Document ID: SEC-2012-0113-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-01-24T05:00Z

[Federal Register Volume 77, Number 15 (Tuesday, January 24, 2012)]
[Notices]
[Pages 3520-3527]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1285]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66175; File No. SR-NASDAQ-2012-004]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Listing and 
Trading of Shares of the Emerging Markets Corporate Bond Fund of the 
WisdomTree Trust

January 18, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 4, 2012, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission

[[Page 3521]]

(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. 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

    Nasdaq proposes change [sic] to list and trade the shares of the 
WisdomTree Emerging Markets Corporate Bond Fund (``Fund'') of the 
WisdomTree Trust (``Trust'') under Nasdaq Rule 5735 (``Managed Fund 
Shares''). The shares of the Fund are collectively referred to herein 
as the ``Shares.'' The text of the proposed rule change is available at 
http://nasdaq.cchwallstreet.com, at Nasdaq's principal office, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below and is set forth in Sections A, B, and C below.

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares on the Exchange.\3\ The Fund will be an actively 
managed exchange traded fund (``ETF''). The Shares will be offered by 
the Trust, which was established as a Delaware statutory trust on 
December 15, 2005. The Fund is registered with the Commission as an 
investment company and has filed a registration statement on Form N-1A 
(``Registration Statement'') with the Commission.\4\
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008) 73 FR 35175 (June 20, 
2008) (SR-NASDAQ-2008-039). Although the Fund would be the first 
actively-managed fund listed on the Exchange, the Commission has 
previously approved the listing and trading of a number of actively 
managed WisdomTree Investments funds on NYSE Arca, Inc. pursuant to 
Rule 8.600 of that exchange. See, e.g., Securities Exchange Act 
Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-
NYSEArca-2008-31) (order approving 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 listing and trading of WisdomTree Dreyfus Emerging 
Currency 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); 63598 (December 22, 2010), 75 FR 82106 (December 29, 
2010) (SR-NYSEArca-2010-98) (order approving listing and trading of 
WisdomTree Managed Futures Strategy Fund); 63919 (February 16, 
2011), 76 FR 10073 (February 23, 2011) (SR-NYSEArca-2010-116) (order 
approving listing and trading of WisdomTree Asia Local Debt Fund); 
64643 (June 10, 2011), 76 FR 35062 (June 15, 2011) (SR-NYSEArca-
2011-21) (order approving listing and trading of WisdomTree Global 
Real Return Fund). The Exchange believes the proposed rule change 
raises no significant issues not previously addressed in those prior 
Commission orders.
    \4\ See Post-Effective Amendment No. 56 to Registration 
Statement on Form N-1A for the Trust, dated July 1, 2011 (File Nos. 
333-132380 and 811-21864). The descriptions of the Fund and the 
Shares contained herein are based, in part, 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\ Western Asset 
Management Company serves as sub-adviser for the Fund (``Sub-
Adviser'').\6\ The Bank of New York Mellon is the administrator, 
custodian and transfer agent for the Trust. ALPS Distributors, Inc. 
(``Distributor'') serves as the distributor for the Trust.\7\
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    \5\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \6\ 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.
    \7\ 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 NASDAQ Rule 5735(b)(5), 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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    Paragraph (g) of Rule 5735 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.\8\ In addition, paragraph 
(g) 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. Rule 5735(g) is similar to 
Nasdaq Rule 5705(b)(5)(A)(i), however, paragraph (g) 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. 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. 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 implement a fire wall with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to a portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of

[[Page 3522]]

material non-public information regarding such portfolio.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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WisdomTree Emerging Markets Corporate Bond Fund
    According to the Registration Statement, the Fund seeks to provide 
a high level of total return consisting of both income and capital 
appreciation. To achieve its objective, the Fund will invest in debt 
securities of corporations that are domiciled or economically tied to 
emerging market countries.\9\
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    \9\ According to the Adviser, 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 5 
years (i.e., per capita gross national product of less than U.S. 
$9,385), (b) has not been a member of OECD for the past five years 
or (c) classified by the World Bank as high income and a member in 
OECD in each of the last five 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.
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This definition could be expanded or exceptions made depending on the 
evolution of market and economic conditions.
    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.\10\ 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 (1) 
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 controlled by the Fund and that 
are engaged in the same, similar or related trades or businesses, and 
(2) 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.
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    \10\ 26 U.S.C. 851.
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    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's 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 Fund's 
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.
Corporate and Quasi-Sovereign Debt
    The Fund intends to achieve its investment objectives through 
direct and indirect investments in Corporate and Quasi-Sovereign Debt. 
For these purposes, Corporate and Quasi-Sovereign Debt includes fixed-
income securities of emerging market countries, such as bonds, notes or 
other debt obligations including loan participation notes 
(``LPNs''),\11\ as well as other instruments, such as derivative 
instruments collateralized by Money Market Securities as described 
below. Quasi-Sovereign Debt, specifically, refers to fixed income 
securities or debt obligations that are issued by companies or agencies 
that may receive financial support or backing from the local government 
(collectively, ``Quasi-Sovereign Institutions''). Under normal 
circumstances,\12\ the Fund will invest at least 80% of its net assets 
in Corporate and Quasi-Sovereign Debt that are fixed income securities.
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    \11\ The Fund may invest in LPNs with a minimum outstanding 
principal amount of $200 million that the Adviser or Sub-Adviser 
deems to be liquid. The Adviser represents that LPNs denominated in 
U.S. dollars are the predominant form of corporate debt financing in 
certain emerging markets, particularly in Russia, where they 
constitute approximately 70% of the corporate debt market 
(approximately $40 billion outstanding). In aggregate, LPNs 
represented over 11% of the JP Morgan Emerging Markets Corporate 
Bond Index as of November 30, 2011. LPNs are highly liquid 
instruments that are typically eligible for settlement at 
Eurcoclear, Clearstream, or in the U.S., through DTC. Moreover, 
intra-day quotations in LPNs are generally available from major 
broker-dealers and data vendors, such as Bloomberg.
    \12\ The term ``under normal circumstances'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
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    Under normal circumstances, the Fund will invest at least 80% of 
its assets in fixed income securities. Fixed income securities include 
debt instruments, such as bonds, notes and other obligations, 
denominated in U.S. dollars or local currencies. Fixed income 
securities include Money Market Securities as defined below. Fixed 
income securities do not include derivatives.
    The Fund intends to provide exposure across several geographic 
regions and countries. The Fund intends to invest in Corporate and 
Quasi-Sovereign Debt from the following regions: Asia, Latin America, 
Eastern Europe, Africa and the Middle East. Within these regions, the 
Fund is likely to invest in countries such as: Argentina, Brazil, 
Chile, China, Colombia, Hong Kong, India, Indonesia, Israel, Jamaica, 
Kazakhstan, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, 
Singapore, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, 
Trinidad & Tobago, Turkey, Ukraine and the United Arab Emirates. This 
list may change, based on market developments. The Fund's credit 
exposures are consistently monitored from a risk perspective, and may 
be modified, reduced, or eliminated. The Fund's exposure to any single 
issuer generally will be limited to 10% of the Fund's assets. The 
percentage of the Fund's assets in a specific region, country or issuer 
will change from time to time. The Fund's exposure to any one country 
generally will be limited to 30% of the Fund's assets though this 
percentage may change from time to time in response to economic events 
and changes to the credit ratings of the Corporate and Quasi-Sovereign 
Debt of such countries.
    The universe of emerging market Corporate and Quasi-Sovereign Debt 
currently includes securities that are rated ``investment grade'' as 
well as ``non-investment grade.'' The Fund intends to provide a broad 
exposure to emerging market Corporate and Quasi-Sovereign Debt and 
therefore will invest in both investment grade and non-investment grade 
securities. The Fund expects to have 65% or more of its assets invested 
in investment grade securities, though this percentage may change from 
time to time in response to economic events and changes to the credit 
ratings of such 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

[[Page 3523]]

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.
    The Fund will invest only in corporate bonds that the Adviser or 
Sub-Adviser deems to be sufficiently liquid.\13\ The Fund will only buy 
performing debt securities and not distressed debt. 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. Economic and other conditions 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 (1) 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), (2) such 
investment is deemed by the Adviser or Sub-Adviser to be in the best 
interest of the Fund, and (3) such investment is deemed consistent with 
the Fund's goal of providing broad exposure to a broad range of 
emerging markets countries and issuers.
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    \13\ The Adviser represents that the size and liquidity of the 
global market for corporate bonds of emerging market issuers 
generally has been increasing in recent years. The aggregate dollar 
amount of emerging market corporate bonds traded in the first two 
quarters of 2011 ($490 billion) represented a 36.4% increase 
compared to the first two quarters of 2010 ($359 billion). This 
growth is consistent with the 71% increase in volume for calendar 
year 2010 ($879.45 billion) over 2009. The $514 billion traded in 
2009 represented a substantial increase over the amount traded in 
2008 ($380 billion). Turnover in emerging market corporate debt in 
the first two quarters of 2011 was approximately 14.2% of the 
overall volume of emerging market debt of $3.443 trillion. In 2010, 
emerging market corporate bonds accounted for 16% of the total 
$6.765 trillion of emerging market debt trading. This represents a 
meaningful increase relative to calendar year 2009 where turnover in 
emerging market corporate debt accounted for 12% of the overall 
volume of emerging market debt ($4.445 trillion). These figures 
compared to only a 9% share in 2008. (Source: Emerging Markets 
Traders Association Press Release(s), December 8, 2010, August 12, 
2010, May 20, 2010, March 8, 2010, March 22, 2011, June 17, 2011 and 
August 22, 2011).
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    The Fund may invest in Corporate and Quasi-Sovereign Debt with 
effective or final maturities of any length. According to the 
Registration Statement, the Fund will seek to keep the average 
effective duration of its portfolio between 2 and 10 years under normal 
market conditions. Effective duration is an indication of an 
investment's interest rate risk or how sensitive an investment or a 
fund is to changes in interest rates. Generally, a fund or instrument 
with a longer effective duration is more sensitive to interest rate 
fluctuations, and, therefore, more volatile, than a fund with a shorter 
effective duration. The Fund's actual portfolio duration may be longer 
or shorter depending on market conditions.
    The Fund intends to invest in Corporate and Quasi-Sovereign Debt 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 their respective agencies 
and instrumentalities or government-sponsored enterprises).\14\
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    \14\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (Oct. 30, 1975), 40 FR 54241 
(November 21, 1975).
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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. Under normal circumstances,\15\ the Fund may 
invest up to 25% of its net assets in Money Market Securities, although 
it may exceed this amount where the Adviser or Sub-Adviser deems such 
investment to be necessary or advisable, due to market conditions. 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 deposit 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.
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    \15\ See footnote 12, supra.
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Derivative Instruments and Other Investments
    The Fund may use derivative instruments as part of its investment 
strategies. Examples of derivative instruments include forward currency 
contracts,\16\ interest rate swaps,\17\ total return swaps,\18\ credit 
linked notes,\19\ and combinations of investments that provide similar 
exposure to local currency debt, such as investment in U.S. dollar 
denominated bonds combined with forward currency positions or swaps. If 
forward currency and swaps positions are not being implemented in 
combination with U.S. dollar denominated bonds, the Fund's use of 
forward contracts and swaps will be combined with investments in short-
term, high quality U.S. money market instruments and will be designed 
to provide exposure similar to investments in local currency deposits.
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    \16\ A forward currency contract is an agreement to buy or sell 
a specific currency on a future date at a price set at the time of 
the contract.
    \17\ An interest rate swap involves the exchange of a floating 
interest rate payment for a fixed interest rate payment.
    \18\ A total return swap is an agreement between two parties in 
which one party agrees to make payments of the total return of a 
reference asset in return for payments equal to a rate of interest 
on another reference asset.
    \19\ A credit linked note is a type of structured note whose 
value is linked to an underling reference asset or entity. Credit 
linked notes typically provide periodic payments of interest as well 
as payment of principal upon maturity.
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    The Fund expects that no more than 20% 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. For example, the Fund may engage in swap 
transactions that provide exposure to corporate debt or interest rates. 
The Fund also may buy or sell listed currency futures contracts.\20\
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    \20\ The exchange-listed futures contracts in which the Fund may 
invest may be listed on exchanges in the U.S., London, Hong Kong or 
Singapore. Each of the United Kingdom's primary financial markets 
regulator, the Financial Services Authority, 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 financial regulators. Both the 
Commission and the Commodity Futures Trading Commission are 
signatories to the IOSCO MMOU.

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[[Page 3524]]

    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 and forward 
contracts, swap contracts, the purchase of securities on a when-issued 
or delayed delivery basis, or reverse repurchase agreements, the Fund, 
in accordance with applicable federal securities laws, rules, and 
interpretations thereof, will ``set aside'' liquid assets, or engage in 
other measures to ``cover'' open positions with respect to such 
transactions.\21\
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    \21\ See 15 U.S.C. 80a-18; Investment Company Act Release No. 
10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus 
Strategic Investing, Commission No-Action Letter (June 22, 1987); 
Merrill Lynch Asset Management, L.P., Commission No-Action Letter 
(July 2, 1996).
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    The Fund may engage in foreign currency transactions, and may 
invest directly in foreign currencies in the form of bank and financial 
institution deposits, and certificates of deposit 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.\22\
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    \22\ The Fund will invest only in currencies, and instruments 
that provide exposure to such currencies, that have significant 
foreign exchange turnover and are included in the Bank for 
International Settlements Triennial Central Bank Survey, December 
2010 (``BIS Survey''). The Fund may invest in currencies, and 
instruments that provide exposure to such currencies, selected from 
the top 40 currencies (as measured by percentage share of average 
daily turnover for the applicable month and year) included in the 
BIS Survey.
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    The Fund may invest in the securities of other investment companies 
(including money market funds and ETFs). The Fund may hold up to an 
aggregate amount of 15% of its net assets in (1) illiquid securities; 
(2) Rule 144A securities; and (3) loan interests (such as loan 
participations and assignments, but not including LPNs). The Commission 
staff has interpreted the term ``illiquid'' in this context to mean a 
security that cannot be sold or disposed of within seven days in the 
ordinary course of business at approximately the amount at which a fund 
has valued such security.\23\
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    \23\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14617 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
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    The Fund will not invest in any non-U.S. equity securities.
The Shares
    The Fund will issue and redeem Shares on a continuous basis at net 
asset value (``NAV'' \24\ only in large blocks of Shares (``Creation 
Units'') in transactions with Authorized Participants. Creation Units 
generally will 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 will issue and redeem Creation Units in 
exchange for a portfolio of Corporate and Quasi-Sovereign Debt and 
other instruments 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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    \24\ 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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    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the National Securities 
Clearing Corporation or a Depository Trust Company participant, and in 
each case, must have executed an agreement with the Distributor with 
respect to creations and redemptions of Creation Unit aggregations.
    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 (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 (``Bid/Ask Price''),\25\ 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 Regular Market Session 
\26\ 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.\27\ 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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    \25\ The Bid/Ask Price of the Fund will be 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.
    \26\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 7 a.m. to 9:30 
a.m.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15 
p.m.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. to 8 
p.m.).
    \27\ Under accounting procedures to be 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 5735 
as the ``Intraday Indicative Value,'' that reflects an estimated 
intraday value of the Fund's portfolio, will be disseminated. Moreover, 
the Intraday Indicative Value, available on the NASDAQ OMX Information 
LLC proprietary index data service,\28\ will be

[[Page 3525]]

based upon the current value for the components of the Disclosed 
Portfolio and will be updated and widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Regular 
Market Session. In addition, during hours when the markets for local 
debt in the Fund's portfolio are closed, the Intraday Indicative Value 
will be updated at least every 15 seconds during the Regular Market 
Session to reflect currency exchange fluctuations.
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    \28\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and ETFs. GIDS provides investment 
professionals with the daily and historical information needed to 
track or trade NASDAQ OMX indexes, listed ETFs or third-party 
partner indexes and ETFs.
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    The dissemination of the Intraday 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, executable price quotations on emerging market Corporate 
and Quasi-Sovereign Debt, as well as derivative 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.
    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 for the 
Shares will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available on 
GIDs, which contains information for widely followed indexes and ETFs.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, 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 Fund must be in compliance with Rule 10A-3 under the 
Act.\29\ 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 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \29\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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. Nasdaq will halt trading in the 
Shares under the conditions specified in Nasdaq Rules 4120 and 4121; 
for example, the Shares of the Fund will be halted if the ``circuit 
breaker'' parameters in Nasdaq Rule 4120(a)(11) 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 the 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 also will be subject to Rule 
5735(d)(2)(D), which sets forth circumstances under which Shares of the 
Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 
from 7 a.m. until 8 p.m. ET. The Exchange has appropriate rules to 
facilitate transactions in the Shares during all trading sessions. As 
provided in Nasdaq Rule 5735(b)(3), the minimum price variation for 
quoting and entry of orders in Managed Fund Shares traded on the 
Exchange is $0.01.
Surveillance
    Nasdaq believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on Nasdaq during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the Shares through 
Nasdaq will be subject to FINRA's surveillance procedures for 
derivative products, including Managed Fund Shares.\30\ The Exchange 
may obtain information via the Intermarket Surveillance Group (``ISG'') 
from other exchanges who are members or affiliates of the ISG.\31\ The 
Exchange prohibits the distribution of material non-public information 
by its employees.
---------------------------------------------------------------------------

    \30\ FINRA surveils trading on Nasdaq pursuant to a regulatory 
services agreement. Nasdaq is responsible for FINRA's performance 
under this regulatory services agreement.
    \31\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2310, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value is disseminated; (4) the risks involved 
in trading the Shares during the Pre-Market and Post-Market Sessions 
when an updated Intraday Indicative Value will not be calculated or 
publicly disseminated; (5) the requirement that members 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 Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site. In addition, the Information Circular will reference that the 
Trust is subject to various fees and expenses described in the Fund's 
Registration Statement.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \32\ in general and Section 6(b)(5) of the Act \33\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the

[[Page 3526]]

mechanism of a free and open market and a national market system.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f.
    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on Nasdaq during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. 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. 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. The 
Exchange may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. According to the 
Registration Statement, the Fund expects that it will have at least 80% 
of its assets invested in Corporate and Quasi-Sovereign Debt that are 
fixed income securities. Under normal circumstances, the Fund will 
invest at least 80% of its assets in fixed income securities. The 
Fund's exposure to any single issuer generally will be limited to 10% 
of the Fund's assets. The Fund's exposure to any single country 
generally will be limited to 30% of the Fund's assets. The Fund expects 
to have 65% or more of its assets invested in investment grade 
securities, though this percentage may change from time to time in 
response to economic events and changes to the credit ratings of such 
issuers. 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 will invest only in corporate bonds that the Adviser or 
Sub-Adviser deems to be sufficiently liquid and, 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. The Fund intends to invest in Corporate and Quasi-Sovereign 
Debt of at least 13 non-affiliated issuers. The Fund expects that no 
more than 20% 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. Such investments also will not be used to 
enhance leverage. Under normal circumstances, the Fund also may invest 
up to 25% of its net assets in Money Market Securities, although it may 
exceed this amount where the Adviser or Sub-Adviser deems such 
investment to be necessary or advisable, due to market conditions. 
Also, The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities and Rule 144A securities and loan 
interests (such as loan participations and assignments, but not 
including LPNs). The Fund will not invest in any non-U.S. equity 
securities.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. The Fund's portfolio holdings 
will be disclosed on its Web site daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day. Moreover, the Intraday Indicative Value, available on 
the GIDs will be disseminated by one or more major market data vendors 
at least every 15 seconds during the Regular Market Session. On each 
business day, before commencement of trading in Shares in the Regular 
Market Session on the Exchange, the Fund will disclose on its Web site 
the Disclosed Portfolio that will form the basis for the Fund's 
calculation of NAV at the end of the business day. 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, and quotation 
and last sale information for the Shares will be available on the GIDs, 
which contains information for the most widely followed indexes and 
ETFs. The Web site for the Fund will include a form of the prospectus 
for the Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
if the circuit breaker parameters in Nasdaq Rule 4120(a)(11) have been 
reached or because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable, and 
trading in the Shares will be subject to Nasdaq Rule 5735(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted. In addition, as noted above, investors will have ready access 
to information regarding the Fund's holdings, the Intraday Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Intraday Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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

    Written comments were neither solicited nor received.

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 (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

[[Page 3527]]

(ii) as to which the Exchange consents, the Commission shall:
    (A) by order approve or disapprove such 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-004 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2012-004. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of Nasdaq. 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-NASDAQ-2012-004 and should 
be submitted on or before February 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1285 Filed 1-23-12; 8:45 am]
BILLING CODE 8011-01-P