
[Federal Register Volume 77, Number 105 (Thursday, May 31, 2012)]
[Notices]
[Pages 32161-32165]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13145]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67054; File No. SR-NYSEArca-2012-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating to Listing and Trading of the 
WisdomTree Brazil Bond Fund Under NYSE Arca Equities Rule 8.600

May 24, 2012.

I. Introduction

    On March 23, 2012, 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 shares (``Shares'') of the WisdomTree Brazil Bond Fund 
(``Fund'') under NYSE Arca Equities Rule 8.600. The proposed rule 
change was published for comment in the Federal Register on April 11, 
2012.\3\ The Commission received no comments on the proposal. This 
order grants approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66753 (April 6, 
2012), 77 FR 21827 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares of the Fund 
pursuant to NYSE Arca Equities Rule 8.600, which governs the listing 
and trading of Managed Fund Shares on the Exchange. The Shares will be 
offered by WisdomTree Trust (``Trust''), a Delaware statutory trust 
registered with the Commission as an investment company.\4\ The 
investment adviser to the Fund is WisdomTree Asset Management, Inc. 
(``Adviser''). The Fund's sub-adviser is Western Asset Management 
Company (``Sub-Adviser''). ALPS Distributors, Inc. serves as the 
distributor for the Trust. The Bank of New York Mellon is the 
administrator, custodian, and transfer agent for the Trust.
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    \4\ See Registration Statement on Form N-1A for the Trust under 
the Securities Act of 1933 (15 U.S.C. 77a) and under the Investment 
Company Act of 1940 (``1940 Act''), dated October 8, 2010 (File Nos. 
333-132380 and 811-21864) (``Registration Statement''). In addition, 
the Commission has issued an order granting certain exemptive relief 
to the Trust under the 1940 Act. See Investment Company Act Release 
No. 28471 (October 27, 2008) (File No. 812-13458) (``Exemptive 
Order'').
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    The Exchange represents that the Adviser is not affiliated with a 
broker-dealer. The Sub-Adviser is affiliated

[[Page 32162]]

with multiple broker-dealers and has implemented a ``fire wall'' with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. In 
addition, Sub-Adviser personnel who make decisions on the Fund's 
portfolio composition are subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
Fund's portfolio.\5\
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    \5\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that, in the event (a) the Adviser or the Sub-
Adviser becomes newly affiliated with a broker-dealer, or (b) any 
new adviser or sub-adviser becomes affiliated with a broker-dealer, 
it will implement a fire wall with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to the portfolio, and will be subject to procedures designed 
to prevent the use and dissemination of material non-public 
information regarding such portfolio.
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Description of the Fund

    The Fund will seek to provide investors with a high level of total 
return consisting of both income and capital appreciation. The Fund 
will be designed to provide exposure to a broad range of Brazilian 
government and corporate bonds through investment in both local 
currency (i.e., Brazilian real) and U.S. dollar-denominated Fixed 
Income Securities, which will include bonds, notes, or other debt 
obligations, including loan participation notes (``LPNs''),\6\ 
inflation-linked debt, and debt securities issued by ``supranational 
issuers,'' such as the European Investment Bank, International Bank for 
Reconstruction and Development, and the International Finance 
Corporation, as well as development agencies supported by other 
national governments. The Fund may invest to a lesser extent in Money 
Market Securities and derivative instruments, as described below.
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    \6\ The Fund may invest in LPNs with a minimum outstanding 
principal amount of $200 million that the Adviser or Sub-Adviser 
deems to be liquid. The Adviser represents that the Fund will invest 
a limited percentage of its assets in LPNs.
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    The Fund will be designed to provide broad exposure to Brazilian 
government and corporate bonds and will invest in a range of 
instruments with varying credit risk and duration. The Fund intends to 
invest in bonds and debt instruments issued by the government of Brazil 
and its agencies and instrumentalities and bonds and other debt 
instruments issued by corporations organized in Brazil.\7\ The Fund 
also may invest in bonds and debt instruments denominated in Brazilian 
real and issued by supranational issuers, as described above. The Fund 
intends to invest at least 70% of its net assets in Fixed Income 
Securities. The Fund will invest only in corporate bonds that the 
Adviser or Sub-Adviser deems to be sufficiently liquid. Generally a 
corporate bond must have $200 million or more par amount outstanding 
and significant par value traded to be considered as an eligible 
investment. Economic and other conditions in Brazil may, from time to 
time, lead to a decrease in the average par amount outstanding of bond 
issuances. Therefore, although the Fund does not intend to do so, the 
Fund may invest up to 20% of its net assets in corporate bonds with 
less than $200 million par amount outstanding, including up to 5% of 
its assets in corporate bonds with less than $100 million par amount 
outstanding, if (i) the Adviser or Sub-Adviser deems such security to 
be sufficiently liquid based on its analysis of the market for such 
security (based on, for example, broker-dealer quotations or its 
analysis of the trading history of the security or the trading history 
of other securities issued by the issuer), (ii) such investment is 
consistent with the Fund's goal of providing exposure to a broad range 
of Brazilian government and corporate bonds, and (iii) such investment 
is deemed by the Adviser or Sub-Adviser to be in the best interest of 
the Fund.
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    \7\ The category of ``Brazilian debt'' includes both U.S. 
dollar-denominated debt and non-U.S. or ``local'' currency debt. The 
market for Brazilian local currency debt is larger and more actively 
traded than the market for Brazilian U.S. dollar-denominated debt. 
The Adviser represents that Brazilian sovereign debt is issued in 
large par size and tends to be very liquid. Real-denominated 
Brazilian debt issued by supranational entities is also actively 
traded. Intra-day, executable price quotations on such instruments 
are available from major broker-dealer firms. Intra-day price 
information is available through subscription services, such as 
Bloomberg and Thomson Reuters, which can be accessed by authorized 
participants and other investors.
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    The Fund typically will maintain aggregate portfolio duration of 
between two and ten years. Aggregate portfolio duration is a measure of 
the portfolio's sensitivity to changes in the level of interest rates. 
The Fund's actual portfolio duration may be longer or shorter depending 
upon market conditions.
    The universe of Brazilian Fixed Income Securities currently 
includes securities that are rated ``investment grade'' as well as 
``non-investment grade'' securities. The Fund is designed to provide a 
broad-based, representative exposure to Brazilian government and 
corporate bonds and therefore will invest in both investment grade and 
non-investment grade securities in a manner designed to provide this 
exposure. The Fund currently expects that it will have 65% or more of 
its assets invested in investment grade securities, and no more than 
35% of its assets invested in non-investment grade securities. Because 
the Fund is designed to provide exposure to a broad range of Brazilian 
government and corporate bonds, and because the debt ratings of the 
Brazilian government and those corporate issuers will change from time 
to time, the exact percentage of the Fund's investments in investment 
grade and non-investment grade securities will change from time to time 
in response to economic events and changes to the credit ratings of the 
Brazilian government and corporate issuers.\8\ Within the non-
investment grade category, some issuers and instruments are considered 
to be of lower credit quality and at higher risk of default. In order 
to limit its exposure to these more speculative credits, the Fund will 
not invest more than 15% of its assets in securities rated B or below 
by Moody's, or equivalently rated by S&P or Fitch. The Fund does not 
intend to invest in unrated securities. However, it may do so to a 
limited extent, such as where a rated security becomes unrated, if such 
security is determined by the Adviser and Sub-Adviser to be of 
comparable quality. In determining whether a security is of 
``comparable quality,'' the Adviser and Sub-Adviser will consider, for 
example, whether the issuer of the security has issued other rated 
securities.
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    \8\ As of January 31, 2012, Brazilian government debt was rated 
investment grade by S&P, Moody's, and Fitch. See http://brasilstocks.com/bonds.
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    The Fund will hold Fixed Income Securities of at least 13 non-
affiliated issuers. The Fund will not concentrate 25% or more of the 
value of its total assets (taken at market value at the time of each 
investment) in any one industry, as that term is used in the 1940 Act 
(except that this restriction does not apply to obligations issued by 
the U.S. government or its agencies and instrumentalities or 
government-sponsored enterprises).
    The Fund intends to qualify each year as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended. The Fund will invest its assets, and otherwise 
conduct its operations, in a manner that is intended to satisfy the 
qualifying income, diversification, and distribution requirements 
necessary to establish and maintain RIC qualification under Subchapter 
M. The Subchapter M diversification tests generally require that (i) 
the Fund invest no more than 25% of its total assets in securities 
(other than securities of the U.S.

[[Page 32163]]

government or other RICs) of any one issuer or two or more issuers that 
are controlled by the Fund and that are engaged in the same, similar, 
or related trades or businesses, and (ii) at least 50% of the Fund's 
total assets consist of cash and cash items, U.S. government 
securities, securities of other RICs, and other securities, with 
investments in such other securities limited in respect of any one 
issuer to an amount not greater than 5% of the value of the Fund's 
total assets and 10% of the outstanding voting securities of such 
issuer.
    In addition to satisfying the above referenced RIC diversification 
requirements, no portfolio security held by the Fund (other than U.S. 
government securities) will represent more than 30% of the weight of 
the portfolio, and the five highest weighted portfolio securities of 
the Fund (other than U.S. government securities) will not in the 
aggregate account for more than 65% of the weight of the portfolio. For 
these purposes, the Fund may treat repurchase agreements collateralized 
by U.S. government securities as U.S. government securities.

Money Market Securities

    The Fund intends to invest in Money Market Securities (as described 
below) in a manner consistent with its investment objective in order to 
help manage cash flows in and out of the Fund, such as in connection 
with payment of dividends or expenses and to satisfy margin 
requirements, to provide collateral, or to otherwise back investments 
in derivative instruments. For these purposes, Money Market Securities 
include: Short-term, high-quality obligations issued or guaranteed by 
the U.S. Treasury or the agencies or instrumentalities of the U.S. 
government; short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies, and instrumentalities; repurchase 
agreements backed by U.S. government securities; money market mutual 
funds; and deposits and other obligations of U.S. and non-U.S. banks 
and financial institutions. All Money Market Securities acquired by the 
Fund will be rated investment grade. The Fund does not intend to invest 
in any unrated money market securities. However, it may do so, to a 
limited extent, such as where a rated Money Market Security becomes 
unrated, if such Money Market Security is determined by the Adviser or 
the Sub-Adviser to be of comparable quality.

Derivative Instruments

    Consistent with the Exemptive Order, the Fund may use derivative 
instruments as part of its investment strategies. Examples of 
derivative instruments include listed futures contracts,\9\ forward 
currency contracts, non-deliverable forward currency contracts,\10\ 
currency swaps (e.g., Brazilian real vs. U.S. dollar), interest rate 
swaps,\11\ total return swaps,\12\ currency options, options on futures 
contracts, and credit-linked notes.\13\ The Fund's use of derivative 
instruments (other than credit-linked notes) will be collateralized or 
otherwise backed by investments in short term, high-quality U.S. money 
market securities and other liquid fixed income securities. The Fund 
expects that no more than 30% of the value of the Fund's net assets 
will be invested in derivative instruments. Such investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage.
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    \9\ The listed futures contracts in which the Fund may invest 
will be listed on exchanges either in the U.S. or in Brazil. 
Brazil's primary financial markets regulator, the Comissao de 
Valores Mobiliarios, is a signatory to the International 
Organization of Securities Commissions (``IOSCO'') Multilateral 
Memorandum of Understanding (``MMOU''), which is a multi-party 
information sharing arrangement among major financial regulators. 
Both the Commission and the Commodity Futures Trading Commission are 
signatories to the IOSCO MMOU.
    \10\ A forward currency contract is an agreement to buy or sell 
a specific currency on a future date at a price set at the time of 
the contract.
    \11\ An interest rate swap involves the exchange of a floating 
interest rate payment for a fixed interest rate payment.
    \12\ A total return swap is an agreement between two parties in 
which one party agrees to make payments of the total return of a 
reference asset in return for payments equal to a rate of interest 
on another reference asset.
    \13\ The Fund may invest in credit-linked notes. A credit linked 
note is a type of structured note whose value is linked to an 
underlying reference asset. Credit linked notes typically provide 
periodic payments of interest as well as payment of principal upon 
maturity. The value of the periodic payments and the principal 
amount payable upon maturity are tied (positively or negatively) to 
a reference asset such as an index, government bond, interest rate, 
or currency exchange rate. The ongoing payments and principal upon 
maturity typically will increase or decrease depending on increases 
or decreases in the value of the reference asset. The Fund's 
investments in credit-linked notes will be limited to notes 
providing exposure to Brazilian Fixed Income Securities. The Fund's 
overall investment in credit-linked notes will not exceed 25% of the 
Fund's assets.
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    With respect to certain kinds of derivative transactions entered 
into by the Fund that involve obligations to make future payments to 
third parties, including, but not limited to, futures, forward 
contracts, swap contracts, the purchase of securities on a when-issued 
or delayed delivery basis, or reverse repurchase agreements, under 
applicable federal securities laws, rules, and interpretations thereof, 
the Fund must ``set aside'' liquid assets or engage in other measures 
to ``cover'' open positions with respect to such transactions.
    The Fund may engage in foreign currency transactions and may invest 
directly in foreign currencies in the form of bank and financial 
institution deposits, certificates of deposit, and bankers acceptances 
denominated in a specified non-U.S. currency. The Fund may enter into 
forward currency contracts in order to ``lock in'' the exchange rate 
between the currency it will deliver and the currency it will receive 
for the duration of the contract.\14\
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    \14\ The Fund will invest only in currencies, and instruments 
that provide exposure to such currencies, that have significant 
foreign exchange turnover and are included in the Bank for 
International Settlements, Triennial Central Bank Survey, Report on 
Global Foreign Exchange Market Activity in 2010 December 2010 (``BIS 
Survey''). The Fund may invest in currencies, and instruments that 
provide exposure to such currencies, selected from the top 40 
currencies (as measured by percentage share of average daily 
turnover for the applicable month and year) included in the BIS 
Survey.
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    The Fund may enter into repurchase agreements with counterparties 
that are deemed to present acceptable credit risks, and may enter into 
reverse repurchase agreements, which involve the sale of securities 
held by the Fund subject to its agreement to repurchase the securities 
at an agreed upon date or upon demand and at a price reflecting a 
market rate of interest.
    The Fund may invest in the securities of other investment companies 
(including money market funds and exchange-traded funds). The Fund may 
hold up to an aggregate amount of 15% of its net assets in (1) illiquid 
securities, (2) Rule 144A securities, and (3) loan interests (such as 
loan participations and assignments, but not including LPNs). Illiquid 
securities include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets. The Fund will not invest in non-U.S. equity 
securities.
    Additional information regarding the Shares and the Fund, including 
investment strategies, Fixed Income Securities, risks, creation and 
redemption procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes can be found in the Notice and Registration 
Statement, as applicable.\15\
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    \15\ See supra notes 3 and 4, respectively.

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[[Page 32164]]

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \16\ and the rules and regulations thereunder applicable to a 
national securities exchange.\17\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\18\ 
which requires, among other things, that the Exchange's rules be 
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, 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 Fund and 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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    \16\ 15 U.S.C. 78f.
    \17\ 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).
    \18\ 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,\19\ 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 (``CTA'') high-speed line. In addition, the Portfolio 
Indicative Value (``PIV''), as defined in NYSE Arca Equities Rule 
8.600(c)(3), will be widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session.\20\ On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, the Fund 
will disclose on its Web site the Disclosed Portfolio, as defined in 
NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for the 
Fund's calculation of the NAV at the end of the business day.\21\ The 
NAV of the Fund's Shares generally will be calculated once daily Monday 
through Friday as of the close of regular trading on the New York Stock 
Exchange (``NYSE'') (generally 4:00 p.m., Eastern time or ``E.T.''). In 
addition, information regarding 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 for the 
Shares will be published daily in the financial section of newspapers. 
The Web site for the Fund will include a form of the prospectus for the 
Fund that may be downloaded, additional data relating to NAV, and other 
applicable quantitative information, updated on a daily basis. Intra-
day and end-of-day prices are readily available through major market 
data providers and broker-dealers for the Fixed Income Securities, 
Money Market Securities, and derivative instruments held by the Fund.
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    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \20\ According to the Exchange, several major market data 
vendors display and/or make widely available PIVs published on the 
CTA or other data feeds. In addition, during hours when the markets 
for Fixed Income Securities in the Fund's portfolio are closed, the 
PIV will be updated at least every 15 seconds during the Core 
Trading Session to reflect currency exchange fluctuations.
    \21\ The Disclosed Portfolio will include, as applicable, the 
names, quantity, percentage weighting, and market value of Fixed 
Income Securities and other assets held by the Fund and the 
characteristics of such assets. The Web site and information will be 
publicly available at no charge.
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    The Commission further believes that the proposal to list and trade 
the Shares 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 Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV and the 
Disclosed Portfolio will be made available to all market participants 
at the same time.\22\ In addition, the Exchange will halt trading in 
the Shares under the specific circumstances set forth in NYSE Arca 
Equities Rule 8.600(d)(2)(D), and may halt trading in the Shares if 
trading is not occurring in the securities and/or the financial 
instruments comprising the Disclosed Portfolio of the Fund, or if other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.\23\ The Exchange will consider the 
suspension of trading in or removal from listing of the Shares if the 
PIV is no longer calculated or available or the Disclosed Portfolio is 
not made available to all market participants at the same time.\24\ 
While the Adviser is not affiliated with a broker-dealer, the Sub-
Adviser is affiliated with multiple broker-dealers and has implemented 
a ``fire wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio.\25\ Further, the Commission notes 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.\26\ The Exchange states that it has a 
general policy prohibiting the distribution of material, non-public 
information by its employees. The Commission also notes that the Fund 
will not invest in non-U.S. equity securities, and the Exchange may 
obtain information via the Intermarket Surveillance Group (``ISG'') 
from other exchanges that are members of ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement.\27\
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    \22\ See NYSE Arca Equities Rule 8.600(d)(1)(B) (requiring, in 
addition, that the Exchange obtain a representation from the issuer 
of the Shares that the NAV will be calculated daily).
    \23\ 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. Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca 
Equities Rule 7.12 have been reached. Trading also may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable.
    \24\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
    \25\ See supra note 5 and accompanying text. The Commission 
notes that an investment adviser to an open-end fund is required to 
be registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
    \26\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \27\ See Notice, supra note 3.
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    The Exchange further represents that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's

[[Page 32165]]

existing 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 NYSE Arca Equities Rule 8.600, 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative 
products, which include Managed Fund Shares, 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.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit 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 in Creation Unit 
aggregations (and that Shares are not individually redeemable); (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit 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 Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (f) trading 
information.
    (5) For initial and/or continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \28\ See 17 CFR 240.10A-3.
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    (6) The Fund may hold up to an aggregate amount of 15% of its net 
assets in: (a) Illiquid securities; (b) Rule 144A securities; and (c) 
loan interests (such as loan participations and assignments, but not 
including LPNs).
    (7) The Fund expects that no more than 30% of the value of the 
Fund's net assets will be invested in derivative instruments, and such 
investments will be consistent with the Fund's investment objective and 
will not be used to enhance leverage.
    (8) The Fund will not invest in non-U.S. equity securities.
    (9) A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange.

This approval order is based on all of the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \29\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \29\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change (SR-NYSEArca-2012-25) be, and it 
hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).
    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13145 Filed 5-30-12; 8:45 am]
BILLING CODE 8011-01-P


