement on Form N-1A with the Commission (File Nos. 
333-155395 and 811-22250); (b) with respect to the PIMCO Enhanced 
Short Maturity Strategy Fund, such Fund will be restricted from 
investing in derivative instruments such as options contracts, 
futures contracts, options on futures contracts, and swap agreements 
(including, but not limited to, credit default swaps and swaps on 
exchange-traded funds); and (c) the respective creation unit sizes 
for the following Funds will be changed:
    (i) PIMCO Enhanced Short Maturity Strategy Fund creation unit 
size will be reduced to 70,000 shares from 100,000 shares;
    (ii) PIMCO Government Limited Maturity Strategy Fund creation 
unit size will be reduced to 90,000 shares from 100,000 shares; and
    (iii) PIMCO Prime Limited Maturity Strategy Fund creation unit 
size will be reduced to 90,000 shares from 100,000 shares.
    The creation unit sizes for each of the PIMCO Intermediate 
Municipal Bond Strategy Fund and the PIMCO Short Term Municipal Bond 
Strategy Fund will not change and will be 100,000 shares, 
respectively.
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I. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.600, which governs the listing of Managed Fund 
Shares. Each of the Funds will be an actively managed exchange-traded 
fund. The Shares will be offered by the Trust.\5\ Pacific Investment 
Management Company LLC (``PIMCO'' or ``Adviser'') is the investment 
adviser to each Fund.\6\ State Street Bank & Trust Co. is the custodian 
and transfer agent for the Funds. The Trust's Distributor is Allianz 
Global Investors Distributors LLC (``Distributor''), an indirect 
subsidiary of Allianz Global Investors of America L.P., PIMCO's parent 
company. The Distributor is a registered broker-dealer.\7\
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    \5\ The Trust is a Delaware statutory trust that is registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a) (``1940 
Act''). See Registration Statement on Form N-1A for the Trust filed 
with the Commission on November 3, 2009 (File Nos. 333-155395 and 
811-22250) (``Registration Statement'').
    \6\ The Exchange represents that the Adviser, as the investment 
adviser of the Funds, and its related personnel, are subject to 
Investment Advisers Act Rule 204A-1. This Rule specifically requires 
the adoption of a code of ethics by an investment adviser to 
include, at a minimum: (i) Standards of business conduct that 
reflect the firm's/personnel fiduciary obligations; (ii) provisions 
requiring supervised persons to comply with applicable federal 
securities laws; (iii) provisions that require all access persons to 
report, and the firm to review, their personal securities 
transactions and holdings periodically as specifically set forth in 
Rule 204A-1; (iv) provisions requiring supervised persons to report 
any violations of the code of ethics promptly to the chief 
compliance officer (``CCO'') or, provided the CCO also receives 
reports of all violations, to other persons designated in the code 
of ethics; and (v) provisions requiring the investment adviser to 
provide each of the supervised persons with a copy of the code of 
ethics with an acknowledgement by said supervised persons. 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.
    \7\ The Funds have made application for an order granting 
certain exemptive relief to the Trust under the 1940 Act. In 
compliance with Commentary .05 to NYSE Arca Equities Rule 8.600, 
which applies to Managed Fund Shares based on an international or 
global portfolio, the Trust's application for exemptive relief under 
the 1940 Act states that the Funds will comply with the federal 
securities laws in accepting securities for deposits and satisfying 
redemptions with redemption securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (15 U.S.C. 77a).
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    The Exchange states that the Shares will be subject to the initial 
and continued listing criteria under NYSE Arca Equities Rule 8.600 
applicable to Managed Fund Shares \8\ and that the Shares will comply 
with Rule 10A-3

[[Page 59595]]

under the Act,\9\ as provided by NYSE Arca Equities Rule 5.3. 
Additional information regarding the Trust, each of the Funds, the 
Shares, the Funds' investment objectives, strategies, policies, and 
restrictions, risks, fees and expenses, creation and redemption 
procedures, portfolio holdings and policies, distributions and taxes, 
availability of information, trading rules and halts, and surveillance 
procedures, among other things, can be found in the Registration 
Statement and in the Notice, as applicable.\10\
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    \8\ The Exchange states that a minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange, and the 
Exchange will obtain a representation from the issuer of the Shares 
that the net asset value (``NAV'') per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time. See Notice, 
supra note 3.
    \9\ 17 CFR 240.10A-3.
    \10\ See supra notes 3 and 5.
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II. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 to the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2009-79 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2009-79. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2009-79 and should 
be submitted on or before December 9, 2009.

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \11\ and the rules and regulations thereunder applicable to a 
national securities exchange.\12\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\13\ 
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 notes that the Shares must comply with 
the requirements of NYSE Arca Equities Rule 8.600 to be listed and 
traded on the Exchange.
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    \11\ 15 U.S.C. 78f.
    \12\ 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).
    \13\ 17 U.S.C. 78f(b)(5).
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    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 
Act,\14\ 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, and the Exchange will 
disseminate the Portfolio Indicative Value (``PIV'') at least every 15 
seconds during the Core Trading Session through the facilities of the 
CTA. In addition, the Funds will make available on a Web site on each 
business day the Disclosed Portfolio that will form the basis for the 
calculation of the NAV, which will be determined as of the close of the 
regular trading session on the New York Stock Exchange (ordinarily 4 
p.m. Eastern Time) on each business day. The Funds' Web site will also 
include additional quantitative information updated on a daily basis 
relating to trading volume, prices, and NAV. Information regarding the 
market price and volume of the Shares will be continually available on 
a real-time basis throughout the day via electronic services, and the 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial sections of newspapers.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission further believes that the proposal 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 Commission 
notes that the Exchange will obtain a representation from the issuer 
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.\15\ Additionally, if it becomes aware 
that the NAV or the Disclosed Portfolio is not disseminated daily to 
all market participants at the same time, the Exchange will halt 
trading in the Shares until such information is available to all market 
participants.\16\ Further, if the PIV is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
disruption occurs; if the interruption persists past the day in which 
it occurred, the Exchange will halt trading no later than the beginning 
of the trading day following the interruption.\17\ The Exchange 
represents that the Adviser is affiliated with a broker-dealer, Allianz 
Global Investors Distributors LLC, and has implemented a ``fire wall'' 
between it and its broker-dealer affiliate with respect to access to 
information concerning the composition and/or changes to each of the 
Funds' portfolios. Further, the Commission notes that the Reporting 
Authority that provides the Disclosed Portfolio must implement and 
maintain, or be subject to, procedures designed to prevent the use and 
dissemination of material non-

[[Page 59596]]

public information regarding the actual components of each of the 
portfolios.\18\
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    \15\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \16\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \17\ Id. Trading in the Shares may also be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities 
comprising the Disclosed Portfolio and/or the financial instruments 
of the Funds; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.
    \18\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Exchange has represented that the Shares are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities. In support of this proposal, the Exchange has made 
representations, including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.
    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares and that Shares 
are not individually redeemable; (b) NYSE Arca Equities Rule 9.2(a), 
which imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(c) the risks involved in trading the Shares during the Opening and 
Late Trading Sessions when an updated PIV will not be calculated or 
publicly disseminated; (d) how information regarding the PIV is 
disseminated; (e) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (f) trading information.
    (4) The Funds will be in compliance with Rule 10A-3 under the Act.
    (5) The Funds will not invest in non-U.S. equity securities.

This approval order is based on the Exchange's representations.

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

IV. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\19\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that it has approved the listing and trading on 
the Exchange of shares of other actively managed exchange-traded funds 
based on a portfolio of securities, the characteristics of which are 
similar to those to be invested by the Funds.\20\ The Commission also 
notes that it has received no comments regarding the proposed rule 
change. Further, the Commission believes that the additional investment 
restrictions with respect to the PIMCO Enhanced Short Maturity Strategy 
Fund and the decreased creation and redemption unit sizes for certain 
of the Funds, as described in Amendment No. 1 to the proposed rule 
change,\21\ do not raise any novel regulatory concerns. The Commission 
believes that accelerating approval of this proposal should benefit 
investors by creating, without undue delay, additional competition in 
the market for Managed Fund Shares.
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    \19\ 15 U.S.C. 78s(b)(2).
    \20\ See, e.g., Securities Exchange Act Release Nos. 57514 
(March 17, 2008), 73 FR 15230 (March 21, 2008) (SR-Amex-2008-02) 
(approving the listing and trading of shares of the Bear Stearns 
Current Yield Fund); 57626 (April 4, 2008), 73 FR 19923 (April 11, 
2008) (SR-NYSEArca-2008-28) (approving the trading of shares of the 
Bear Stearns Current Yield Fund on the Exchange pursuant to UTP); 
and 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (approving the listing and trading of shares of twelve 
actively-managed funds of the WisdomTree Trust).
    \21\ See supra note 4.
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V. Conclusion

    It is therfore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NYSEArca-2009-79), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved on 
an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27607 Filed 11-17-09; 8:45 am]

BILLING CODE 8011-01-P