Document ID: SEC-2010-1757-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-11-17T05:00Z

[Federal Register Volume 75, Number 221 (Wednesday, November 17, 2010)]
[Notices]
[Pages 70319-70325]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28894]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63292; File No. SR-NYSEArca-2010-98]

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

November 9, 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 November 1, 2010, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'' or ``Corporation'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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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: WisdomTree Managed Futures Strategy 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 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 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 Fund 
under NYSE Arca Equities Rule 8.600,\4\ which governs the listing and 
trading of ``Managed Fund Shares'' on the Exchange.\5\

[[Page 70320]]

    The Fund will be an actively managed exchange-traded fund. 
WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') is 
the investment adviser (``Adviser'') to the Fund. WisdomTree 
Investments, Inc. (``WisdomTree Investments'') is the parent company of 
WisdomTree Asset Management. Mellon Capital Management Corporation 
(``Mellon'' or ``Sub-Adviser'') serves as the sub-adviser for the Fund. 
The Bank of New York Mellon is the administrator, custodian and 
transfer agent for the Fund. ALPS Distributors, Inc. serves as 
distributor for the Fund. The Shares will be offered by the Trust, 
which is registered with the Commission as an investment company.\6\
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    \4\ NYSE Arca Equities Rule 8.600(c)(1) provides that, among 
other criteria, a Managed Fund Share is a security that represents 
an interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Commission approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain shares 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 Managed 
Fund Shares 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); 60981 
(November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-
2009-79) (order approving listing of five fixed income funds of the 
PIMCO ETF Trust); 61697 (March 12, 2010), 75 FR 13616 (March 22, 
2010) (SR-NYSEArca 2010-04) (order approving listing and trading of 
WisdomTree Real Return Fund); and 62604 (June [sic] 30, 2010), 75 FR 
47323 (August 5, 2010) (SR-NYSEArca-2010-49) (order approving 
listing and trading of the WisdomTree Emerging Markets Local Debt 
Fund).
    \6\ See Registration Statement on Form N-1A for the Trust filed 
with the Securities and Exchange Commission on July 22, 2010 (File 
Nos. 333-132380 and 811-21864) (``Registration Statement''). The 
Registration Statement became effective on September 20, 2010. The 
descriptions of the Fund and the Shares contained herein are based 
on information in the Registration Statement.
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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. 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.\7\ 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. 
WisdomTree Asset Management is not affiliated with any broker-dealer. 
Mellon 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.\8\ 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 a 
portfolio.
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    \7\ 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.
    \8\ The Exchange represents that the Adviser and the 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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    Description of the Shares, the Benchmark and the Fund:
    According to the Registration Statement, the WisdomTree Managed 
Futures Strategy Fund seeks to provide investors with positive total 
returns in rising or falling markets that are not directly correlated 
to broad market equity or fixed income returns. The Fund is managed 
using a quantitative, rules-based strategy designed to provide returns 
that correspond to the performance of the Diversified Trends 
Indicator\TM\ (``Benchmark''). The Benchmark is a widely used indicator 
designed to capture the economic benefit derived from rising or 
declining price trends in the commodity, currency and U.S. Treasury 
futures markets.
    The Benchmark:
    The Benchmark is a rules-based indicator designed to capture rising 
and falling price trends in the commodity, currency and U.S. Treasury 
markets through long and short positions on U.S. listed futures 
contracts. The Benchmark consists of U.S. listed futures contracts on 
16 tangible commodities and 8 financial futures. The 16 commodity 
futures contracts are: light crude oil, natural gas, RBOB gas, heating 
oil, soybeans, corn, wheat, gold, silver, copper, live cattle, lean 
hogs, coffee, cocoa, cotton and sugar. The 8 financial futures 
contracts are: the Australian dollar, British pound, Canadian dollar, 
Euro, Japanese yen, Swiss franc, U.S. Treasury Notes and U.S. Treasury 
bonds. Each contract is sometimes referred to as a ``Component'' of the 
Benchmark.
    Components that are similar in nature (such as gas and oil or gold 
and silver) are aggregated into ``Sectors.'' There are nine commodity 
Sectors in the Benchmark: Energy, Grains, Precious Metals, Industrial 
Metals, Livestock, Coffee, Cocoa, Cotton, and Sugar. Each financial 
futures contract is considered to be its own Sector. As a result, there 
are eight financial Sectors in the Benchmark: The Australian dollar, 
British pound, Canadian dollar, Euro, Japanese yen, Swiss franc, U.S. 
Treasury Notes and U.S. Treasury bonds.
    In order to capture both rising and falling price trends, at the 
end of each month each Sector in the Benchmark (other than the Energy 
Sector) is positioned as either ``long'' or ``short'' (at the end of 
each month, the Energy Sector is positioned as either ``long'' or 
``flat'' (i.e., no exposure)). This determination is made using an 
algorithm that compares the Sector's monthly return to the Sector's 
historic weighted moving average returns. If the Sector's returns are 
above its moving average returns the Sector is positioned as ``long'' 
throughout the following month. If the Sector's returns are below its 
moving average the Sector is positioned as ``short'' throughout the 
following month (with the sole exception of the Energy Sector, which 
would be positioned as ``flat''). All Components within a Sector are 
held in the same direction. The value of a Sector and the value of the 
Benchmark should increase if a long position increases in value or if a 
short position decreases in value. For example, if a Sector is long in 
the Benchmark and the value of its Components goes up intra-month, the 
return of the Sector (and therefore the Benchmark) should

[[Page 70321]]

increase. If a Sector is short in the Benchmark, and the value of its 
Components goes down intra-month, the return of the Sector (and 
therefore the Benchmark) should increase.
    The Energy Sector and its Components may never be positioned short 
within the Benchmark. The Benchmark's methodology provides that, due to 
significant levels of continuous consumption, limited reserves and 
other factors, the Energy Sector can only be long or flat (i.e., no 
exposure) within the Benchmark. If the Energy Sector is flat then the 
weighting of the other Sectors and Components within the Benchmark is 
increased on a pro-rata basis.\9\ As a result, when the Energy Sector 
is flat, financial futures will represent approximately 61.5% of the 
weight of the Benchmark and commodities will represent approximately 
38.5% of the weight of the Benchmark. When the Energy Sector is long, 
financial futures and commodity futures each represent 50% of the 
weight of the Benchmark.
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    \9\ To arrive at the Sector weightings when the Energy Sector is 
flat, divide the Sector Base Weight by one minus the Energy Sector 
Base Weight (i.e., Sector Base Weight/1-0.1875)).
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    At the beginning of each year and month, the Benchmark is weighted 
in one of two ways. If the Energy Sector is long, the Benchmark is 
weighted evenly (i.e., 50/50) between commodity futures contracts and 
financial futures contracts. If the Energy Sector is flat, financial 
futures represent approximately 61.5% of the weight of the Benchmark 
and commodity futures represent approximately 38.5% of the Benchmark. 
At the beginning of 2010, the Benchmark was weighted evenly: A 50% 
weight to commodity futures and a 50% weight to financial futures. At 
the beginning of each year, each Component and Sector also has a ``Base 
Weight,'' depending on whether the Energy Sector is long or flat. If 
the Energy Sector is flat, then the Base Weight of the other Sectors 
and Components within the Benchmark is increased on a pro-rata basis. 
Commodity Sector weights are based on, but not exactly proportional to, 
historical world production levels. Commodity Sectors that have higher 
historical production levels are weighted higher in the Benchmark. 
Weightings of the financial futures Sectors are based on, but not 
directly proportional to, historical gross domestic product (``GDP''). 
Larger economic regions (i.e., Europe as measured by the Euro) should 
get a higher weighting than smaller regions (i.e., Australia as 
measured by the Australian dollar).\10\
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    \10\ The current Sector (and Component) Base Weights when the 
Energy Sector is long are as follows: Energy 18.75% (light crude 
8.50%, natural gas 4.25%, RBOB 3.0%, heating oil 3.0%); Grains 
11.50% (soybeans 5.0%, corn 4.0%, wheat 2.50%); Precious Metals 
5.25% (Gold 3.50%, Silver 1.75%); Industrial Metals 5.0% (copper 
5.0%); Livestock 5.0% (live cattle 3.0%, lean hogs 2.0%); Coffee 
1.5%; Cocoa 1.0%; Cotton 1.0%; Sugar 1.0%; Euro 13.0%; Japanese Yen 
12.0%; U.S. Treasury Note 7.50%; U.S. Treasury Bond 7.50%; British 
Pound 5.00%; Swiss Franc 2.0%; Australian Dollar 2.0%; and Canadian 
Dollar 1.00%.
     The current Sector (and Component) Base Weights when the Energy 
Sector is flat are as follows: Energy 0% (light crude 0%, natural 
gas 0%, RBOB 0%, heating oil 0%); Grains 14.15% (soybeans 6.15%, 
corn 4.92%, wheat 3.08%); Precious Metals 6.46% (gold 4.31%, silver 
2.15%); Industrial Metals 6.15% (copper 6.15%); Livestock 6.15% 
(live cattle 3.69%, lean hogs 2.46%); Coffee 1.85%; Cocoa 1.23%; 
Cotton 1.23%; Sugar 1.23%; Euro 16.0%; Japanese Yen 14.77%; U.S. 
Treasury Note 9.23%; U.S. Treasury Bond 9.23%; British Pound 6.15%; 
Swiss Franc 2.46%; Australian Dollar 2.46%; and Canadian Dollar 
1.23%.
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    The weight of each Component and Sector in the Benchmark changes 
throughout each month based upon performance. At the end of each month, 
each Sector is reset back to its applicable Base Weight depending on 
whether the Energy Sector is long or flat. Within Sectors that have 
multiple Components, the weight of each Component relative to the 
others is allowed to fluctuate throughout the year and Component 
weights are reset back to their respective Base Weights only at year-
end.
    The Fund:
    The Fund will invest substantially all of its assets in a 
combination of commodity- and currency-linked investments (including 
investments linked to U.S. Treasuries) designed to correspond to the 
performance of the Benchmark, and U.S. government securities (as 
defined in Section 3(a)(42) of the Exchange Act) (``Government 
Securities'') that serve as collateral or otherwise back the commodity- 
and currency-linked investments. More specifically, the Fund will 
invest at least 70% of its assets in a combination of: (i) Listed 
commodity and financial futures contracts included in the Benchmark; 
and (ii) forward currency contracts based on currencies represented in 
the Benchmark,\11\ in each case collateralized or otherwise backed by 
Government Securities. The Fund may invest up to 30% of its assets in a 
combination of swap transactions \12\ and commodity-linked notes.\13\ 
The Fund's

[[Page 70322]]

investments in listed futures contracts, forward currency contracts and 
swap transactions will be backed by investments in Government 
Securities in an amount equal to the exposure of such contracts.
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    \11\ The Fund's investments in commodity futures contracts will 
be limited by the application of position limits imposed by the CFTC 
and U.S. futures exchanges intended to prevent undue influence on 
prices by a single trader or group of affiliated traders. The 
Adviser has represented that the Fund's investment in futures 
contracts will be limited to investments in the U.S. listed futures 
contracts included in the Benchmark, except that the Fund may invest 
up to 10% of its assets in U.S. listed commodity and currency 
futures contracts not included in the Benchmark in a manner designed 
to achieve its investment objective.
     The U.S. listed commodity futures contracts included in the 
Benchmark (and therefore included in the Fund) are heavily traded 
and are based on some of the world's most liquid and actively-traded 
commodities. As of August 31, 2010, the ten commodity futures 
contracts that are given the greatest weighting in the Benchmark, 
and their three-month Average Daily Dollar Volume (``ADDV''), were: 
high grade copper (6.15% weight; ADDV $528,158,471); soybeans (6.06% 
weight; ADDV $3,172,701,410); corn (4.67% weight; ADDV 
$2,528,323,106); gold (4.29% weight; ADDV $6,226,943,776); live 
cattle (3.75% weight; ADDV $566,731,652); wheat (3.42% weight; ADDV 
$1,385,115,481); lean hogs (2.40% weight; ADDV $339,611,918); silver 
(2.17% weight; ADDV $641,111,990); coffee (1.85% weight; ADDV 
$505,778,511); and cocoa (1.23% weight; ADDV $144,259,844).
    The Fund will not invest in any currency that is not represented 
in the Benchmark. The listed financial futures contracts included in 
the Benchmark (and therefore included in the Fund) are heavily 
traded and represent six of the world's most liquid and actively-
traded currencies (as well as the U.S. dollar through futures on 
Treasury bonds and 10 year notes) as measured by daily turnover. For 
example, according to Table B.5 of the 2007 Triennial Central Bank 
Survey of Foreign Exchange and Derivative Market Activity by the 
Bank for International Settlements (``BIS 2007 Survey''), the most 
actively traded currency pairs against the U.S. dollar (based on 
average daily turnover in U.S. dollars at current exchange rates in 
April 2007) were as follows: euro ($840 billion), yen ($397 
billion), British pound ($361 billion), Australian dollar ($175 
billion), Swiss franc ($143 billion), and Canadian dollar ($115 
billion). According to Table E.2 of the BIS 2007 Survey, the daily 
turnover in April 2007 consisted of the following (in billions of 
U.S. dollars) (approximate):
    Each of the currencies listed above is represented by U.S. 
listed financial futures contracts in the Benchmark.
    As of August 31, 2010, the weighting of the financial futures 
contracts in the Benchmark, and their respective three month ADDV, 
was: euro (16.00% weight; ADDV $43,890,327,409); Japanese yen 
(14.77% weight; ADDV $16,832,896,412), U.S. Treasury 10 yr. note 
(9.23% weight, ADDV $15,149,128,260); U.S. Treasury Bond (9.23% 
weight; ADDV $5,233,746,635); British pound (6.15% weight; ADDV 
$9,822,322,233); Australian dollar (2.46% weight; ADDV U.S. 
$8,172,424,454); Swiss franc (2.46% weight; ADDV $4,342,434,023); 
and Canadian dollar (1.23% weight; ADDV U.S. $7,560,986,056). The 
Adviser represents that the returns of the forward currency 
contracts held by the Fund will be highly correlated to the returns 
of the listed futures contracts included in the Benchmark.
    \12\ The Fund will enter into over-the-counter swap transactions 
only with respect to transactions based on (i) the return of the 
Benchmark or any subset of the Benchmark, (ii) any Component in the 
Benchmark, or (iii) any commodity or currency represented in the 
Benchmark.
    \13\ The Fund may invest in commodity-linked notes. Commodity-
linked notes are over-the-counter debt instruments, typically issued 
by a bank or broker-dealer, that are designed to provide cash flows 
linked to the value of a reference asset. They provide exposure, 
which may include long and/or short exposure, to the investment 
returns of the reference asset underlying the note. The performance 
of these notes is determined by the price movement of the reference 
asset underlying the note. The Fund's investment in commodity-linked 
notes will be limited to notes providing exposure to (i) the 
Benchmark or any subset of the Benchmark, (ii) any Component of the 
Benchmark or (iii) any commodity or currency represented in the 
Benchmark. As noted, the Benchmark consists of heavily traded U.S. 
listed futures contracts based on liquid and actively-traded 
commodities and currencies and there is also an active market for 
forward currency contracts and other derivatives based on the 
commodities and currencies represented in the Benchmark. In 
addition, the Benchmark is widely-followed and currently serves as 
the basis for a range of investment products, including funds, swap 
contracts and other derivatives. The Fund's overall investment in 
swaps and commodity-linked notes will not exceed 30% of the Fund's 
assets.

----------------------------------------------------------------------------------------------------------------
                                                       Total           Spot           Forward          Swap
----------------------------------------------------------------------------------------------------------------
Euro............................................             840             265              90             485
Yen.............................................             397             140              42             215
British Pound...................................             361             103              30             228
Australian Dollar...............................             175              39              15             121
Swiss Franc.....................................             143              49              12              81
Canadian Dollar.................................             115              33              12              69
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    The Fund will be managed so that the long and short exposure of the 
Fund's portfolio is economically similar to the long and short 
positions in the Benchmark. This does not, however, mean that the long 
and short exposures will be identical. The Fund's positions in such 
listed futures contracts may deviate from the Benchmark when the 
Adviser or the Sub-Adviser believes it is in the best interest of the 
Fund to do so.\14\ For example, the Fund may deviate from the Benchmark 
in order to manage cash flows in and out of the Fund, such as in 
connection with the payment of dividends or expenses, to manage 
portfolio holdings around Benchmark changes, or to comply with the 1940 
Act, the Commodity Exchange Act (``CEA''), the Internal Revenue Code of 
1986 (``Code''), exchange position limits or other applicable laws, 
rules and regulations.
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    \14\ 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.
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    To the extent the Fund invests in futures contracts it will do so 
only in accordance with Rule 4.5 of the CEA. The Trust, on behalf of 
the Fund, has filed a notice of eligibility for exclusion from the 
definition of the term ``commodity pool operator'' in accordance with 
Rule 4.5 so that the Fund is not subject to registration or regulation 
as a commodity pool operator under the CEA. The Fund does not invest 
directly in physical commodities.
    The Fund's investment in Government Securities shall be limited to 
investments: (i) To satisfy margin requirements, to provide collateral 
or to otherwise back investments in commodity- and currency-linked 
derivatives (such as futures contracts, forward contracts and swaps); 
(ii) to help manage cash flows in and out of the Fund, such as in 
connection with the payment of dividends or expenses; or (iii) as a 
substitute for investment in the listed U.S. Treasury futures contracts 
included in the Benchmark. In addition, the Fund may invest in money 
market instruments with remaining maturities of one year or less, as 
well as cash and cash equivalents, in order to collateralize or 
otherwise back its positions in listed futures contracts, forward 
currency contracts or swaps or for cash management purposes. All money 
market securities acquired by the Fund will be rated investment grade. 
The Fund generally expects to maintain an average portfolio maturity of 
90 days or less on its investments in money market securities.
    Neither the Fund nor the Benchmark is leveraged. The Fund will be a 
``non-diversified'' fund. This means that a relatively high percentage 
of its assets may be invested in a limited number of securities and 
instruments. The Fund intends to maintain the level of diversification 
necessary to qualify as a regulated investment company (``RIC'') under 
Subchapter M of the Code.
    The Fund will seek to gain exposure to the commodity and currency 
markets, in whole or in part, through investments in a subsidiary 
organized in the Cayman Islands (``Subsidiary''). The Subsidiary is 
wholly-owned and controlled by the Fund, and its investments will be 
consolidated into the Fund's financial statements. The Fund's and the 
Subsidiary's holdings will be disclosed on the Fund's website on a 
daily basis. The Fund's investment in the Subsidiary may not exceed 25% 
of the Fund's total assets at the end of each fiscal quarter. The 
Subsidiary's shares will be offered only to the Fund and the Fund will 
not sell shares of the Subsidiary to other investors.
    The Fund's use of the Subsidiary is designed to help the Fund 
achieve exposure to commodity and currency returns in a manner 
consistent with the federal tax requirements applicable to the Fund and 
other regulated investment companies. The Subsidiary will comply with 
the 1940 Act except that, unlike the Fund, the Subsidiary may invest 
without limitation in commodity- and currency-linked investments based 
on commodities and currencies included within the Benchmark. The 
Subsidiary will otherwise operate in the same manner as the Fund with 
regard to applicable compliance policies and procedures. The Fund's 
Registration Statement states that since the Subsidiary's investments 
are consolidated into the Fund's, the Fund's combined holdings 
(including the investments of the Subsidiary) must comply with the 1940 
Act.
    The Fund will not invest in non-U.S. equity securities (other than 
shares of the Subsidiary).
    The Shares:
    According to the Registration Statement, the Fund issues and 
redeems Shares on a continuous basis at net asset value (``NAV'') \15\ 
only in large blocks of Shares, typically 50,000 Shares or more 
(``Creation Unit Aggregations''), in transactions with Authorized 
Participants. Only institutional investors who have entered into an 
Authorized Participant agreement may purchase or redeem Creation Unit 
Aggregations. Orders to create or redeem Creation Unit Aggregations of 
the Fund must be delivered through an Authorized Participant prior to 
the

[[Page 70323]]

Fund's NAV calculation time. The consideration for purchase of Creation 
Unit Aggregations of the Fund will consist of the in-kind deposit of a 
designated portfolio of Government Securities and/or listed futures 
contracts included in the Benchmark (``Deposit Securities'') and an 
amount of cash (``Cash Component''). Together, the Deposit Securities 
and the Cash Component constitute the ``Fund Deposit,'' which 
represents the minimum initial and subsequent investment amount for a 
Creation Unit Aggregation of the Fund. The Fund Deposit may consist 
entirely of cash.
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    \15\ 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.
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    The process to redeem Creation Unit Aggregations works much like 
the process to purchase Creation Unit Aggregations, but in reverse.
    Each business day prior to the opening of trading the Fund will 
publish the specific securities and designated amount of cash included 
in that day's basket for the Fund through the National Securities 
Clearing Corporation or other method of public dissemination. The Fund 
reserves the right to accept or pay out a basket of securities or cash 
that differs from the published basket. The prices at which creations 
and redemptions occur are based on the next calculation of NAV after an 
order is received in proper form.
    Additional information regarding the Fund and the Shares, including 
investment strategies, risks, creation and redemption procedures, fees, 
portfolio holdings, disclosure policies, distributions and taxes is 
included in the Registration Statement. All terms relating to the Fund 
that are referred to, but not defined in, this proposed rule change are 
defined in the Registration Statement.
    Availability of Information:
    The Fund's website (http://www.wisdomtree.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The 
website 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''),\16\ 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.
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    \16\ The Bid/Ask Price of the Fund is determined using the mid-
point of the highest bid and the lowest offer on the Exchange as of 
the time of calculation of the Fund's NAV. The records relating to 
Bid/Ask Prices will be retained by the Fund and/or its service 
providers.
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    On each business day, before commencement of trading in Shares in 
the Core Trading Session \17\ on the Exchange, the Trust will disclose 
on its website the identities and quantities of the portfolio of 
securities and other assets (``Disclosed Portfolio'') \18\ held by the 
Fund and the Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\19\ On a daily 
basis, the Adviser (using an automated process currently used by 
existing WisdomTree Funds) will disclose for each portfolio security or 
other investment of the Fund the following information: ticker symbol 
(if applicable), name or description of security or investment, number 
of shares or dollar value of investments held in the portfolio, and 
percentage weighting of the security or investment in the portfolio. 
The website information will be publicly available at no charge.
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    \17\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \18\ The Exchange notes that NYSE Arca Equities Rule 
8.600(d)(2)(B)(ii) provides 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-public information regarding the actual components 
of the portfolio.
    \19\ 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 NYSE Arca 
Equities Rule 8.600 as the ``Portfolio Indicative Value,'' that 
reflects an estimated intra-day 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. 
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.
    Intra-day and end-of-day prices are readily available through 
Bloomberg, other major market data providers and broker-dealers for the 
Benchmark, the listed futures contracts included in the Benchmark, the 
commodities and currencies represented in the Benchmark, and the 
forward currency contracts, swaps, notes and other derivatives based on 
the Benchmark. As a result, information necessary to evaluate the value 
of any swap or commodity-linked note purchased by the Fund will be 
readily available to market participants. Intra-day prices for the 
Benchmark are updated and disseminated at least every 15 seconds during 
the Core Trading Session on the Exchange.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's website at http://www.sec.gov. 
Information regarding market price and trading 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. 
Information regarding 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 (``CTA'') high-speed 
line.
    Initial and Continued Listing:
    The Shares will be subject to NYSE Arca Equities Rule 8.600(d), 
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,\20\ 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 per Share for the Fund will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
---------------------------------------------------------------------------

    \20\ 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

[[Page 70324]]

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 comprising the Disclosed Portfolio 
and/or the financial instruments 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 NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. Such rule 
provides that, if the Portfolio Indicative Value (as defined in Rule 
8.600(c)(3)) of a series of Managed Fund Shares is not being 
disseminated as required, the Corporation may halt trading during the 
day in which the interruption to the dissemination of the Portfolio 
Indicative Value occurs. If the interruption to the dissemination of 
the Portfolio Indicative Value persists past the trading day in which 
it occurred, the Corporation will halt trading no later than the 
beginning of the trading day following the interruption. In addition, 
if the Exchange becomes aware that the NAV or the Disclosed Portfolio 
with respect to a series of Managed Fund Shares is not disseminated to 
all market participants at the same time, it will halt trading in such 
series until such time as the NAV or the Disclosed Portfolio is 
available to all market participants.
    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 NYMEX, ICE Futures and other 
exchanges that are members of ISG.\21\
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    \21\ 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 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.
    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 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) \22\ 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 an additional type of exchange-traded product 
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 NYSE Arca Equities Rule 8.600 are intended to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

[[Page 70325]]

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-2010-98 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-2010-98. 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 20549-1090 on official business days 
between 10 a.m. and 3 p.m. Copies of the filing will also be available 
for inspection and copying at the NYSE's principal office. 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-2010-98 and should 
be submitted on or before December 8, 2010.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28894 Filed 11-16-10; 8:45 am]
BILLING CODE 8011-01-P