Document ID: SEC-2011-0001-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-01-03T05:00Z

[Federal Register Volume 76, Number 1 (Monday, January 3, 2011)]
[Notices]
[Pages 194-199]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32943]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63609; File No. SR-NYSEArca-2010-116]

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

December 27, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on December 13, 2010, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the WisdomTree Trust (``Trust'') under NYSE Arca Equities Rule 
8.600 (``Managed Fund Shares''): WisdomTree Asia Bond Fund (``Fund''). 
The shares of the Fund are collectively referred to herein as the 
``Shares.'' \3\ The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
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    \3\ See Form 19b-4 Information of the proposed rule change at 3.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the 
WisdomTree Asia Bond Fund under NYSE Arca Equities Rule 8.600, which 
governs the listing and trading of Managed Fund Shares on the 
Exchange.\4\ The Fund will

[[Page 195]]

be an actively managed exchange-traded fund. The Shares will be offered 
by the Trust, which was established as a Delaware statutory trust on 
December 15, 2005. The Trust is registered with the Commission as an 
investment company and the Fund has filed a registration statement on 
Form N-1A (``Registration Statement'') with the Commission.\5\
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    \4\ The Commission approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain funds of the PowerShares Actively 
Managed Funds Trust on the Exchange pursuant to Rule 8.600 in 
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 
19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission also 
previously approved listing and trading on the Exchange of a number 
of actively managed funds under Rule 8.600. See, e.g., Securities 
Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 
2008) (SR-NYSEArca-2008-31) (order approving Exchange listing and 
trading of twelve actively-managed funds of the WisdomTree Trust); 
58564 (September 17, 2008), 73 FR 55194 (September 24, 2008) (SR-
NYSEArca-2008-86) (order approving Exchange listing and trading of 
WisdomTree Dreyfus Emerging Markets Fund); 62604 (July 30, 2010), 75 
FR 47323 (August 5, 2010) (SR-NYSEArca-2010-49) (order approving 
listing and trading of WisdomTree Emerging Markets Local Debt Fund); 
62623 (August 2, 2010), 75 FR 47652 (August 6, 2010) (SR-NYSEArca-
2010-51) (order approving listing and trading of WisdomTree Dreyfus 
Commodity Currency Fund).
    \5\ See Post-Effective Amendment No. 41 to Registration 
Statement on Form N-1A for the Trust, dated October 19, 2010 (File 
Nos. 333-132380 and 811-21864). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
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Description of the Shares and the Fund
    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser (``Adviser'') to the Fund.\6\ WisdomTree 
Asset Management is not affiliated with any broker-dealer. Mellon 
Capital Management serves as sub-adviser for the Fund (``Sub-
Adviser'').\7\ The Bank of New York Mellon is the administrator, 
custodian and transfer agent for the Trust. ALPS Distributors, Inc. 
serves as the distributor for the Trust.\8\
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    \6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \7\ The Sub-Adviser is responsible for day-to-day management of 
the Fund and, as such, typically makes all decisions with respect to 
portfolio holdings. The Adviser has ongoing oversight 
responsibility.
    \8\ The Commission has issued an order granting certain 
exemptive relief to the Trust under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company Act 
Release No. 28171 (October 27, 2008) (File No. 812-13458). In 
compliance with Commentary .05 to NYSE Arca Equities Rule 8.600, 
which applies to Managed Fund Shares based on an international or 
global portfolio, the Trust's application for exemptive relief under 
the 1940 Act states that the Fund will comply with the Federal 
securities laws in accepting securities for deposits and satisfying 
redemptions with redemption securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (15 U.S.C. 77a).
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the Investment Company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such Investment Company portfolio.\9\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. Commentary .06 to 
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. The 
Sub-Adviser is affiliated with multiple broker-dealers and has 
implemented a ``fire wall'' with respect to such broker-dealers 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio.\10\ In addition, Sub-Adviser personnel 
who make decisions regarding the Fund's portfolio are subject to 
procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the Fund's portfolio. In the event (a) 
the Adviser or the Sub-Adviser becomes newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser becomes affiliated with a 
broker-dealer, they will be required to implement a fire wall with 
respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to the portfolio.
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    \9\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser 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.
    \10\ The Exchange represents that the Adviser and Sub-Adviser, 
and their 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.
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WisdomTree Asia Bond Fund
    According to the Registration Statement, the Fund seeks to provide 
investors with a high level of total return consisting of both income 
and capital appreciation. The Fund is an actively managed exchange-
traded fund (``ETF''). The Fund is designed to provide exposure to a 
broad range of Asian government and corporate bonds through investment 
in both local currency (e.g., Hong Kong dollar; South Korean won) and 
U.S. dollar-denominated Fixed Income Securities. For purposes of this 
proposed rule change, Fixed Income Securities include bonds, notes or 
other debt obligations, such as government or corporate bonds, 
denominated in local currencies or U.S. dollars, as well as issues 
denominated in Asian local currencies that are issued by 
``supranational issuers,'' such as the European Investment Bank, 
International Bank for Reconstruction and Development, and the 
International Finance Corporation, as well as development agencies 
supported by other national governments. The Fund may also invest in 
Money Market Securities and derivative instruments, as described below.
    The Fund seeks to achieve its investment objective through direct 
and indirect investments in Fixed Income Securities issued by 
governments and corporations in Asian countries. The Fund intends to 
focus on the developing/emerging market economies in Asia, primarily 
China, Hong Kong, India, Indonesia, South Korea, Malaysia, the 
Philippines, Singapore, Taiwan and Thailand. While the Fund is 
permitted to invest in developed market economies, this is not a focus 
of the Fund. Therefore, although the Fund is permitted to do so, the 
Fund is unlikely to invest in issuers in Japan, Australia, or New 
Zealand.
    The Fund is designed to provide broad exposure to Asian government 
and corporate bonds and will invest in a range of instruments with 
varying credit risk and duration. The Fund

[[Page 196]]

intends to invest in both bonds and debt instruments issued by the 
governments of Asia and their agencies and instrumentalities and as 
well in bonds and other debt instruments issued by corporations 
organized in Asian countries. The Fund also may invest in Fixed Income 
Securities denominated in Asian local currencies that are issued by 
supranational issuers, as described above. The Fund also may invest in 
inflation-linked Fixed Income Securities denominated in Asian local 
currencies.
    The Fund intends to invest at least 70% of its net assets in Fixed 
Income Securities.\11\ The Fund expects to invest up to 20% of its net 
assets in Asian corporate bonds. The Fund will invest only in corporate 
bonds that the Adviser or Sub-Adviser deems to be sufficiently liquid. 
Generally, a corporate bond must have $200 million or more par amount 
outstanding and significant par value traded to be considered as an 
eligible investment.\12\ Economic and other conditions in Asia may, 
from time to time, lead to a decrease in the average par amount 
outstanding of bond issuances. Therefore, although the Fund does not 
intend to do so, the Fund may invest up to 5% of its net assets in 
corporate bonds with less than $200 million par amount outstanding if 
(i) the Adviser or Sub-Adviser deems such security to be sufficiently 
liquid based on its analysis of the market for such security (based on, 
for example, broker-dealer quotations or its analysis of the trading 
history of the security or the trading history of other securities 
issued by the issuer), (ii) such investment is consistent with the 
Fund's goal of providing exposure to a broad range of Asian government 
and corporate bonds, and (iii) such investment is deemed by the Adviser 
or Sub-Adviser to be in the best interest of the Fund.
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    \11\ The category of ``Asian debt'' includes both U.S. dollar-
denominated debt and non-U.S. or ``local'' currency debt. According 
to the Emerging Markets Traders Association, the global dollar 
amount of emerging market debt instruments traded in 2009 was $4.445 
trillion, of which Asian emerging market (i.e., excluding Japan) 
debt represented $1.609 trillion. Asian sovereign debt issued by 
major emerging market countries in 2009 included: (1) China, $175 
billion; (2) Hong Kong, $590 billion; (3) India, $164 billion; (4) 
Indonesia, $63 billion; (5) Malaysia, $119 billion; (6) Philippines, 
$61 billion; (7) Singapore, $166 billion; (8) South Korea, $172 
billion; (9) Taiwan, $27 billion; and (10) Thailand, $43 billion. 
Local market instruments traded among major Asian emerging markets 
in 2009 included: (1) Hong Kong, $557 billion; (2) India, $148 
billion; (3) China, $147 billion; (4) Singapore, $146 billion; and 
(5) South Korea, $93 billion. (Source: Emerging Markets Traders 
Association, 2009 Annual Debt Trading Volume Survey, March 8, 2010. 
Additional information relating to emerging market corporate bonds 
is available at: http://www.emta.org.) Local currency bond issuance 
in emerging East Asian markets (comprising China, Hong Kong, Taiwan, 
Indonesia, South Korea, Malaysia, Philippines, Singapore, Thailand 
and Viet Nam) grew by 18.8% through June 2010. (Source: Asian 
Development Bank, Asia's Local Bond Markets Expand 18.8%, Foreign 
Investment Soars (October 4, 2010), http://www.adb.org.)
    The Adviser represents that Asian sovereign debt is typically 
issued in large par size and tends to be very liquid. Local 
currency-denominated Asian debt issued by supranational entities is 
also actively traded. Intra-day, executable price quotations on such 
instruments are available from major broker-dealer firms. Intra-day 
price information is available through subscription services, such 
as Bloomberg and Thomson Reuters, which can be accessed by 
Authorized Participants and other investors.
    \12\ The Adviser represents that the size and liquidity of the 
market for emerging market bonds, including Asian corporate bonds, 
generally has been increasing in recent years. The aggregate dollar 
amount of emerging market corporate bonds traded in 2009 was $514 
billion, representing a 32% increase over the $380 billion traded in 
2008. Turnover in emerging market corporate debt accounted for 12% 
of the overall volume of emerging market debt of $4.445 trillion in 
2009, an increase over the 9% share in 2008. (Source: Emerging 
Markets Traders Association Press Release, March 8, 2010.) 
Additional information relating to emerging market corporate bonds 
is available at: http://www.emta.org. Annual growth in the emerging 
East Asian corporate bond markets (comprising China, Hong Kong, 
Taiwan, Indonesia, South Korea, Malaysia, Philippines, Singapore, 
Thailand and Viet Nam) increased by 24.4% through June 2010. China's 
local currency corporate bond market grew by 52.7% over that period. 
(Source: Asian Development Bank, Asia's Local Bond Markets Expand 
18.8%, Foreign Investment Soars (October 4, 2010), http://www.adb.org.) Corporate bonds outstanding in representative emerging 
East Asian markets as of June 2010, included: (1) China, $546 
billion; (2) Hong Kong, $73 billion; (3) Indonesia, $10 billion; (4) 
South Korea, $571 billion; (5) Malaysia, $91 billion; (6) 
Philippines, $8 billion; (7) Singapore, $70 billion; (8) Thailand, 
$38 billion; and (9) Viet Nam, $2 billion (Source: Asian Development 
Bank, Asia Bond Monitor (October 2010), http://www.adb.org.)
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    According to the Registration Statement, the Fund typically will 
maintain aggregate portfolio duration of between 2 and 8 years. 
Aggregate portfolio duration is a measure of the portfolio's 
sensitivity to changes in the level of interest rates. The Fund's 
actual portfolio duration may be longer or shorter depending upon 
market conditions.
    The universe of Asian Fixed Income Securities includes securities 
that are rated ``investment grade'' as well as ``non-investment grade'' 
securities. The Fund is designed to provide a broad-based, 
representative exposure to Asian government and corporate bonds and 
therefore will invest in both investment grade and non-investment grade 
securities in a manner designed to provide this exposure. The Fund 
expects that it will have 75% or more of its assets invested in 
investment grade securities, and no more than 25% of its assets 
invested in non-investment grade securities. Because the Fund is 
designed to provide exposure to a broad range of Asian government and 
corporate bonds, and because the debt ratings of the Asian governments 
and those corporate issuers will change from time to time, the exact 
percentage of the Fund's investments in investment grade and non-
investment grade securities will change from time to time in response 
to economic events and changes to the credit ratings of the Asian 
government and corporate issuers.\13\ Within the non-investment grade 
category, some issuers and instruments are considered to be of lower 
credit quality and at higher risk of default. In order to limit its 
exposure to these more speculative credits, the Fund will not invest 
more than 15% of its assets in securities rated B or below by Moody's, 
or equivalently rated by S&P or Fitch. The Fund does not intend to 
invest in unrated securities. However, it may do so to a limited 
extent, such as where a rated security becomes unrated, if such 
security is, determined by the Adviser and Sub-Adviser to be of 
comparable quality. In determining whether a security is of 
``comparable quality,'' the Adviser and Sub-Adviser will consider, for 
example, whether the issuer of the security has issued other rated 
securities.
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    \13\ As of October 19, 2010, government debt of China, Hong 
Kong, India, Malaysia, Singapore, South Korea, Taiwan and Thailand 
was rated investment grade by S&P and Fitch. The sovereign debt of 
Indonesia and the Philippines was rated just below investment grade. 
See http://www.standardandpoors.com; http://www.fitchratings.com.
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    The Fund will hold Fixed Income Securities of at least 13 non-
affiliated issuers. The Fund will not concentrate 25% or more of the 
value of its total assets (taken at market value at the time of each 
investment) in any one industry, as that term is used in the 1940 Act 
(except that this restriction does not apply to obligations issued by 
the U.S. government, or any non-U.S. government, or their respective 
agencies and instrumentalities or government-sponsored enterprises).
    The Fund intends to qualify each year as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended. The Fund will invest its assets, and otherwise 
conduct its operations, in a manner that is intended to satisfy the 
qualifying income, diversification and distribution requirements 
necessary to establish and maintain RIC qualification under Subchapter 
M. The Subchapter M diversification tests generally require that (i) 
the Fund invest no more than 25% of its total assets in securities 
(other than securities of the U.S. government or other RICs) of any one 
issuer or two or more issuers that are

[[Page 197]]

controlled by the Fund and that are engaged in the same, similar or 
related trades or businesses, and (ii) at least 50% of the Fund's total 
assets consist of cash and cash items, U.S. government securities, 
securities of other RICs and other securities, with investments in such 
other securities limited in respect of any one issuer to an amount not 
greater than 5% of the value of the Fund's total assets and 10% of the 
outstanding voting securities of such issuer.
    In addition to satisfying the above referenced RIC diversification 
requirements, no portfolio security held by the Fund (other than U.S. 
government securities and non-U.S. government securities) will 
represent more than 30% of the weight of the portfolio and the five 
highest weighted portfolio securities of the Fund (other than U.S. 
government securities and/or non-U.S. government securities) will not 
in the aggregate account for more than 65% of the weight of the 
portfolio. For these purposes, the Fund may treat repurchase agreements 
collateralized by U.S. government securities or non-U.S. government 
securities as U.S. or non-U.S. government securities, as applicable.
Money Market Securities
    The Fund intends to invest in Money Market Securities in order to 
help manage cash flows in and out of the Fund, such as in connection 
with payment of dividends or expenses, and to satisfy margin 
requirements, to provide collateral or to otherwise back investments in 
derivative instruments. For these purposes, Money Market Securities 
include: short-term, high-quality obligations issued or guaranteed by 
the U.S. Treasury or the agencies or instrumentalities of the U.S. 
government; short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies and instrumentalities; repurchase 
agreements backed by U.S. government securities; money market mutual 
funds; and deposits and other obligations of U.S. and non-U.S. banks 
and financial institutions. All Money Market Securities acquired by the 
Fund will be rated investment grade; except that the Fund may invest in 
unrated Money Market Securities that are deemed by the Adviser or Sub-
Adviser to be of comparable quality to money market securities rated 
investment grade.
Derivative Instruments
    The Fund may use derivative instruments as part of its investment 
strategies. Examples of derivative instruments include listed futures 
contracts,\14\ forward currency contracts, non-deliverable forward 
currency contracts, currency and interest rate swaps, currency options, 
options on futures contracts, swap agreements and credit-linked 
notes.\15\ The Fund's use of derivative instruments (other than credit-
linked notes) will be collateralized or otherwise backed by investments 
in short term, high-quality U.S. money market securities. The Fund 
expects that no more than 30% of the value of the Fund's net assets 
will be invested in derivative instruments. Such investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage.
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    \14\ The listed futures contracts in which the Fund will invest 
may be listed on exchanges either in the U.S. or in either Hong Kong 
or Singapore. Both Hong Kong's primary financial markets regulator, 
the Securities and Futures Commission, and Singapore's primary 
financial markets regulator, the Monetary Authority of Singapore, 
are signatories to the International Organization of Securities 
Commissions (``IOSCO'') Multilateral Memorandum of Understanding 
(``MMOU''), which is a multi-party information sharing arrangement 
among major financial regulators. Both the SEC and the Commodity 
Futures Trading Commission are signatories to the IOSCO MMOU.
    \15\ The Fund may invest in credit-linked notes. A credit linked 
note is a type of structured note whose value is linked to an 
underlying reference asset. Credit linked notes typically provide 
periodic payments of interest as well as payment of principal upon 
maturity. The value of the periodic payments and the principal 
amount payable upon maturity are tied (positively or negatively) to 
a reference asset such as an index, government bond, interest rate 
or currency exchange rate. The ongoing payments and principal upon 
maturity typically will increase or decrease depending on increases 
or decreases in the value of the reference asset. The Fund's 
investments in credit-linked notes will be limited to notes 
providing exposure to Asian Fixed Income Securities. The Fund's 
overall investment in credit-linked notes will not exceed 25% of the 
Fund's assets.
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    With respect to certain kinds of derivative transactions entered 
into by the Fund that involve obligations to make future payments to 
third parties, including, but not limited to, futures, forward 
contracts, swap contracts, the purchase of securities on a when-issued 
or delayed delivery basis, or reverse repurchase agreements, under 
applicable Federal securities laws, rules, and interpretations thereof, 
the Fund must ``set aside'' liquid assets, or engage in other measures 
to ``cover'' open positions with respect to such transactions.
    The Fund may engage in foreign currency transactions, and may 
invest directly in foreign currencies in the form of bank and financial 
institution deposits, certificates of deposit, and bankers acceptances 
denominated in a specified non-U.S. currency. The Fund may enter into 
forward currency contracts in order to ``lock in'' the exchange rate 
between the currency it will deliver and the currency it will receive 
for the duration of the contract.
    The Fund may enter into swap agreements, including interest rate 
swaps and currency swaps (e.g., Hong Kong dollar vs. U.S. dollar), and 
may buy or sell put and call options on foreign currencies, either on 
exchanges or in the over-the-counter market. The Fund may enter into 
repurchase agreements with counterparties that are deemed to present 
acceptable credit risks, and may enter into reverse repurchase 
agreements, which involve the sale of securities held by the Fund 
subject to its agreement to repurchase the securities at an agreed upon 
date or upon demand and at a price reflecting a market rate of 
interest.
    The Fund may invest in the securities of other investment companies 
(including money market funds and ETFs). The Fund may invest up to an 
aggregate amount of 10% of its net assets in illiquid securities. 
Illiquid securities include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets.
    The Fund will not invest in non-U.S. equity securities.
The Shares
    The Fund issues and redeems Shares on a continuous basis at NAV 
\16\ only in large blocks of shares (``Creation Units'') in 
transactions with authorized participants. Creation Units consist of 
100,000 Shares.\17\ The Fund issues and redeems Creation Units in 
exchange for a portfolio of Fixed Income Securities closely 
approximating the holdings of the Fund and/or an amount of cash in U.S. 
dollars. Once created, Shares of the Fund trade on the secondary market 
in amounts less than a Creation Unit.
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    \16\ The NAV of the Fund's Shares generally is calculated once 
daily Monday through Friday as of the close of regular trading on 
the New York Stock Exchange, generally 4 p.m. Eastern time (``NAV 
Calculation Time''). NAV per Share is calculated by dividing the 
Fund's net assets by the number of Fund Shares outstanding. For more 
information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
    \17\ See E-mail from Timothy Malinowski, Senior Director, NYSE 
Euronext, to Daniel Gien, Staff Attorney, Division of Trading and 
Markets, Commission, dated December 15, 2010.
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    Additional information regarding the Shares and the Fund, including 
investment strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, distributions and taxes is 
included in the Registration Statement.
Availability of Information
    The Fund's Web site (http://www.wisdomtree.com), which will be

[[Page 198]]

publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund: (1) The prior business day's 
reported NAV, mid-point of the bid/ask spread at the time of 
calculation of such NAV (``Bid/Ask Price''),\18\ and a calculation of 
the premium and discount of the Bid/Ask Price against the NAV; and (2) 
data in chart format displaying the frequency distribution of discounts 
and premiums of the daily Bid/Ask Price against the NAV, within 
appropriate ranges, for each of the four previous calendar quarters. On 
each business day, before commencement of trading in Shares in the Core 
Trading Session \19\ on the Exchange, the Trust will disclose on its 
Web site the identities and quantities of the portfolio of securities 
and other assets (``Disclosed Portfolio'') held by the Fund that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\20\ The Disclosed Portfolio will include, as applicable, 
the names, quantity, percentage weighting and market value of Fixed 
Income Securities, and other assets held by the Fund and the 
characteristics of such assets. The Web site and information will be 
publicly available at no charge.
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    \18\ The Bid/Ask Price of the Fund is determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of such Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \19\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \20\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
NAV on such business day. Accordingly, the Fund will be able to 
disclose at the beginning of the business day the portfolio that 
will form the basis for the NAV calculation at the end of the 
business day.
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    In addition, for the Fund, an estimated value, defined in Rule 
8.600 as the ``Portfolio Indicative Value,'' that reflects an estimated 
intraday value of the Fund's portfolio, will be disseminated. The 
Portfolio Indicative Value will be based upon the current value for the 
components of the Disclosed Portfolio and will be updated and 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session on the Exchange. In addition, 
during hours when the markets for Fixed Income Securities in the Fund's 
portfolio are closed, the Portfolio Indicative Value will be updated at 
least every 15 seconds during the Core Trading Session to reflect 
currency exchange fluctuations.
    The dissemination of the Portfolio Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and to provide a 
close estimate of that value throughout the trading day.
    Information regarding market price and volume of the Shares is and 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information will be 
published daily in the financial section of newspapers. Quotation and 
last-sale information for the Shares will be available via the 
Consolidated Tape Association high-speed line.
    Intra-day and end-of-day prices are readily available through major 
market data providers and broker-dealers for the Fixed Income 
Securities, Money Market Securities and derivative instruments held by 
the Fund.
Initial and Continued Listing
    The Shares will be subject to Rule 8.600, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Shares must be in compliance with Rule 10A-3 under the 
Exchange Act,\21\ as provided by NYSE Arca Equities Rule 5.3. A minimum 
of 100,000 Shares will be outstanding at the commencement of trading on 
the Exchange. The Exchange will obtain a representation from the issuer 
of the Shares that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.
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    \21\ See 17 CFR 240.10A-3.
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Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or financial instruments comprising the 
Disclosed Portfolio of the Fund; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares will be subject 
to Rule 8.600(d)(2)(D), which sets forth circumstances under which 
Shares of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which includes Managed 
Fund Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable Federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\22\
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    \22\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.

[[Page 199]]

Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) the risks involved in trading 
the Shares during the Opening and Late Trading Sessions when an updated 
Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \23\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest. The 
Exchange believes that the proposed rule change will facilitate the 
listing and trading of additional types of exchange-traded products 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. In addition, the listing and trading 
criteria set forth in Rule 8.600 are intended to protect investors and 
the public interest.
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    \23\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the 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-2010-116 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-2010-116. 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 Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of 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-
NYSEArca-2010-116 and should be submitted on or before January 18, 
2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32943 Filed 12-30-10; 8:45 am]
BILLING CODE 8011-01-P