
[Federal Register: August 6, 2010 (Volume 75, Number 151)]
[Notices]               
[Page 47652-47655]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06au10-141]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62623; File No. SR-NYSEArca-2010-51]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change Relating to Listing and Trading of 
WisdomTree Dreyfus Commodity Currency Fund under NYSE Arca Equities 
Rule 8.600

August 2, 2010.

I. Introduction

    On June 10, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca''), 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade the shares (``Shares'') of the WisdomTree Dreyfus 
Commodity Currency Fund (``Fund'') under NYSE Arca Equities Rule 8.600. 
The proposed rule change was published for comment in the Federal 
Register on June 29, 2010.\3\ The Commission received no comment 
letters on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 62349 (June 22, 2010), 
75 FR 37510 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.600 which governs the listing and trading of 
``Managed Fund Shares'' on the Exchange.\4\
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    \4\ Managed Fund Shares are defined as securities that (a) 
represent an interest in a registered investment company organized 
as an open-end management investment company or similar entity that 
invests in a portfolio of securities selected by the investment 
company's investment adviser consistent with the investment 
company's investment objectives and policies; (b) are issued in a 
specified aggregate minimum number in return for a deposit of a 
specified portfolio of securities and/or a cash amount with a value 
equal to the next determined net asset value; and (c) when 
aggregated in the same specified minimum number, may be redeemed at 
a holder's request, which holder will be paid a specified portfolio 
of securities and/or cash with a value equal to the next determined 
net asset value. See NYSE Arca Equities Rule 8.600(c)(1).
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    The Fund will be an actively managed exchange traded fund. The 
Shares will

[[Page 47653]]

be offered by the WisdomTree Trust (``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\ WisdomTree 
Asset Management, Inc. (``WisdomTree Asset Management'') is the 
investment adviser (``Adviser'') to the Fund.\6\ The Exchange 
represents that WisdomTree Asset Management is not affiliated with any 
broker-dealer. The Dreyfus Corporation (``Dreyfus''), which will serve 
as the sub-adviser for the Fund (``Sub-Adviser''), is affiliated with 
multiple broker-dealers and, accordingly, 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.\7\ The Bank of New York is the administrator, custodian and 
transfer agent for the Trust. ALPS Distributors, Inc. serves as the 
distributor for the Trust.\8\
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    \5\ See Post-Effective Amendment No. 32 to Registration 
Statement on Form N-1A for the Trust, dated March 19, 2010 (File 
Nos. 333-132380 and 811-21864), as supplemented on June 8, 2010 (the 
``Registration Statement''). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
    \6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \7\ The Exchange represents that the Adviser and Sub-Adviser, 
and their related personnel, are subject to Investment Advisers Act 
Rule 204A-1. This Rule specifically requires the adoption of a code 
of ethics by an investment adviser to include, at a minimum: (i) 
Standards of business conduct that reflect the firm's/personnel 
fiduciary obligations; (ii) provisions requiring supervised persons 
to comply with applicable Federal securities laws; (iii) provisions 
that require all access persons to report, and the firm to review, 
their personal securities transactions and holdings periodically as 
specifically set forth in Rule 204A-1; (iv) provisions requiring 
supervised persons to report any violations of the code of ethics 
promptly to the chief compliance officer (``CCO'') or, provided the 
CCO also receives reports of all violations, to other persons 
designated in the code of ethics; and (v) provisions requiring the 
investment adviser to provide each of the supervised persons with a 
copy of the code of ethics with an acknowledgement by said 
supervised persons. In addition, Rule 206(4)-7 under the Advisers 
Act makes it unlawful for an investment adviser to provide 
investment advice to clients unless such investment adviser has (i) 
adopted and implemented written policies and procedures reasonably 
designed to prevent violation, by the investment adviser and its 
supervised persons, of the Advisers Act and the Commission rules 
adopted thereunder; (ii) implemented, at a minimum, an annual review 
regarding the adequacy of the policies and procedures established 
pursuant to subparagraph (i) above and the effectiveness of their 
implementation; and (iii) designated an individual (who is a 
supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
    \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. 28174 (February 27, 2008) (File No. 812-13470). 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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WisdomTree Commodity Currency Fund

    The Fund seeks to achieve total returns reflective of money market 
rates in selected commodity-producing countries and changes to the 
value of such countries' currencies relative to the U.S. dollar.
    The Fund is designed to provide exposure to both the currencies and 
money market rates available to foreign investors in selected 
commodity-producing countries. The Fund intends to invest in commodity-
producing countries such as Australia, Brazil, Canada, Chile, 
Indonesia, Mexico, New Zealand, Norway, Russia and South Africa. In 
addition to seeking broad exposure across countries and currencies, the 
Fund intends to seek exposure across currencies correlated to each of 
the key commodity groups: Industrial metals, precious metals, energy, 
agriculture and livestock. The Fund generally will invest only in 
currencies that ``float'' relative to other currencies. The value of a 
floating currency is largely determined by supply and demand and 
prevailing market rates. In contrast, the value of a ``fixed'' currency 
generally is set by a government or central bank at an official 
exchange rate. The Fund generally does not intend to invest in the 
currencies of notable commodity producers, such as China, Saudi Arabia 
and the United Arab Emirates, since they are fixed or otherwise closely 
linked to the U.S. dollar. The Fund will only invest in currencies that 
it deems to be sufficiently liquid and accessible.\9\
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    \9\ The Fund may pursue its objectives through direct 
investments in money market instruments issued by entities in the 
applicable foreign country and denominated in the applicable non-
U.S. currency when WisdomTree Asset Management believes it is in the 
best interest of the Fund to do so. The decision to secure exposure 
directly or indirectly will be a function of, among other things, 
market accessibility, credit exposure, and tax ramifications for 
foreign investors. If the Fund pursues direct investment, eligible 
investments include short-term securities issued by the applicable 
foreign government and its agencies or instrumentalities, bank debt 
obligations and time deposits, bankers' acceptances, commercial 
paper, and short-term, high-quality corporate debt obligations 
designed to provide exposure to the applicable non-U.S. currency and 
money market rates, and U.S. dollar money market instruments.
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    The Fund intends to achieve exposure to selected commodity-
producing countries available to U.S. investors by investing primarily 
in short-term U.S. money market securities and forward currency 
contracts and swaps. The combination of money market securities with 
forward currency contracts and currency swaps is designed to create a 
position economically similar to a money market instrument denominated 
in a non-U.S. currency. A forward currency contract is an agreement to 
buy or sell a specific currency at a future date at a price set at the 
time of the contract. A currency swap is an agreement between two 
parties to exchange one currency for another at a future rate.
    In order to reduce interest rate risk, the Fund generally expects 
to maintain an average portfolio maturity of 90 days or less. The 
``average portfolio maturity'' of the Fund is the average of all the 
current maturities of the individual securities in the Fund's 
portfolio. All money market securities acquired by the Fund will be 
rated in the upper two short-term ratings by at least two nationally 
recognized statistical rating organizations (``NRSROs'') or, if 
unrated, deemed by the Adviser to be of equivalent quality.
    As a matter of general policy, the Fund will invest, under normal 
circumstances, at least 80% of its net assets, plus the amount of any 
borrowings for investment purposes, in investments that are tied 
economically to selected commodity-producing countries available to 
U.S. investors that make a significant contribution to the global 
export of commodities. If, subsequent to an investment, the 80% 
requirement is no longer met, the Fund's future investments will be 
made in a manner that will bring the Fund into compliance with this 
policy.
    The Fund may invest up to an aggregate amount of 10% of its net 
assets in illiquid securities. Illiquid securities include securities 
subject to contractual or other restrictions on resale and other 
instruments that lack readily available markets.
    Additional information regarding the Trust, the Fund, the Shares, 
the investment objectives, strategies, policies, and restrictions, 
risks, fees and expenses, creation and redemption procedures, portfolio 
holdings, distributions and taxes, availability of information, trading 
rules and halts, and surveillance procedures, among other things, can 
be found in the Registration Statement and in the Notice, as 
applicable.\10\
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    \10\ See supra notes 3 and 5.

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[[Page 47654]]

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \11\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\12\ In particular, the Commission finds that the 
proposed rule change is consistent with the requirements of Section 
6(b)(5) of the Act,\13\ which requires, among other things, that the 
Exchange's rules be designed to prevent fraudulent and manipulative 
acts and practices, promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
The Commission notes that the Shares must comply with the requirements 
of NYSE Arca Equities Rule 8.600 to be listed and traded on the 
Exchange.
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    \11\ 15 U.S.C. 78f.
    \12\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\14\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Quotation and last-sale 
information for the Shares will be available via the Consolidated Tape 
Association's high-speed line, and the Portfolio Indicative Value 
(``PIV'') will be updated and disseminated by one or more major market 
data vendors at least every 15 seconds during the Core Trading Session. 
In addition, the Trust will make available on its Web site on each 
business day before the commencement of trading in Shares in the Core 
Trading Session the Disclosed Portfolio that will form the basis for 
the calculation of the NAV, which will be determined at the end of the 
business day.\15\ The Fund's Web site will also include additional 
quantitative information updated on a daily basis relating to NAV. 
Information regarding the market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services, and the 
previous day's closing price and trading volume information will be 
published daily in the financial section of newspapers.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \15\ The Commission notes that the Reporting Authority providing 
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. See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Commission further believes that the proposed rule change is 
reasonably designed to promote fair disclosure of information that may 
be necessary to price the Shares appropriately and to prevent trading 
when a reasonable degree of transparency cannot be assured. The 
Exchange represents that it 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.\16\ Additionally, if the Exchange becomes aware that the NAV or 
the Disclosed Portfolio is not disseminated daily to all market 
participants at the same time, the Exchange will halt trading until 
such time as the NAV or the Disclosed Portfolio is available to all 
market participants.\17\ Further, if the PIV is not being disseminated 
as required, the Exchange may halt trading during the day in which the 
interruption occurs; if the interruption persists past the trading day 
in which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption.\18\ The 
Exchange represented that the Sub-Adviser is affiliated with multiple 
broker-dealers and, accordingly, has implemented a ``fire wall'' with 
respect to those broker-dealers regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. 
Further, the Commission notes 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.\19\
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    \16\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \17\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \18\ Id. Trading may also 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 a Fund; or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.
    \19\ See Commentary .06 to NYSE Arca Equities Rule 8.600.
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    The Exchange represented that the Shares are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities. In support of this proposal, the Exchange has made 
representations, including:
    (1) The Shares will be subject to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600(d).
    (2) The Exchange's surveillance 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.
    (3) Before 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. Specifically, the 
Information Bulletin will discuss the following: (a) The procedures for 
purchases and redemptions of shares and that Shares are not 
individually redeemable; (b) 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; 
(c) 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; (d) how information regarding the PIV is 
disseminated; (e) 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 (f) trading information.
    (4) The Fund will be in compliance with Rule 10A-3 under the 
Act.\20\
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    \20\ 17 CFR 240.10A-3.
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    (5) The Fund will not invest in non-U.S. equity securities.

This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSEArca-2010-51) be, and it 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).


[[Page 47655]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19434 Filed 8-5-10; 8:45 am]
BILLING CODE 8010-01-P

