Document ID: SEC-2013-1014-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2013-06-04T04:00Z

[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]
[Notices]
[Pages 33457-33461]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-13110]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69657; File No. SR-NASDAQ-2013-079]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of a Proposed Rule Change, as Modified by Amendment 
No. 1 Thereto, Relating to the WisdomTree Global Corporate Bond Fund 
and the WisdomTree Emerging Markets Corporate Bond Fund

May 29, 2013.
    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 May 17, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NASDAQ. On May 20, 
2013, the Exchange filed Partial Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1 thereto, 
from interested persons.

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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Partial Amendment No. 1, the Exchange corrected a 
typographical error by moving the word ``indicative'' from just 
before ``NAV'' to just before ``intra-day'' such that the sentence, 
as modified, reads: ``The Adviser represents that it does not 
believe that the ability of the Funds' agent to calculate NAV and an 
indicative intra-day value (``IIV'') for each Fund, and disseminate 
such IIV every 15 seconds throughout the trading day, has been 
impeded by the Funds' current Rule 144A holdings limited to 15% of 
net assets.''
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDAQ is filing with the Commission a proposed rule change 
relating to the WisdomTree Global Corporate Bond Fund (the ``Global 
Fund'') and the WisdomTree Emerging Markets Corporate Bond Fund (the 
``Emerging Markets Fund,'' and collectively with the Global Fund, the 
``Funds'') of the WisdomTree Trust (the ``Trust'') listed under NASDAQ 
Rule 5735 (Managed Fund Shares). The shares of the Fund are 
collectively referred to herein as the ``Shares.''
    The Exchange requests that the proposal be approved on an 
accelerated basis.
    The text of the proposed rule change is available from NASDAQ's Web 
site at http://nasdaq.cchwallstreet.com/Filings/, 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 and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASDAQ has prepared summaries, set

[[Page 33458]]

forth in sections A, B, and C below, of the most significant aspects 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 reflect changes to the means of achieving 
the investment objectives of each of the Funds. The Commission has 
approved the listing and trading of Shares of each of the Funds under 
NASDAQ Rule 5735, which governs the listing and trading of Managed Fund 
Shares on the Exchange.\4\ The Exchange believes the proposed rule 
change raises no significant issues not previously addressed in the 
Prior Approval Orders. The Funds are actively managed exchange traded 
funds (``ETFs''). The Shares are offered by the Trust, which was 
established as a Delaware statutory trust on December 15, 2005. The 
Trust, which is registered with the Commission as an investment 
company, has filed a registration statement on Form N-1A with the 
Commission on behalf of each of the Funds (each, a ``Registration 
Statement'').\5\
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    \4\ 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). The Commission previously approved 
the listing and trading of the Shares of each of the Funds. See 
Securities Exchange Act Release Nos. 66489 (February 29, 2012), 77 
FR 13379 (March 6, 2012) (SR-NASDAQ-2012-004) (order approving 
listing and trading of WisdomTree Emerging Markets Corporate Bond 
Fund) (``Emerging Markets Fund Order''); and 68073 (October 19, 
2012), 77 FR 65237 (October 25, 2012) (SR-NASDAQ-2012-98) (order 
approving listing and trading of WisdomTree Global Corporate Bond 
Fund) (``Global Fund Order,'' and collectively the ``Prior Approval 
Orders'').
    \5\ See Post-Effective Amendment Nos. 99 to Registration 
Statement on Form N-1A for the Trust, dated February 8, 2012 (File 
Nos. 333-132380 and 811-21864) (relating to the Emerging Markets 
Fund); and 139 to Registration Statement on Form N-1A for the Trust, 
dated October 26, 2012 (relating to the Global Fund). The 
descriptions of the Funds and the Shares contained herein are based, 
in part, on information in the applicable Registration Statement for 
each Fund.
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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 Funds. Western Asset 
Management Company serves as sub-adviser for the Funds (``Sub-
Adviser'').\6\
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    \6\ The Commission has issued an order granting certain 
exemptive relief to the Trust under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company Act 
Release No. 28171 (October 27, 2008) (File No. 812-13458) 
(``Exemptive Order'').
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    In this proposed rule change, the Exchange proposes to amend the 
description of the measures the Sub-Adviser may utilize to implement 
each of the Fund's investment objectives.\7\ The Emerging Markets Fund 
Order defined Corporate and Quasi-Sovereign Debt as fixed income 
securities of emerging market countries, such as bonds, notes or other 
debt obligations, including loan participation notes (``LPNs''), as 
well as other instruments, such as derivative instruments, 
collateralized by money market securities, as defined therein. Quasi-
Sovereign Debt referred specifically to fixed income securities or debt 
obligations that are issued by companies or agencies that may receive 
financial support or backing from a local government. The Global Fund 
Order defined Global Corporate Debt to include fixed income securities, 
such as bonds, notes, or other debt obligations, including LPNs, as 
well as debt instruments denominated in U.S. dollars or local 
currencies. Global Corporate Debt also included fixed income securities 
or debt obligations issued by companies or agencies that may receive 
financial support or backing from local governments, as well as money 
market securities as defined therein.\8\
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    \7\ The changes described herein, including the risks associated 
with investing in 144A securities, will be reflected in each Fund's 
Registration Statement, as amended, and become effective upon the 
filing thereof with the Commission, following approval of this 
proposal. See supra note 5. The Adviser represents that the Adviser 
and Sub-Adviser have managed and will continue to manage the Funds 
in the manner prescribed in the Prior Approval Orders, and will not 
implement the changes described herein until the instant proposed 
rule change has been approved.
    \8\ See supra note 4.
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    Under the Prior Approval Orders, the Funds are permitted to hold up 
to 15% of their respective net assets in illiquid securities 
(calculated at the time of investment), including (1) Rule 144A 
securities and (2) loan interests (such as loan participations and 
assignments, but not including LPNs).\9\ Under the 1940 Act and rules 
thereunder, the Funds are required to monitor their respective 
portfolio's liquidity on an ongoing basis to determine whether, in 
light of current circumstances, an adequate level of liquidity is being 
maintained, and to consider taking appropriate steps in order to 
maintain adequate liquidity if through a change in values, net assets 
or other circumstances, more than 15% of the Fund's net assets were 
held in illiquid securities.\10\
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    \9\ 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 
14618 (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).
    \10\ Illiquid securities were defined in the Emerging Markets 
Fund Order to include securities 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 securities. 
Illiquid securities were defined in the Global Fund Order to include 
securities subject to contractual or other restrictions on resale 
and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance. See Prior 
Approval Orders, supra note 4.
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    The Exchange seeks to make a change to the representations made by 
the Adviser reflected in the Prior Approval Orders to increase the 
amount of Rule 144A securities that each Fund may hold. Under the 
proposed amendment, each Fund may continue to hold up to an aggregate 
amount of 15% of its net assets in illiquid securities (calculated at 
the time of investment), including (1) Rule 144A securities deemed 
illiquid by the Adviser or Sub-Adviser, and (2) loan interests 
(including loan participations and assignments, but not including 
LPNs).\11\ Each Fund will, however, continue to hold up to an 
additional 40% of its net assets in Rule 144A securities not deemed 
illiquid by the Sub-Adviser (calculated at the time of investment). The 
proposed rule change would therefore exclude Rule 144A securities not 
deemed illiquid by the Adviser or Sub-Adviser from the 15% limitation 
on investments in illiquid securities, and limit each Fund's investment 
in liquid Rule 144A securities to 40% of Fund net assets.

[[Page 33459]]

The Adviser represents that each Fund's holdings in Rule 144A 
securities not deemed illiquid by the Sub-Adviser will be comprised of 
issuances with more than $100 million principal outstanding.
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    \11\ While the ultimate responsibility for determination of 
liquidity of securities (including Rule 144A securities) lies with 
each Fund's Board of Directors, the Funds' Sub-Adviser is 
responsible for complying with each Fund's restrictions on investing 
in illiquid securities on a day to day basis. In doing that, the 
Sub-Adviser makes ongoing determinations about the liquidity of Rule 
144A securities that the respective Fund may invest in. In reaching 
liquidity decisions, the Adviser represents that the Sub-Adviser may 
consider the following factors: the frequency of trades and quotes 
for the security; the number of dealers wishing to purchase or sell 
the security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and of the marketplace trades (e.g. the time needed to 
dispose of the security, the method of soliciting offers, and the 
mechanics of transfer). See Securities Act Release No. 6862 (April 
23, 1990), 55 FR 17933, 17940 (April 30, 1990) (Resale of Restricted 
Securities; Changes to Method of Determining Holding Period of 
Restricted Securities Under Rules 144 and 145).
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    The Adviser represents that the purpose of the proposed change 
would be to permit the Sub-Adviser the flexibility to meet each Fund's 
investment objectives by permitting each Fund to invest in a higher 
percentage of Rule 144A securities not deemed illiquid by the Adviser 
or Sub-Adviser in accordance with Commission guidance and regulations. 
Rule 144A securities are securities that are not registered under the 
Securities Act, but which can only be offered and sold to ``qualified 
institutional buyers'' under Rule 144A of the Securities Act.\12\ The 
Exchange notes that Rule 144A was adopted, in part, to promote a more 
liquid resale market in unregistered securities among institutional 
investors,\13\ and the Adviser represents that liquid institutional 
markets for Rule 144A securities, including those Rule 144A securities 
generally held by the Funds, have developed. In this regard, the 
Adviser represents that most reference benchmarks for non-investment 
grade corporate bonds include more than 25% Rule 144A securities.\14\ 
ETFs tracking such benchmarks have not, to the knowledge of the 
Adviser, experienced particular secondary market liquidity issues due 
to positions in Rule 144A securities. The Adviser would not expect a 
materially different result for the Funds as the market for investment 
grade bonds,\15\ which the Funds each hold, is typically more liquid 
than the market for similar non-investment grade bonds. The Adviser 
notes further that the average issue size for Rule 144A securities is 
also comparable to the average issue size for registered securities 
within most high yield bond indices. The Adviser represents further 
that currently-listed high yield bond ETFs typically include a 
significant percentage of Rule 144A securities within their respective 
portfolios.\16\ Based on these representations, the Exchange believes 
there is ample existing precedent, and that its proposal is consistent 
with such precedent, to permit the Funds to invest in Rule 144A 
securities not deemed illiquid by the Adviser or Sub-Adviser, without 
the 15% limitation currently imposed by the Prior Approval Orders.
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    \12\ The term ``qualified institutional buyer'' (QIB) is defined 
in Rule 144A(a)(1). 17 CFR 230.144A(a)(1).
    \13\ See Securities Act Release No. 6862 (April 23, 1990), 55 FR 
17933 (April 30, 1990).
    \14\ See, e.g., Merrill Lynch High Yield Master II index 
(``Master II index''), which as of November 6, 2012, was comprised 
of 32% Rule 144A securities. The Master II index is the benchmark 
index for the American Century High-Yield Inv ETF (ABHIX). Also, as 
of March 6, 2013, Barclays High Yield Very Liquid Index was 
comprised of 43% Rule 144A securities. That index is the benchmark 
for the SPDR Barclays High Yield Bond ETF (JNK).
    \15\ The Global Fund intends to have 55% 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 
in the credit ratings of such issuers. See Global Fund Order at 
65238. The Emerging Markets Fund expects to have 65% or more of its 
assets invested in investment grade securities, though this 
percentage may change in response to economic events and changes to 
the ratings of such issuers. See Emerging Markets Order at 13380.
     The Global Fund Order defines the term ``investment grade'' to 
mean securities rated in the Baa/BBB categories or above by one or 
more nationally recognized statistical rating organizations 
(``NRSROs''). If a security is rated by multiple NRSROs, each Fund 
will treat the security as being rated in the highest rating 
category received from an NRSRO. Rating categories may include sub-
categories or gradations indicating relative standing. See Global 
Fund Order at note 11. The Emerging Markets Fund Order does not 
define the term ``investment grade.'' However, the Adviser 
represents that it intends to apply the definition of ``investment'' 
grade'' in the Global Fund Order to the Emerging Markets Fund.
    \16\ For example, the Adviser represents that as of November 6, 
2012, more than 30% of the investment portfolio of the actively-
managed Peritus High Yield ETF was comprised of Rule 144A 
securities. See Securities Exchange Act Release Nos. 63329 (November 
17, 2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86) 
(order approving proposed rule change relating to listing and 
trading of Peritus High Yield ETF); and 63041 (October 5, 2010), 75 
FR 62905 (October 13, 2010) (SR-NYSEArca-2010-86) (notice of filing 
of proposed rule change to list the Peritus High Yield ETF). See 
also Securities Exchange Act Release No. 66818 (April 17, 2012), 77 
FR 24233 (April 23, 2012) (SR-NYSEArca-2012-33) (notice of filing 
and immediate effectiveness of proposed rule change regarding 
Peritus High Yield ETF). The Adviser also represents that the 
investment strategies of various index-based high yield ETFs permit 
active use of Rule 144A securities, provided such securities are 
deemed liquid. See, e.g., prospectus for SPDR Barclays Capital High 
Yield Bond ETF, https://www.spdrs.com/library-content/public/SPDR_SERIES%20TRUST_SAI.pdf, which explicitly permits the fund to invest 
in Rule 144A securities deemed liquid. The Adviser represents that 
as of November 6, 2012, the portfolio of the SPDR Barclays High 
Yield Bond ETF included approximately 37% Rule 144A securities.
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    In addition, the Exchange proposes that the requirements of the 
Global Fund Order be modified to permit the Global Fund to invest up to 
20% of its net assets in sovereign debt.\17\ The Exchange also proposes 
that the requirements of the Prior Approval Orders be modified to amend 
the definitions of Global Corporate Debt and Corporate and Quasi-
Sovereign Debt, as applicable, to include both inflation-protected 
debt, including fixed income securities and other debt obligations 
linked to inflation rates of local economies, and variable rate or 
floating rate securities which are readjusted on set dates (such as the 
last day of the month or calendar quarter) in the case of variable 
rates or whenever a specified interest rate change occurs in the case 
of a floating rate instrument.\18\ The Adviser represents that these 
proposed changes in the permitted investments will permit the Funds to 
invest in a broader range of market sectors, and will thereby help 
further the Funds' investment objectives to obtain both income and 
capital appreciation through direct and indirect investments in Global 
Corporate Debt or Corporate and Quasi-Sovereign Debt, as applicable, 
and other investments.
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    \17\ The sovereign debt would not fall within the definition of 
Global Corporate Debt in the Global Fund Order, and it therefore 
would not be considered as part of the 80% minimum investment in 
fixed income securities that are Global Corporate Debt within that 
order. The Registration Statement defines ``sovereign debt'' as 
``debt securities of emerging market countries,'' for purposes of 
the Emerging Markets Fund, and ``as debt securities of foreign 
governments,'' for purposes of the Global Fund.
    \18\ Variable or floating interest rates generally reduce 
changes in the market price of securities from their original 
purchase price because, upon readjustment, such rates approximate 
market rates. Accordingly, as interest rates decrease or increase, 
the potential for capital appreciation or depreciation is less for 
variable or floating rate securities than for fixed rate 
obligations.
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    The Adviser represents that there is no change to the Funds' 
respective investment objectives. The Funds will continue to comply 
with all initial and continuing listing requirements under NASDAQ Rule 
5735.
    The Net Asset Value (``NAV'') of each Fund's Shares is calculated 
each day the New York Stock Exchange is open for trading as of the 
close of regular trading on that exchange, generally 4:00 p.m. Eastern 
Time (the ``NAV Calculation Time''). NAV per Share is calculated by 
dividing a Fund's net assets by the number of Fund Shares outstanding. 
In calculating the Fund's NAV, each Fund's investments generally are 
valued using market valuations. Short-term debt securities with 
remaining maturities of 60 days or less generally are valued on the 
basis of amortized cost, which approximates fair value. U.S. fixed 
income assets may be valued as of the announced closing time for such 
securities on any day that the Securities Industry and Financial 
Markets Association announces an early closing time. The values of any 
assets or liabilities of a Fund that are denominated in a currency 
other than the U.S. dollar are converted into U.S. dollars using an 
exchange rate deemed appropriate by the Fund.
    In certain instances, such as when reliable market valuations are 
not readily available or are not deemed to

[[Page 33460]]

reflect current market values, the Fund's investments will be valued in 
accordance with the Fund's pricing policy and procedures. Such 
securities may be valued using ``fair value'' pricing and may include, 
but are not limited to, securities for which there are no current 
market quotations or whose issuer is in default or bankruptcy, 
securities subject to corporate actions (such as mergers or 
reorganizations), securities subject to non-U.S. investment limits or 
currency controls, and securities affected by ``significant events.'' 
An example of a significant event is an event occurring after the close 
of the market in which a security trades but before the Fund's next NAV 
Calculation Time that may materially affect the value of the Fund's 
investment (e.g., government action, natural disaster, or significant 
market fluctuation).
    Price movements in U.S. markets that are deemed to affect the value 
of foreign securities, or reflect changes to the value of such 
securities, also may cause securities to be ``fair valued.'' When fair-
value pricing is employed, the prices of securities used by the Fund to 
calculate its NAV may differ from quoted or published prices for the 
same securities.
    The Adviser represents that it does not believe that the ability of 
the Funds' agent to calculate NAV and an indicative intra-day value 
(``IIV'') for each Fund, and disseminate such IIV every 15 seconds 
throughout the trading day, has been impeded by the Funds' current Rule 
144A holdings limited to 15% of net assets. Moreover, the Adviser does 
not expect that permitting the Funds to increase each of their liquid 
Rule 144A holdings as requested herein will otherwise impede the 
ability of the Funds' agent to calculate an NAV and an IIV, and 
disseminate such IIV every 15 seconds throughout the trading day.
    Except for the limited changes proposed herein, all other facts 
presented and representations made in the Rule 19b-4 \19\ filings 
underlying the Prior Approval Orders remain unchanged. The changes 
proposed herein would be consistent with the Exemptive Order \20\ and 
the 1940 Act and rules thereunder.
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    \19\ 17 CFR 240.19b-4.
    \20\ See supra note 6.
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2. Statutory Basis
    NASDAQ believes that the proposal is consistent with Section 6(b) 
of the Act \21\ in general and Section 6(b)(5) of the Act \22\ 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 mechanism of a free and open 
market and a national market system.
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    \21\ 15 U.S.C. 78f.
    \22\ 15 U.S.C. 78f(b)(5).
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    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 Funds 
will not hold more than 15% of their respective net assets (calculated 
at the time of investment) in illiquid securities, including (1) Rule 
144A securities deemed illiquid, or (2) loan participations or 
assignments (but not including LPNs). Each Fund may, however, hold up 
to an additional 40% of its net assets in Rule 144A securities not 
deemed illiquid by the Sub-Adviser (calculated at the time of 
investment). The proposal would therefore exclude Rule 144A securities 
not deemed illiquid by the Adviser or Sub-Adviser from the 15% 
limitation on investments in illiquid securities, and limit each Fund's 
investment in liquid Rule 144A securities to 40% of Fund net assets. 
The Adviser represents that the Fund's holdings in Rule 144A securities 
not deemed illiquid by the Sub-Adviser will be part of an issuance with 
more than $100 million in principal outstanding.
    Under the 1940 Act and rules thereunder, the Funds are required to 
monitor their respective portfolio's liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and to consider taking appropriate 
steps in order to maintain adequate liquidity if through a change in 
values, net assets or other circumstances, more than 15% of the Fund's 
net assets were held in illiquid securities.\23\ Moreover, while the 
ultimate responsibility for determination of liquidity of securities 
(including Rule 144A securities) lies with each Fund's Board of 
Directors, the Funds' Sub-Adviser is responsible for complying with 
each Fund's restrictions on investing in illiquid securities on a day 
to day basis. In doing that, the Sub-Adviser makes ongoing 
determinations about the liquidity of Rule 144A securities that the 
respective Fund may invest in. In reaching liquidity decisions, the 
Sub-Adviser may consider the following factors: The frequency of trades 
and quotes for the security; the number of dealers wishing to purchase 
or sell the security and the number of other potential purchasers; 
dealer undertakings to make a market in the security; and the nature of 
the security and of the marketplace trades (e.g. the time needed to 
dispose of the security, the method of soliciting offers, and the 
mechanics of transfer).
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    \23\ See supra note 10.
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    The Global Fund will continue, under normal circumstances,\24\ to 
invest not less than 80% of its net assets in Global Corporate Debt 
that are fixed income securities, and the Emerging Markets Fund will 
continue to invest at least 80% of its net assets in Corporate and 
Quasi-Sovereign Debt that are fixed income securities. The Funds will 
continue to comply with all initial and continued listing requirements 
under NASDAQ Rule 5735.
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    \24\ 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. See supra note 4 regarding SR-NASDAQ-2012-004 and SR-
NASDAQ-2012-98.
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    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 Adviser represents there is no change to either Fund's 
investment objective. The Adviser represents that the purpose of the 
proposed changes would be, respectively, to (1) permit the Sub-Adviser 
the flexibility to meet each Fund's investment objectives by permitting 
each Fund to invest in Rule 144A securities not deemed illiquid by the 
Adviser or Sub-Adviser, or (2) permit the Funds to invest in a broader 
range of market sectors, and thereby help further the Fund's objectives 
to obtain both income and capital appreciation through direct and 
indirect investments in Global Corporate Debt or Corporate and Quasi-
Sovereign Debt, as applicable, and other investments.
    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 the Funds may invest more than 15% of their 
respective net assets in Rule 144A securities solely if those 
securities are not deemed illiquid by the Adviser or Sub-Adviser. 
Investors and the public interest are protected under the proposal by 
finite parameters regarding 144A securities investments: A 40% cap on 
144A investment, whereby up to a total of 40% may be in not illiquid 
144A securities, and a requirement that

[[Page 33461]]

holdings in not illiquid Rule 144A securities will be comprised of 
issuances with more than $100 million principal outstanding. Moreover, 
under the proposal the Global Fund may invest up to 20% of its net 
assets in sovereign debt, because sovereign debt will not fall within 
the definition of Global Corporate Debt under the Global Fund 
Order.\25\ Under the proposal, each of the Global Fund and the Emerging 
Markets Fund will continue to invest not less than 80% of such Fund's 
respective net assets in fixed income securities, because both 
inflation-protected debt and variable rate or floating rate debt \26\ 
will fall within the definitions of Global Corporate Debt or Corporate 
and Quasi-Sovereign Debt, as applicable, under the Prior Approval 
Orders. The proposed changes are intended to provide additional 
flexibility to the Funds' Sub-Adviser to meet each Fund's investment 
objectives.\27\
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    \25\ Sovereign debt enjoys a relationship to foreign governments 
that is not unlike that of Treasury debt securities and the U.S. 
government. For purposes of the Global Fund, for example, sovereign 
debt is specifically defined as the debt securities of foreign 
governments. See supra note 16.
    \26\ For variable or floating interest rates, as interest rates 
decrease or increase the potential for capital appreciation or 
depreciation is less than for fixed rate obligations. Moreover, 
variable or floating interest rates generally reduce changes in the 
market price of securities from their original purchase price 
because, upon readjustment, such rates approximate market rates.
    \27\ Moreover, it is not expected that the proposed rule change 
will impede the ability of the Funds' agent to calculate an NAV and 
an IIV, and disseminate such IIV every 15 seconds throughout the 
trading day.
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    For the above reasons, NASDAQ believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act, and 
consistent with investment protection in that each Fund's holdings of 
Rule 144A securities not deemed illiquid by the Sub-Adviser would be 
limited to 40% of such Fund's net assets, and the holdings in Rule 144A 
securities not deemed illiquid by the Sub-Adviser will be comprised of 
issuances with more than $100 million principal outstanding.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the proposed rule change is decidedly pro-competitive. The proposed 
rule change will result in additional investment options to achieve the 
investment objectives of the Funds, thereby facilitating the listing 
and trading of additional actively-managed exchange-traded products 
that will enhance competition to the benefit of investors, market 
participants, and the marketplace.

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 (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-2013-079 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-NASDAQ-2013-079. 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 10:00 a.m. and 
3:00 p.m. Copies of the 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-NASDAQ-2013-079 and should 
be submitted on or before June 25, 2013.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13110 Filed 6-3-13; 8:45 am]
BILLING CODE 8011-01-P