Document ID: SEC-2010-0954-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-06-29T04:00Z

[Federal Register: June 29, 2010 (Volume 75, Number 124)]
[Notices]               
[Page 37502-37507]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jn10-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62350; File No. SR-NYSEArca-2010-49]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change and Amendment No. 1 Thereto Regarding Listing 
and Trading of the WisdomTree Emerging Markets Local Debt Fund

June 22, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on June 10, 2010, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. On June 
18, 2010, the Exchange filed Amendment No. 1 to the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as amended, 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 (the ``Trust'') under NYSE Arca Equities 
Rule 8.600 (``Managed Fund Shares''): WisdomTree Emerging Markets Local 
Debt Fund (the ``Fund''). The shares of the Fund are collectively 
referred to herein as the ``Shares.'' The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

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 Emerging Markets Local Debt Fund under NYSE Arca Equities 
Rule 8.600, which governs the listing and trading of Managed Fund 
Shares on the Exchange.\3\ The Fund will 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.\4\
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    \3\ 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).
    \4\ See Post-Effective Amendment No. 32 to Registration 
Statement on Form N-1A for the Trust, dated March 19, 2010 (File 
Nos. 333-132380 and 811-21864), as amended June 8, 2010. 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.\5\ WisdomTree 
Asset Management is not affiliated with any broker-dealer. Mellon 
Capital Management Corporation (``MCM'') serves as sub-adviser for the 
Fund (``Sub-Adviser''). 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.\6\
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    \5\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \6\ 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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[[Page 37503]]

    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.\7\ 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. MCM 
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 addition, MCM 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.
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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 (the ``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 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 Emerging Markets Local Debt 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'') and is designed to provide exposure to a broad 
range of emerging market countries and issuers through investment in 
local currency debt instruments. A ``local currency'' debt instrument 
is a bond, note or other debt obligation denominated in a currency 
other than the U.S. dollar.
    The Fund is designed to provide exposure to a broad range of 
emerging market countries.\9\ The Fund intends to invest in issuers in 
Asia, Latin America, Eastern Europe, Africa and the Middle East. Likely 
country exposures include Brazil, Chile, Colombia, Hungary, Indonesia, 
Israel, Malaysia, Mexico, Peru, Poland, Russia, South Africa, South 
Korea, Thailand and Turkey. The Fund intends to invest at least 70% of 
its net assets in debt instruments denominated in a currency other than 
the U.S. dollar issued by emerging market governments, government 
agencies, corporations and supranational issuers (``Debt 
Instruments''). ``Supranational issuers'' include international 
organizations such as the European Investment Bank, International Bank 
for Reconstruction and Development, International Finance Corporation, 
or other regional development banks.\10\ The Fund expects to invest up 
to 20% of its net assets in emerging market 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.\11\ The Fund is 
designed to

[[Page 37504]]

provide exposure to a broad range of emerging market countries and 
issuers. Economic and other conditions in specific countries 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 countries and issuers, 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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    \9\ According to the Registration Statement, while there is no 
universally accepted definition of what constitutes an ``emerging 
market,'' in general, emerging market countries are characterized by 
developing commercial and financial infrastructure with significant 
potential for economic growth and increased capital market 
participation by foreign investors. The Adviser and Sub-Adviser look 
at a variety of commonly-used factors when determining whether a 
country is an ``emerging'' market. In general, the Adviser and Sub-
Adviser consider a country to be an emerging market if:
    (1) It is either (a) classified by the World Bank in the lower 
middle or upper middle income designation for one of the past 3 
years (i.e., per capita gross national product of less than U.S. 
$9,385), or (b) classified by the World Bank as high income in each 
of the last three years, but with a currency that has been primarily 
traded on a non-delivered basis by offshore investors (e.g., Korea 
and Taiwan); and
    (2) The country's debt market is considered relatively 
accessible by foreign investors in terms of capital flow and 
settlement considerations; and
    (3) The country has issued the equivalent of $5 billion in local 
currency sovereign debt. The criteria used to evaluate whether a 
country is an ``emerging market'' will change from time to time 
based on economic and other events.
    \10\ The category of ``emerging market bonds'' includes both 
U.S. dollar-denominated debt and non-U.S. or ``local'' currency 
debt. The market for local currency debt is larger and more actively 
traded than the market for dollar-denominated debt. According to the 
Emerging Markets Traders Association, the total dollar amount of 
emerging market debt instruments traded in 2009 was $4.445 trillion. 
Turnover in local currency debt instruments in 2009 was $2.870 
trillion and accounted for approximately 65% of the total turnover 
in emerging market bonds. (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.) As of September 30, 2009, the total market 
capitalization of emerging market local currency sovereign debt in 
the J.P. Morgan Government Bonds Index--Emerging Markets (``GBI-
EM'') was $625 billion. The GBI-EM is a widely followed index of 
regularly traded, liquid, fixed-rate domestic currency government 
bonds. As of the same date, the market capitalization of emerging 
market dollar-denominated bonds in the J.P. Morgan Emerging Markets 
Bond Index (``EMBI'') was $326 billion. The EMBI is a widely 
followed index of U.S. dollar denominated debt instruments issued by 
emerging market sovereign and quasi-sovereign entities. (Source: 
J.P. Morgan as of September 30, 2009). The Adviser represents that 
sovereign debt of many emerging market countries is issued in large 
par size and tends to be very liquid. Locally-denominated debt 
issued by supra-national 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.
    \11\ The Adviser represents that the size and liquidity of the 
market for emerging market bonds, and in particular 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. Emerging market corporate bond 
issuance in 2010 was $68 billion (through March). Local currency 
issuance made up 72% of the total $68 billion. (Source: Emerging 
Markets Bonds Come of Age, Corporate Financing Week, March 2010 
(http://www.corporatefinancing week.com/file/87470/emerging-market-
bond-markets-come-of-age.html)).
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    According to the Registration Statement, the Fund typically will 
maintain aggregate portfolio duration of between 2 and 7 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 emerging markets local currency debt currently 
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 emerging market debt and 
therefore will invest in both investment grade and non-investment grade 
securities in a manner designed to provide this exposure. The Fund 
currently 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 emerging market 
countries and issuers, and because the debt ratings of such countries 
and issuers will change from time to time, the exact percentage of the 
Fund's investments in investment grade and non-investment grade debt 
will change from time to time in response to economic events and 
changes to the credit ratings of such government and corporate issuers. 
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.
    All money market securities acquired by the Fund will be rated 
investment grade or, if unrated, deemed to be of equivalent quality. 
The Fund does not intend to invest in any unrated money market 
securities.
    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 (a ``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.
    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 Fund 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 Fund. 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.
    The Fund will invest, under normal circumstances, at least 80% of 
the value of its net assets in investments that are tied economically 
to the particular country or geographic region suggested by the Fund's 
name (i.e., emerging markets).
    With respect to its limited investments in instruments other than 
Debt Instruments, the Fund may purchase short-term obligations issued 
or guaranteed by the U.S. Treasury or the agencies or instrumentalities 
of the U.S. government; may invest in short-term securities issued or 
guaranteed by non-U.S. governments, agencies and instrumentalities; may 
invest in deposits and other obligations of U.S. and non-U.S. banks and 
financial institutions; may invest in deposits and obligations of banks 
and financial institutions including certificates of deposit, time 
deposits, and bankers' acceptances.
    The Fund also may invest in corporate debt obligations with less 
than 397 calendar days remaining to maturity, and may purchase floating 
rate and adjustable rate obligations, such as demand notes, bonds, and 
commercial paper. The Fund may pursue its investment objective by 
investing some of its assets in other WisdomTree Funds based on foreign 
currencies, as described in the Registration Statement.
    The Fund may use derivative instruments as part of its investment 
strategies. The examples of derivative instruments include forward 
currency contracts, non-deliverable forward currency contracts, 
currency and interest rate swaps, currency options, futures contracts, 
options on futures contracts and swap agreements. The Fund's use of 
derivative instruments will be underpinned 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.
    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

[[Page 37505]]

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, 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 net 
asset value (``NAV'') \12\ only in large blocks of Shares (``Creation 
Units'') in transactions with authorized participants. Currently, 
Creation Units generally consist of 100,000 Shares, though this may 
change from time to time. Creation Units are not expected to consist of 
less than 50,000 Shares. The Fund generally issues and redeems Creation 
Units in exchange for a portfolio of money market securities closely 
approximating the holdings of the Fund or a designated basket of non-
U.S. currency and/or an amount of U.S. cash. Once created, Shares of 
the Fund trade on the secondary market in amounts less than a Creation 
Unit.
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    \12\ 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 (the 
``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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    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 
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 (the ``Bid/Ask Price''),\13\ 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 \14\ on the Exchange, the Trust will 
disclose on its Web site the identities and quantities of the portfolio 
of securities and other assets (the ``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.\15\ The Disclosed Portfolio will include, 
as applicable, the names, quantity, percentage weighting and market 
value of 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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    \13\ 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.
    \14\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \15\ 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 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.
Initial and Continued Listing
    The Shares will be subject to 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,\16\ 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 net asset value and the Disclosed Portfolio will 
be made available to all market participants at the same time.
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    \16\ 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 37506]]

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 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.
    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.\17\
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    \17\ 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.
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) \18\ 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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    \18\ 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 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date 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 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-2010-49 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-2010-49. 
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

[[Page 37507]]

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-2010-49 and should be submitted 
on or before July 20, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15752 Filed 6-28-10; 8:45 am]
BILLING CODE 8010-01-P