
[Federal Register Volume 75, Number 35 (Tuesday, February 23, 2010)]
[Notices]
[Pages 8164-8169]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-3464]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61519; File No. SR-NYSEArca-2010-04]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the WisdomTree Real Return Fund

February 16, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'')\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 25, 2010, NYSE Arca, Inc. (``NYSE 
Arca'' or ``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 the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the WisdomTree Trust (the ``Trust'') under NYSE Arca Equities 
Rule 8.600: WisdomTree Real Return Fund (the ``Fund''). The shares of 
the Fund are collectively referred to herein as the ``Shares.'' The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and on the Exchange's Web site at 
http://www.nyx.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.

[[Page 8165]]

 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 NYSE Arca Equities Rule 8.600,\3\ which governs the listing and 
trading of ``Managed Fund Shares,'' on the Exchange.\4\ The Fund will 
be an actively-managed exchange traded fund. The Shares will be offered 
by the Trust, which was established as a Delaware statutory trust on 
December 15, 2005. The Trust is registered with the Commission as an 
investment company.\5\
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    \3\ NYSE Arca Equities Rule 8.600(c)(1) provides that a Managed 
Fund Share is a security that represents an interest in an 
investment company registered under the Investment Company Act of 
1940 (15 U.S.C. 80a) (``1940 Act'') organized as an open-end 
investment company or similar entity that invests in a portfolio of 
securities selected by its investment adviser consistent with its 
investment objectives and policies. In contrast, an open-end 
investment company that issues Investment Company Units, listed and 
traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), 
seeks to provide investment results that correspond generally to the 
price and yield performance of a specific foreign or domestic stock 
index, fixed income securities index or combination thereof.
    \4\ The Commission approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain funds of the PowerShares Actively 
Managed Funds Trust on the Exchange pursuant to Rule 8.600 in 
Securities Exchange Act Release No. 57619 (April 4, 2008) 73 FR 
19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission also 
previously approved listing and trading on the Exchange, or trading 
on the Exchange pursuant to unlisted trading privileges (``UTP''), 
of the following actively managed funds under Rule 8.600: Securities 
Exchange Act Release Nos. 57626 (April 4, 2008), 73 FR 19923 (April 
11, 2008) (SR-NYSEArca-2008-28) (order approving trading on the 
Exchange pursuant to UTP of Bear Stearns Active ETF); 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); 59826 (April 28, 2009), 74 FR 20512 
(May 4, 2009) (SR-NYSEArca-2009-22) (order approving Exchange 
listing and trading of Grail American Beacon Large Cap Value ETF); 
60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-
2009-55) (order approving Exchange listing and trading of Dent 
Tactical ETF); 60717 (September 24, 2009), 74 FR 50853 (October 1, 
2009) (SR-NYSEArca-2009-74) (order approving listing of four Grail 
Advisors RP ETFs); 60975 (November 10, 2009), 74 FR 59590 (November 
18, 2009) (SR-NYSEArca-2009-83) (order approving listing of Grail 
American Beacon International Equity ETF); 60981 (November 10, 
2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order 
approving listing of five fixed income funds of the PIMCO ETF 
Trust).
    \5\ See Registration Statement on Form N-1A for the Trust filed 
with the Securities and Exchange Commission on October 28, 2009 
(File Nos. 333-132380 and 811-21864) (the ``Registration 
Statement''). The descriptions of the Fund and the Shares contained 
herein are based on information in the Registration Statement.
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Description of the Shares and the Fund
    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser to the Fund (``Advisor'').\6\ WisdomTree 
Asset Management is not affiliated with any broker-dealer. Commentary 
.07 to Rule 8.600 provides that, if the investment adviser to the 
Investment Company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser shall erect a ``fire wall'' 
between the investment adviser and the broker-dealer with respect to 
access to information concerning the composition and/or changes to such 
Investment Company portfolio.\7\ In addition, Commentary .07 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. The Mellon Capital Management 
Corporation (``Mellon'') serves as the sub-adviser for the Fund. Mellon 
is affiliated with multiple broker-dealers and has implemented a ``fire 
wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. The Bank of New York Mellon is the administrator, custodian 
and transfer agent for the Fund. ALPS Distributors, Inc. serves as the 
distributor for the Fund.\8\
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    \6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management. The Exchange 
represents that WisdomTree Asset Management, as the investment 
adviser of the Fund, and Mellon Capital Management Corporation, as 
the sub-adviser of the Fund, and their respective related personnel, 
are subject to Rule 204A-1 (17 CFR 240.10A-3) [sic] under the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-1) (the ``Advisers 
Act''). This Rule specifically requires the adoption of a code of 
ethics by an investment adviser to include, at a minimum: (i) 
Standards of business conduct that reflect the firm's/personnel 
fiduciary obligations; (ii) provisions requiring supervised persons 
to comply with applicable Federal securities laws; (iii) provisions 
that require all access persons to report, and the firm to review, 
their personal securities transactions and holdings periodically as 
specifically set forth in Rule 204A-1; (iv) provisions requiring 
supervised persons to report any violations of the code of ethics 
promptly to the chief compliance officer (``CCO'') or, provided the 
CCO also receives reports of all violations, to other persons 
designated in the code of ethics; and (v) provisions requiring the 
investment adviser to provide each of the supervised persons with a 
copy of the code of ethics with an acknowledgement by said 
supervised persons. In addition, Rule 206(4)-7 under the Advisers 
Act makes it unlawful for an investment adviser to provide 
investment advice to clients unless such investment adviser has (i) 
adopted and implemented written policies and procedures reasonably 
designed to prevent violation, by the investment adviser and its 
supervised persons, of the Advisers Act and the Commission rules 
adopted thereunder; (ii) implemented, at a minimum, an annual review 
regarding the adequacy of the policies and procedures established 
pursuant to subparagraph (i) above and the effectiveness of their 
implementation; and (iii) designated an individual (who is a 
supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
    \7\ An investment adviser to an open-end fund is required to be 
registered under the Advisers Act. As a result, the investment 
adviser is subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act.
    \8\ The 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. 28471 (October 27, 2008) (File No. 812-13458). In 
compliance with Commentary .05 to NYSE Arca Equities Rule 8.600, 
which applies to Managed Fund Shares based on an international or 
global portfolio, the Trust's application for exemptive relief under 
the 1940 Act states that the Funds 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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    According to the Registration Statement, the Fund seeks to provide 
investors with total returns that exceed the rate of inflation over 
long-term investment horizons. The Fund's investment objective is non-
fundamental and may be changed without shareholder approval. To achieve 
its objective, the Fund intends to invest in a portfolio of inflation-
linked securities, such as U.S. Treasury Inflation Protected Securities 
(``TIPS''), and other investment grade fixed income securities. The 
Fund will have targeted exposure to commodities and commodity 
strategies. Using this approach, the Fund seeks (i) to take advantage 
of the potential inflation-protection benefits of inflation-linked 
bonds and commodity instruments and (ii) to provide income.
    While the Fund intends to invest up to 70% or more of the value of 
its portfolio in TIPS, the Fund may invest in other types of inflation-
linked fixed income securities. For example, the Fund may invest in 
investment grade, floating-rate fixed income securities linked to U.S. 
inflation rates that are issued by the U.S. government, government 
agencies or corporations. The Fund may invest in inflation-linked 
swaps. An inflation-linked swap is an agreement between two parties to 
exchange payments at a future date based on the difference between a 
fixed

[[Page 8166]]

payment and a payment linked to the inflation rate at future date. The 
Fund also may invest in securities linked to inflation rates outside 
the U.S., including securities or instruments linked to rates in 
emerging market countries. The Fund may invest a portion of its assets 
in fixed-income securities that are not linked to inflation, such as 
U.S. government securities. While the Fund intends to invest primarily 
in investment grade securities, the Fund may invest up to 10% of its 
net assets in securities rated ``BB'' or lower by at least two 
nationally recognized statistical rating organizations (``NSROs'') 
[sic] or if unrated, deemed to be of equivalent quality.
    The Fund may invest in securities with effective or final 
maturities of any length. The Fund will seek to keep the average 
effective duration of its portfolio between two and ten 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 may 
adjust its portfolio holdings or average effective duration based on 
actual or anticipated changes in interest rates or credit quality.
    According to the Registration Statement, the Fund intends to have 
targeted exposure to commodities across a number of sectors, such as 
energy, precious metals and agriculture. While the Fund seeks exposure 
to commodity markets, it generally does not expect to invest in 
commodities directly in the spot market. The Fund intends to seek 
exposure to commodity markets primarily through its investments in the 
WisdomTree Real Return Investment Portfolio, Inc. (the ``Subsidiary''), 
a wholly-owned subsidiary controlled by the Fund which is organized in 
the Cayman Islands. In addition, the Fund may invest a more limited 
portion of its assets directly in commodity-linked instruments. The 
Fund and the Subsidiary may invest in swaps on commodities or commodity 
indexes, and may also invest in commodity-based structured notes and 
exchange-traded commodity-based derivative products that provide 
commodity returns (collectively, ``Commodity-Linked Instruments''). The 
Fund and Subsidiary may engage in commodity swaps or commodities index 
swaps in which fixed- or variable-rate payments on commodity returns or 
commodity index returns are exchanged.\9\ The Fund represents that 
investments in Commodity-Linked Instruments must be consistent with the 
Fund's investment objective and will not be used to enhance leverage.
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    \9\ As described in the Registration Statement, structured notes 
are debt instruments, typically issued by a bank, that are designed 
to provide cash flows linked to the value of commodities, commodity 
indexes or the value of commodity futures and options contracts. 
They may be listed and traded on a securities exchange or traded 
over-the-counter. Exchange-traded commodity-based derivative 
products include funds and trusts that invest in commodities or 
provide exposure to commodities whose units or shares are traded on 
major securities exchanges in the U.S. or throughout the world.
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    The Fund intends to invest up to 25% of its assets in the 
Subsidiary. The Subsidiary intends to invest all of its assets in 
Commodity-Linked Instruments and/or fixed income securities that serve 
as collateral for its commodity exposure. The Subsidiary's investments 
will be consolidated into the Fund's financial statements and the 
Fund's and Subsidiary's holdings will be publicly available on a daily 
basis.
    According to the Registration Statement, the Fund's use of the 
Subsidiary is designed to help the Fund achieve exposure to commodity 
returns in a manner consistent with the requirements of Federal tax 
laws applicable to regulated investment companies, such as the Fund. 
These requirements limit the exposure of the Fund to commodities and 
Commodity-Linked Instruments. The Subsidiary has the same investment 
objective as the Fund. Unlike the Fund, the Subsidiary is not 
restricted in the level of investments it may make in commodities and 
Commodity-Linked Instruments. The Subsidiary is otherwise subject to 
the same investment restrictions as the Fund, and will operate in the 
same manner as the Fund with regard to applicable compliance policies 
and procedures (other than investments in Commodity-Linked 
Instruments). Although the Subsidiary is not registered under the 1940 
Act, WisdomTree Asset Management manages both the Fund and the 
Subsidiary and the Fund's Board of Trustees oversees the operation of 
the Fund and its investment in the Subsidiary. The Registration 
Statement states that, since the Subsidiary's investments are 
consolidated into the Fund's, the Fund's combined holdings must comply 
with the 1940 Act. The Fund is the sole shareholder of the Subsidiary 
and does not expect shares of the Subsidiary to be offered or sold to 
other investors.
    The Fund and the Subsidiary will not invest in non-U.S. equity 
securities, except that the Fund will invest in shares issued by the 
Subsidiary.
    According to the Registration Statement, the Fund is considered to 
be ``non-diversified'' and is not limited by the 1940 Act with regard 
to the percentage of its assets that may be invested in the securities 
of a single issuer. As a result, the Fund may invest more of its assets 
in the securities of a single issuer or a smaller number of issuers 
than if it were classified as a diversified fund. Therefore, the Fund 
may be more exposed to the risks associated with and developments 
affecting an individual issuer or a small number of issuers than a fund 
that invests more widely, which may have a greater impact on the Fund's 
volatility and performance.
    The Fund does, however, intend to maintain the level of 
diversification necessary to qualify as a regulated investment company 
(``RIC'') under Subchapter M of the Internal Revenue Code of 1986, as 
amended. The Subchapter M diversification tests generally require that 
(i) a 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 a Fund and that 
are engaged in the same, similar or related trades or businesses, and 
(ii) at least 50% of a 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 a Fund's total assets and 10% of the outstanding voting securities 
of such issuer. These tax requirements are generally applied at the end 
of each quarter of a Fund's taxable year.
    The Fund may invest up to an aggregate amount of 15% of its net 
assets in illiquid securities. Illiquid securities include securities 
subject to contractual or other restrictions on resale and other 
instruments that lack readily available markets.\10\ The liquidity of 
securities purchased by the Fund which are eligible for resale pursuant 
to Rule 144A will be monitored by the Fund on an ongoing basis. In the 
event that such a security is deemed to be no longer liquid, the Fund's 
holdings will be reviewed to determine what action, if any, is

[[Page 8167]]

required to ensure that the retention of such security does not result 
in the Fund having more than 15% of its assets invested in illiquid or 
not readily marketable securities.
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    \10\ For these purposes, an ``illiquid'' security is deemed 
illiquid if it can not be sold or disposed of in the ordinary course 
of business within seven days at a price that approximates fair 
market value.
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    The Fund may invest in deposits and other obligations of U.S. and 
non-U.S. banks and financial institutions; high-quality money market 
instruments; short-term obligations issued or guaranteed by the U.S. 
Treasury or the agencies or instrumentalities of the U.S. government; 
short-term securities issued or guaranteed by non-U.S. governments, 
agencies and instrumentalities; and sovereign debt obligations. The 
Fund may hold a significant portion of its assets in inflation indexed 
bonds and in floating rate and adjustable rate obligations, such as 
demand notes, bonds, and commercial paper. The Fund may hold corporate 
debt obligations with less than 397 calendar days remaining to 
maturity; mortgage backed and asset-backed securities. The Fund may 
enter into mortgage ``dollar roll'' transactions with selected banks 
and broker-dealers. The Fund may use derivative instruments as part of 
its investment strategies, may engage in ``short sale'' transactions; 
may hold commodity-linked derivative instruments; may invest in 
investments denominated in non-U.S. currencies, or in securities (such 
as foreign currency forward and foreign currency futures contracts) 
that provide exposure to such currencies, currency exchange rates or 
interest rates denominated in such currencies; may enter into swap 
agreements, including interest rate swaps and currency swaps; may enter 
into U.S. or foreign futures contracts and options and options on 
futures contracts; and may enter into swap agreements and reverse 
repurchase agreements. The Fund may invest in the securities of other 
investment companies (including exchange traded funds and money market 
funds) to the extent permitted by the 1940 Act. The Fund may invest in 
debt securities and other instruments of companies that are considered 
to be in the financial sector, including commercial banks, brokerage 
firms, diversified financial services, a variety of firms in all 
segments of the insurance industry (such as multi-line, property and 
casualty, and life insurance) and real estate related companies.
The Shares
    According to the Registration Statement, the Fund issues and 
redeems Shares on a continuous basis at net asset value (``NAV'')\11\ 
only in large blocks of shares, typically 50,000 shares or more 
(``Creation Unit Aggregations''), in transactions with Authorized 
Participants. Only institutional investors who have entered into an 
Authorized Participant agreement [sic] purchase or redeem Creation Unit 
Aggregations. The consideration for purchase of Creation Unit 
Aggregations of the Fund generally consists of the in-kind deposit of a 
designated portfolio of fixed income securities (the ``Deposit 
Securities'') and an amount of cash (the ``Cash Component''). Together, 
the Deposit Securities and the Cash Component constitute the ``Fund 
Deposit,'' which represents the minimum initial and subsequent 
investment amount for a Creation Unit Aggregation of the Fund.
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    \11\ 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 4:00 p.m. Eastern time (the 
``NAV Calculation Time''). NAV per share is calculated by dividing 
the Fund's net assets by the number of Fund shares outstanding. For 
more information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
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    Each business day prior to the opening of trading the Fund will 
publish the specific securities and designated amount of cash included 
in that day's basket for the Fund through the National Securities 
Clearing Corporation (``NSCC'') or other method of public 
dissemination. The Fund reserves the right to accept or pay out a 
basket of securities or cash that differs from the published basket. 
The prices at which creations and redemptions occur are based on the 
next calculation of NAV after an order is received in proper form.
    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the Continuous Net 
Settlement System of the NSCC or a DTC 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 Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement. All terms relating 
to the Fund that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
Availability of Information
    The Fund's 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 each [sic] Fund that may be downloaded. 
The Web site will include additional quantitative information updated 
on a daily basis, including, for the Fund: (1) The prior business day's 
reported NAV, mid-point of the bid/ask spread at the time of 
calculation of such NAV (the ``Bid/Ask Price''),\12\ 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\13\ on the Exchange, the Trust will 
disclose on its Web site the identities and quantities of the portfolio 
of securities and other assets (the ``Disclosed Portfolio'')\14\ held 
by the Fund and the Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\15\ The Web site and 
information will be publicly available at no charge.
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    \12\ The Bid/Ask Price of the Fund is determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and/or its service 
providers.
    \13\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
time.
    \14\ The Exchange notes that NYSE Arca Equities Rule 
8.600(d)(2)(B)(ii) provides that the Reporting Authority that 
provides the Disclosed Portfolio must implement and maintain, or be 
subject to procedures designed to prevent the use and dissemination 
of material non-public information regarding the actual components 
of the portfolio.
    \15\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
NAV on such business day. Accordingly, the Fund will be able to 
disclose at the beginning of the business day the portfolio that 
will form the basis for the NAV calculation at the end of the 
business day.
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    In addition, for the Fund, an estimated value, defined in NYSE Arca 
Equities Rule 8.600 as the ``Portfolio Indicative Value,'' that 
reflects an estimated intraday value of the Fund's portfolio, will be 
disseminated. The Portfolio Indicative Value will be based upon the 
current value for the components of the Disclosed Portfolio and will be 
updated and disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session on the

[[Page 8168]]

Exchange. The dissemination of the Portfolio Indicative Value, together 
with the Disclosed Portfolio, will allow investors to determine the 
value of the underlying portfolio of the Fund on a daily basis and to 
provide a close estimate of that value throughout the trading day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at http://www.sec.gov. 
Information regarding market price and trading volume of the Shares is 
and will be continually available on a real-time basis throughout the 
day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume information will be published daily in the financial section of 
newspapers. Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line.
    On a daily basis, the Adviser [sic] will disclose for each 
portfolio security or other financial instrument of the Fund the 
following information: ticker symbol (if applicable), name of security 
or financial instrument, number of shares or dollar value of financial 
instruments held in the portfolio, and percentage weighting of the 
security or financial instrument in the portfolio.
Initial and Continued Listing
    The Shares will be subject to NYSE Arca Equities Rule 8.600(d), 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares. The Exchange represents that, for initial and/
or continued listing, the Shares must be in compliance with Rule 10A-
3\16\ under the Exchange Act, as provided by NYSE Arca Equities Rule 
5.3. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the net asset value 
per share for the Fund will be calculated daily and that the net asset 
value and the Disclosed Portfolio will be made available to all market 
participants at the same time.
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    \16\ See 17 CFR 240.10A-3.
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Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Shares of the Funds 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 comprising the Disclosed Portfolio and/or 
the financial instruments of the Fund; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares will be subject 
to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. Such rule 
provides that, if the Portfolio Indicative Value (as defined in Rule 
8.600(c)(3)) of a series of Managed Fund Shares is not being 
disseminated as required, the Corporation may halt trading during the 
day in which the interruption to the dissemination of the Portfolio 
Indicative Value occurs. If the interruption to the dissemination of 
the Portfolio Indicative Value persists past the trading day in which 
it occurred, the Corporation will halt trading no later than the 
beginning of the trading day following the interruption. In addition, 
if the Exchange becomes aware that the net asset value or the Disclosed 
Portfolio with respect to a series of Managed Fund Shares is not 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the net asset value or the 
Disclosed Portfolio is available to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. The minimum 
trading increment for Shares on the Exchange will be $0.01.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which include 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 
ISG.\17\
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    \17\ For a list of the current members of ISG, see http://
www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of ISG.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) the risks involved in trading 
the Shares during the Opening and Late Trading Sessions when an updated 
Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. Eastern time each trading day.

[[Page 8169]]

2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \18\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest. The 
Exchange believes that the proposed rule change will facilitate the 
listing and trading of an additional type of exchange-traded product 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace. In addition, the listing and trading 
criteria set forth in NYSE Arca Equities Rule 8.600 are intended to 
protect investors and the public interest.
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    \18\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

The Exchange has requested accelerated approval of this proposed rule 
change prior to the 30th day after the date of publication of notice in 
the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 15-day 
comment period.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2010-04 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-NYSEArca-2010-04. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2010-04 and should be submitted on or before 
March 10, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3464 Filed 2-22-10; 8:45 am]
BILLING CODE 8011-01-P


