Document ID: SEC-2011-1882-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-12-05T05:00Z

[Federal Register Volume 76, Number 233 (Monday, December 5, 2011)]
[Notices]
[Pages 75932-75939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31044]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65846; File No. SR-NYSEArca-2011-82]

 Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Shares 
of the WisdomTree Emerging Markets Inflation Protection Bond Fund Under 
NYSE Arca Equities Rule 8.600

November 29, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on November 14, 2011, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 75933]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the WisdomTree Trust (``Trust'') under NYSE Arca Equities Rule 
8.600 (``Managed Fund Shares''): WisdomTree Emerging Markets Inflation 
Protection Bond Fund (``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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the 
WisdomTree Emerging Markets Inflation Protection Bond 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 (``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 the Fund has filed a registration statement on 
Form N-1A (``Registration Statement'') with the Commission.\4\
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    \3\ The Commission has approved listing and trading on the 
Exchange of a number of actively managed funds under Rule 8.600. 
See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 
73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving 
Exchange listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 58564 (September 17, 2008), 73 FR 55194 
(September 24, 2008) (SR-NYSEArca-2008-86) (order approving Exchange 
listing and trading of WisdomTree Dreyfus Emerging Markets Fund); 
62604 (July 30, 2010), 75 FR 47323 (August 5, 2010) (SR-NYSEArca-
2010-49) (order approving Exchange listing and trading of WisdomTree 
Emerging Markets Local Debt Fund); 63919 (February 16, 2011), 76 FR 
10073 (February 23, 2011) (SR-NYSEArca-2010-116) (order approving 
Exchange listing and trading of WisdomTree Asia Local Debt Fund); 
65458 (September 30, 2011), 76 FR 62112 (October 6, 2011) (SR-
NYSEArca-2011-54) (order approving Exchange listing and trading of 
WisdomTree Dreyfus Australia and New Zealand Debt Fund).
    \4\ See Post-Effective Amendment No. 54 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\ Mellon Capital 
Management 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) 
(``Exemptive Order''). In compliance with Commentary .05 to NYSE 
Arca Equities Rule 8.600, which applies to Managed Fund Shares based 
on an international or global portfolio, the Trust's application for 
exemptive relief under the 1940 Act states that the Fund will comply 
with the federal securities laws in accepting securities for 
deposits and satisfying redemptions with redemption securities, 
including that the securities accepted for deposits and the 
securities used to satisfy redemption requests are sold in 
transactions that would be exempt from registration under the 
Securities Act of 1933 (15 U.S.C. 77a).
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\8\ 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. 
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, it will implement a fire wall with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of 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 Inflation Protection Bond Fund
    According to the Registration Statement, the Fund seeks to provide 
a high level of income and capital appreciation representative of 
investments in inflation-linked debt of

[[Page 75934]]

emerging market issuers.\9\ To achieve its objective, the Fund will 
invest in Fixed Income Securities (defined below) and other instruments 
designed to provide protection against inflation.
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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 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);
    (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.
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Fixed Income Securities
    The Fund intends to achieve its investment objectives through 
direct and indirect investments in inflation-protected Fixed Income 
Securities of emerging market countries.\10\ For these purposes, Fixed 
Income Securities include bonds, notes or other debt obligations, such 
as government or corporate bonds, denominated in local currencies or 
U.S. dollars, as well as issues denominated in emerging market local 
currencies that are issued by ``supranational issuers,'' such as the 
International Bank for Reconstruction and Development and the 
International Finance Corporation, as well as development agencies 
supported by other national governments. The Fund expects that it will 
have at least 70% of its assets invested in Fixed Income Securities. 
The Fund will invest in Fixed Income Securities linked to inflation 
rates in emerging markets throughout the world. The Fund may invest in 
Fixed Income Securities that are not linked to inflation, such as U.S. 
or non-U.S. government bonds, as well as Fixed Income Securities that 
pay variable or floating rates. The Fund may also invest in Money 
Market Securities and derivative instruments, as described below.
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    \10\ As of October 31, 2011, the total market capitalization of 
inflation-linked bonds in the Barclays Capital World Inflation 
Linked Index, a leading index of inflation-linked bonds in developed 
markets outside the United States, was approximately $1.06 trillion. 
As of October 31, 2011, the total market capitalization of 
inflation-linked bonds in the Barclays Capital Emerging Markets 
Government Inflation Linked Bond Index, a leading index of 
inflation-linked debt issued by emerging market governments, was 
approximately $452.9 billion. The Adviser represents that inflation-
linked bonds outside the United States are issued in large par size 
(i.e., $200 million or more) and tend to be liquid. Locally-
denominated debt issued by supra-national entities, such as the 
European Investment Bank or the International Bank for 
Reconstruction and Development, is also actively traded. Email from 
Timothy J. Malinowski, Senior Director, NYSE Euronext, to Edward Y. 
Cho, Special Counsel, and Daniel T. Gien, Special Counsel, Division 
of Trading and Markets, Commission, dated November 23, 2011.
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    The Fund intends to invest in inflation-linked Fixed Income 
Securities of issuers in 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 Brazil, Chile, Colombia, 
Hungary, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, 
Russia, South Africa, South Korea, Thailand and Turkey, although this 
list may change as market developments occur and may include additional 
emerging market countries that conform to selected ratings, liquidity 
and other criteria. As a general matter, and subject to the Fund's 
investment guideline to provide exposure across geographic regions and 
countries, the Fund generally will invest a higher percentage of its 
assets in countries with larger and more liquid debt markets. The 
Fund's exposure to any single country generally will be limited to 20% 
of the Fund's assets. The percentage of Fund assets invested in a 
specific region, country or issuer will change from time to time. While 
the Fund is permitted to invest in developed market economies, this is 
not a focus of the Fund.\11\
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    \11\ The Fund expects that it will initially hold inflation-
linked debt issued by the following emerging market governments: 
Brazil ($255,861 million outstanding); Chile ($12,689 million 
outstanding); Colombia ($2,583 million outstanding); Israel ($38,757 
million outstanding); Mexico ($50,506 million outstanding); Poland 
($5,611 million outstanding); South Africa ($29,316 million 
outstanding); South Korea ($4,371 million outstanding); Thailand 
($1,343 million outstanding); and Turkey ($39,048 million 
outstanding). Outstanding amounts of debt are as of October 31, 2011 
(Sources: Barclays Capital Emerging Markets Government Inflation 
linked Bond Index; and http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1141179/1/.html (for Thailand)). Email 
from Timothy J. Malinowski, Senior Director, NYSE Euronext, to 
Edward Y. Cho, Special Counsel, and Daniel T. Gien, Special Counsel, 
Division of Trading and Markets, Commission, dated November 23, 
2011.
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    The Fund expects that it will have at least 70% of its assets 
invested in investment grade securities, and no more than 30% of its 
assets invested in non-investment grade securities. Because the debt 
ratings of issuers will change from time to time, the exact percentage 
of the Fund's investments in investment grade and non-investment grade 
Fixed Income Securities will 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 than 10% of its assets in 
securities rated BB 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.
    While the Fund intends to focus its investments in Fixed Income 
Securities on bonds and other obligations of governments and agencies 
of emerging market countries, the Fund may invest up to 20% of its net 
assets in corporate bonds. The Fund will invest only in corporate bonds 
that the Adviser or Sub-Adviser deems to be sufficiently liquid.\12\ 
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

[[Page 75935]]

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 deemed by the Adviser or 
Sub-Adviser to be in the best interest of the Fund, and (iii) such 
investment is deemed consistent with the Fund's goal of providing broad 
exposure to inflation-linked Fixed Income Securities.
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    \12\ 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 second 
quarter of 2011 ($221 billion) was comparable to the volumes seen in 
the first quarter of 2010 ($201 billion). The $514 billion traded in 
2009 represented a substantial increase over the amount traded in 
2008 ($380 billion). Turnover in emerging market corporate debt as 
an overall percentage of emerging market debt has also increased 
significantly. Turnover in emerging market corporate debt for 2010 
was approximately 13.0% of the overall volume of emerging market 
debt of $6.765 trillion for the same period. This is similar to 
calendar year 2009 where turnover in emerging market corporate debt 
accounted for 12% of the overall volume of emerging market debt of 
$6 trillion in 2009, an increase over the 9% share in 2008 (Source: 
Emerging Markets Traders Association Press Release(s), March 22, 
2011, December 8, 2010, August 12, 2010, May 20, 2010 and March 8, 
2010). Email from Timothy J. Malinowski, Senior Director, NYSE 
Euronext, to Edward Y. Cho, Special Counsel, and Daniel T. Gien, 
Special Counsel, Division of Trading and Markets, Commission, dated 
November 23, 2011.
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    The Fund may invest in Fixed Income Securities with effective or 
final maturities of any length. The Fund will seek to keep the average 
effective duration of its portfolio between 2 and 8 years. 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 Fixed Income Securities of at least 
13 non-affiliated issuers. The Fund will not concentrate 25% or more of 
the value of its total assets (taken at market value at the time of 
each investment) in any one industry, as that term is used in the 1940 
Act (except that this restriction does not apply to obligations issued 
by the U.S. government, or any non-U.S. government, or their respective 
agencies and instrumentalities or government-sponsored 
enterprises).\13\
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    \13\ 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 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    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.\14\ The Fund will invest its assets, and otherwise 
conduct its operations, in a manner that is intended to satisfy the 
qualifying income, diversification and distribution requirements 
necessary to establish and maintain RIC qualification under Subchapter 
M. The Subchapter M diversification tests generally require that (i) 
the Fund invest no more than 25% of its total assets in securities 
(other than securities of the U.S. government or other RICs) of any one 
issuer or two or more issuers that are controlled by the Fund and that 
are engaged in the same, similar or related trades or businesses, and 
(ii) at least 50% of the Fund's total assets consist of cash and cash 
items, U.S. government securities, securities of other RICs and other 
securities, with investments in such other securities limited in 
respect of any one issuer to an amount not greater than 5% of the value 
of the Fund's total assets and 10% of the outstanding voting securities 
of such issuer.
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    \14\ 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.
Money Market Securities
    The Fund intends to invest in Money Market Securities in order to 
help manage cash flows in and out of the Fund, such as in connection 
with payment of dividends or expenses, and to satisfy margin 
requirements, to provide collateral or to otherwise back investments in 
derivative instruments. For these purposes, Money Market Securities 
include: Short-term, high-quality obligations issued or guaranteed by 
the U.S. Treasury or the agencies or instrumentalities of the U.S. 
government; short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies and instrumentalities; repurchase 
agreements backed by short-term U.S. government securities or non-U.S. 
government securities; money market mutual funds; and deposits and 
other obligations of U.S. and non-U.S. banks and financial 
institutions. All Money Market Securities acquired by the Fund will be 
rated investment grade. The Fund does not intend to invest in any 
unrated Money Market Securities. However, it may do so to a limited 
extent, such as where a rated Money Market Security becomes unrated, if 
such Money Market Security is determined by the Adviser and Sub-Adviser 
to be of comparable quality.
Derivative Instruments and Other Investments
    Consistent with the Exemptive Order, the Fund may use derivative 
instruments as part of its investment strategies. Examples of 
derivative instruments include exchange-listed futures contracts, 
forward currency contracts, non-deliverable forward currency contracts, 
currency swaps, interest rate swaps, inflation rate swaps, currency 
options, options on futures contracts, swap agreements and structured 
notes. The Fund's use of derivatives contracts (other than structured 
notes) will be collateralized or otherwise backed by investments in 
short-term, high quality U.S. Money Market Securities.
    The Fund expects that no more than 30% of the value of the Fund's 
net assets will be invested in derivative instruments. Such investments 
will be consistent with the Fund's investment objective and will not be 
used to enhance leverage. For example, the Fund may engage in swap 
transactions that provide exposure to inflation rates, inflation-linked 
bonds, inflation-sensitive indices or interest rates.\15\ The Fund also 
may buy or sell listed futures contracts on U.S. Treasury securities, 
non-U.S. government securities and major non-U.S. currencies.\16\
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    \15\ An inflation-linked swap is an agreement between two 
parties to exchange payments at a future date based on the 
difference between a fixed payment and a payment linked to an 
inflation rate or value at a future date. A typical interest rate 
swap involves the exchange of a floating interest rate payment for a 
fixed interest payment.
    \16\ 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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    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

[[Page 75936]]

interpretations thereof, will ``set aside'' liquid assets, or engage in 
other measures to ``cover'' open positions with respect to such 
transactions.\17\
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    \17\ 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, 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.\18\
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    \18\ The Fund will invest only in currencies, and instruments 
that provide exposure to such currencies, that are have significant 
foreign exchange turnover and are included in the Bank for 
International Settlements, Triennial Central Bank Survey, Report on 
Global Foreign Exchange Market Activity in 2010 (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 invest up to an 
aggregate amount of 15% of its net assets in (a) illiquid securities 
and (2) Rule 144A securities. 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.\19\
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    \19\ 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'') \20\ only in large blocks of Shares (``Creation 
Units'') in transactions with Authorized Participants. 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 will issue and redeem Creation Units in exchange for a 
portfolio of Fixed Income 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 will trade on the 
secondary market in amounts less than a Creation Unit.
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    \20\ The NAV of the Fund's Shares generally will be 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 will be 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 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 (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 (``Bid/Ask Price''),\21\ 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 \22\ 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.\23\ 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 information will be 
publicly available at no charge.
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    \21\ 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.
    \22\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \23\ 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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    Intra-day, executable price quotations on emerging market Fixed 
Income Securities, as well as Money Market Securities and 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 via the Consolidated Tape Association 
(``CTA'') high-speed line.
    In addition, for the Fund, an estimated value, defined in Rule 
8.600 as the Portfolio Indicative Value (``PIV'') that reflects an 
estimated intraday value of the Fund's portfolio, will be disseminated. 
The PIV will be based upon the current value for the components of the 
Disclosed Portfolio and will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core

[[Page 75937]]

Trading Session on the Exchange.\24\ In addition, during hours when the 
markets for Fixed Income Securities in the Fund's portfolio are closed, 
the PIV will be updated at least every 15 seconds during the Core 
Trading Session to reflect currency exchange fluctuations.
---------------------------------------------------------------------------

    \24\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
published on CTA or other data feeds.
---------------------------------------------------------------------------

    The dissemination of the PIV, 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.
Initial and Continued Listing
    The Shares will be subject to Rule 8.600, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 under the 
Exchange Act,\25\ as provided by NYSE Arca Equities Rule 5.3. A minimum 
of 100,000 Shares will be outstanding at the commencement of trading on 
the Exchange. The Exchange will obtain a representation from the issuer 
of the Shares that the NAV per Share will be calculated daily and that 
the NAV and the Disclosed Portfolio will be made available to all 
market participants at the same time.
---------------------------------------------------------------------------

    \25\ 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. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or 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 will be subject 
to Rule 8.600(d)(2)(D), which sets forth circumstances under which 
Shares of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which includes Managed 
Fund Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\26\
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    \26\ 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.
---------------------------------------------------------------------------

    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 
Equity Trading Permit (``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 PIV will not be calculated or publicly 
disseminated; (4) how information regarding the PIV is disseminated; 
(5) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \27\ 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.
---------------------------------------------------------------------------

    \27\ 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 NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. 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. The Sub-Adviser is affiliated with multiple broker-dealers 
and has implemented a ``fire wall'' with

[[Page 75938]]

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. According to the Registration Statement, the Fund expects 
that it will have at least 70% of its assets invested in Fixed Income 
Securities. The Fund's exposure to any single country generally will be 
limited to 20% of the Fund's assets. The Fund expects that it will have 
at least 70% of its assets invested in investment grade securities, and 
no more than 30% of its assets invested in non-investment grade 
securities. The Fund will not invest more than 10% of its assets in 
securities rated BB or below by Moody's, or equivalently rated by S&P 
or Fitch. The Fund may invest up to 20% of its net assets in corporate 
bonds. 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 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. 
Such investments also will not be used to enhance leverage. 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 PIV will be widely by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session. On each business day, before commencement of 
trading in Shares in the Core Trading 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 will be available via 
the CTA high-speed line. 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. Moreover, prior to the 
commencement of trading, the Exchange will inform its ETP Holders in an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of the Fund will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 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 NYSE Arca 
Equities Rule 8.600(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 PIV, 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 PIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.

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

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

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

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

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (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 or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-82 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-2011-82. 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

[[Page 75939]]

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-2011-82 and should be submitted on or before 
December 27, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \28\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31044 Filed 12-2-11; 8:45 am]
BILLING CODE 8011-01-P