
[Federal Register Volume 79, Number 162 (Thursday, August 21, 2014)]
[Notices]
[Pages 49544-49549]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19806]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72853; File No. SR-NYSEArca-2014-57]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendments No. 1 and No. 2 To List 
and Trade Shares of the PIMCO Foreign Bond Exchange-Traded Fund (U.S. 
Dollar-Hedged), PIMCO Foreign Bond Exchange-Traded Fund (Unhedged), 
PIMCO Global Advantage Bond Exchange-Traded Fund, and PIMCO 
International Advantage Bond Exchange-Traded Fund

August 15, 2014.

I. Introduction

    On May 1, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule 
change to list and trade shares (``Shares'') of the PIMCO Foreign Bond 
Exchange-Traded Fund (U.S. Dollar-Hedged) (``Hedged Foreign Bond 
Fund''), PIMCO Foreign Bond Exchange-Traded Fund (Unhedged) (``Unhedged 
Foreign Bond Fund''), PIMCO Global Advantage Bond Exchange-Traded Fund 
(``Global Advantage Bond Fund''), and PIMCO International Advantage 
Bond Exchange-Traded Fund (``International Advantage Bond Fund'') (each 
a ``Fund,'' and collectively ``Funds''). The proposed rule change was 
published for comment in the Federal Register on May 22, 2014.\4\ On 
June 12, 2014, the Exchange filed Amendment No. 1 to the proposed rule 
change, which amended and replaced the proposed rule change in its 
entirety. On July 9, 2014, the Commission published notice to solicit 
comments from interested persons on the proposed rule change, as 
modified by Amendment No. 1, and to designate a longer period for 
Commission action on the proposed rule change, as modified by Amendment 
No. 1.\5\ On July 31, 2014, the Exchange filed Amendment No. 2 to the 
proposed rule change, which amended and replaced the proposed rule 
change in its entirety.\6\ The Commission received no comments on the 
proposal. The Commission is publishing this notice to solicit comments 
on Amendment No. 2 from interested persons and is approving the 
proposed rule change, as modified by Amendments No. 1 and No. 2, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 72180 (May 16, 
2014), 79 FR 29461.
    \5\ See Securities Exchange Act Release No. 72531 (July 3, 
2014), 79 FR 39048. Pursuant to Section 19(b)(2) of the Act, the 
Commission determined that it was appropriate to designate a longer 
period within which to take action on the proposed rule change. 
Accordingly, the Commission designated August 21, 2014, as the date 
by which the Commission should either approve or disapprove or 
institute proceedings to determine whether to disapprove the 
proposed rule change.
    \6\ In Amendment No. 2, the Exchange: (1) Designated structured 
notes, including hybrid or indexed securities and event linked 
bonds, as non-principal (rather than principal) potential 
investments of the Funds; (2) provided more information about 
delayed funding loans, stating that they: (a) Are borrowing 
arrangements in which the lender agrees to make loans up to a 
maximum amount upon demand by the borrower during a specified term, 
and (b) normally provide for floating or variable rates of interest; 
(3) deleted an inaccurate reference to equity securities as a 
principal investment of the Unhedged Foreign Bond Fund; (4) 
supplemented its disclosures regarding the pricing of the Funds' 
underlying investments for net asset value (``NAV'') purposes to 
state that equity securities traded over-the-counter (``OTC'') will 
be valued based on price quotations obtained from a broker-dealer 
who makes markets in such securities or other equivalent indications 
of value provided by a third-party pricing service; (5) supplemented 
its disclosures regarding the availability of price information for 
the Funds' underlying holdings to add that equity securities traded 
OTC will be available from major market data vendors; and (6) 
clarified that the Hedged Foreign Bond Fund and Unhedged Foreign 
Bond Fund may invest in mortgage-backed securities rated below B 
subject to the limitation of the Funds to invest up to 10% of its 
total assets in high-yield securities (junk bonds) rated B or higher 
by Moody's, or equivalently rated by S&P or Fitch, or, if unrated, 
determined by PIMCO to be of comparable quality. The text of 
Amendment No. 2 is available at: http://www.sec.gov/comments/sr-nysearca-2014-57/nysearca201457.shtml.
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II. Description of the Proposed Rule Change

    The Exchange has proposed to list and trade the Shares under 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 
PIMCO ETF Trust (``Trust''), a statutory trust organized under the laws 
of the State of Delaware and registered with the Commission as an open-
end management investment company.\7\ The investment manager to

[[Page 49545]]

the Funds will be Pacific Investment Management Company LLC (``PIMCO'' 
or the ``Adviser''). PIMCO Investments LLC will serve as the 
distributor for the Funds. State Street Bank & Trust Co. will serve as 
the custodian and transfer agent for the Funds. The Exchange represents 
that the Adviser is not registered as a broker-dealer, but is 
affiliated with a broker-dealer, and will implement a ``firewall'' with 
respect to such broker-dealer regarding access to information 
concerning the composition of or changes to a Fund's portfolio.\8\
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    \7\ The Trust is registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). On January 27, 2014, the 
Trust filed an amendment to its registration statement on Form N-1A 
under the Securities Act of 1933 (15 U.S.C. 77a) and the 1940 Act 
relating to the Funds (File Nos. 333-155395 and 811-22250) (the 
``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. 28993 (November 10, 
2009) (File No. 812-13571).
    \8\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that, in the event (a) the Adviser becomes 
registered as a broker-dealer or newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser is a registered 
broker-dealer or becomes affiliated with a broker-dealer, the 
adviser or sub-adviser, as appropriate, will implement a firewall 
with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
of or changes to the applicable portfolio and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio. See Amendment No. 
2, supra note 6 at 5.
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    The Exchange has made the following representations and statements 
regarding the Fund.\9\
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    \9\ Additional information regarding the Trust, the Funds, the 
Shares, investment strategies, investment restrictions, risks, NAV 
calculation, creation and redemption procedures, fees, portfolio 
holdings, disclosure policies, distributions, and taxes, among other 
information, is included in Amendment No. 2 and the Registration 
Statement, as applicable. See Amendment No. 2 and Registration 
Statement, supra notes 6 and 7, respectively.
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Hedged Foreign Bond Fund--Principal Investments

    The Hedged Foreign Bond Fund will seek maximum total return, 
consistent with preservation of capital and prudent investment 
management. The Fund will seek to achieve its investment objective by 
investing, under normal circumstances,\10\ at least 80% of its assets 
in Fixed Income Instruments \11\ and derivatives \12\ based on Fixed 
Income Instruments that are economically tied to foreign countries, 
representing at least three foreign countries (the ``Hedged Foreign 
Bond Fund 80% policy'').
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    \10\ With respect to each Fund, the term ``under normal 
circumstances'' includes, but is not limited to, the absence of 
extreme volatility or trading halts in the fixed income markets or 
the financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as a systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption, or any similar intervening circumstance.
    \11\ Each Fund may invest in Fixed Income Instruments, which 
include: Securities issued or guaranteed by the U.S. Government, its 
agencies or government-sponsored enterprises (``U.S. Government 
Securities''); corporate debt securities of U.S. and non-U.S. 
issuers, including convertible securities and corporate commercial 
paper; mortgage-backed and other asset-backed securities; inflation-
indexed bonds issued both by governments and corporations; loan 
participations and assignments; delayed funding loans and revolving 
credit facilities; bank certificates of deposit, fixed time 
deposits, and bankers' acceptances; repurchase agreements on Fixed 
Income Instruments and reverse repurchase agreements on Fixed Income 
Instruments; debt securities issued by state or local governments 
and their agencies, authorities, and other government-sponsored 
enterprises; obligations of non-U.S. governments or their 
subdivisions, agencies, and government-sponsored enterprises; and 
obligations of international agencies or supranational entities. 
Each of the Funds may invest up to 20% of its assets in mortgage-
related and other asset-backed securities, although this 20% 
limitation does not apply to securities issued or guaranteed by 
Federal agencies or U.S. government sponsored instrumentalities.
    \12\ With respect to each Fund, derivative instruments will 
include forwards; exchange-listed and OTC options contracts; 
exchange-traded futures contracts; exchange-traded and OTC swap 
agreements; exchange-traded and OTC options on futures contracts; 
and exchange-traded and OTC options on swap agreements.
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    The Hedged Foreign Bond Fund will invest primarily in investment-
grade debt securities, but may invest up to 10% of its total assets in 
high-yield securities (``junk bonds'') rated B or higher by Moody's 
Investors Service, Inc. (``Moody's''), equivalently rated by Standard & 
Poor's Ratings Services (``S&P'') or Fitch, Inc. (``Fitch''), or, if 
unrated, determined by PIMCO to be of comparable quality, except that, 
within such limitation, the Fund may invest in mortgage-backed 
securities rated below B.
    In furtherance of the Hedged Foreign Bond Fund 80% policy, or with 
respect to the Fund's other investments, the Hedged Foreign Bond Fund 
may invest in derivative instruments.\13\
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    \13\ With respect to each Fund, derivative instruments will 
include: Forwards; exchange-traded and OTC options contracts; 
futures contracts; exchange-traded and OTC swap agreements; 
exchange-traded and OTC options on futures contracts; and exchange-
traded and OTC options on swap agreements. See Amendment No. 2, 
supra note 6 at 8.
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    Normally, the Hedged Foreign Bond Fund will limit its foreign 
currency exposure (from non-U.S. dollar-denominated securities or 
currencies) to 20% of its total assets. The Fund may engage in foreign 
currency transactions on a spot (cash) basis or forward basis and may 
invest in foreign currency futures and exchange-traded or OTC options 
contracts.\14\
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    \14\ See Amendment No. 2, supra note 6 at 13.
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    The Hedged Foreign Bond Fund may, without limitation, seek to 
obtain market exposure to the securities in which it primarily invests 
by entering into a series of purchase and sale contracts or by using 
other investment techniques (such as buy backs or dollar rolls). The 
Hedged Foreign Bond Fund may purchase or sell securities that it is 
eligible to purchase or sell on a when-issued, delayed delivery or 
forward commitment basis, and may engage in short sales.\15\
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    \15\ See id. at 13-14.
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Hedged Foreign Bond Fund--Other (Non-Principal) Investments

    The Hedged Foreign Bond Fund may invest up to 10% of its total 
assets in preferred stock, convertible securities, and other equity-
related securities. The Fund may invest in variable and floating rate 
securities that are not Fixed Income Instruments, meaning securities 
that pay interest at rates that adjust whenever a specified interest 
rate changes or that reset on predetermined dates (such as the last day 
of a month or calendar quarter).\16\ The Fund may invest in floating 
rate debt instruments (``floaters'') and inverse floating rate debt 
instruments (``inverse floaters'') that are not Fixed Income 
Instruments and may engage in credit spread trades.\17\
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    \16\ See id. at 14.
    \17\ See id.
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    The Hedged Foreign Bond Fund also may invest in trade claims, 
privately placed and unregistered securities, and exchange-traded and 
OTC-traded structured products, including credit-linked securities, 
commodity-linked notes, hybrid or ``indexed'' securities, event-linked 
bonds, and structured notes. The Fund may invest in Brady Bonds.
    The Hedged Foreign Bond Fund may enter into repurchase agreements 
on instruments other than Fixed Income Instruments. The Fund may enter 
into reverse repurchase agreements on instruments other than Fixed 
Income Instruments,\18\ subject to the Fund's limitations on 
borrowings.
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    \18\ See id. at 15.
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Unhedged Foreign Bond Fund--Principal Investments

    The Unhedged Foreign Bond Fund will seek maximum total return, 
consistent with preservation of capital and prudent investment 
management. The Fund will seek to achieve its investment objective by 
investing, under normal circumstances, at least 80% of its assets in 
Fixed Income Instruments and derivatives based on Fixed Income 
Instruments that are economically tied to foreign countries 
representing at least three foreign countries (the ``Unhedged Foreign 
Bond Fund 80% policy'').
    The Unhedged Foreign Bond Fund will invest primarily in investment-
grade debt securities, but may invest up to 10% of its total assets in 
high-yield

[[Page 49546]]

securities (junk bonds) rated B or higher by Moody's, equivalently 
rated by S&P or Fitch, or, if unrated, determined by PIMCO to be of 
comparable quality, except that, within such limitation, the Fund may 
invest in mortgage-backed securities rated below B.
    The Unhedged Foreign Bond Fund may invest in securities and 
instruments that are economically tied to emerging market countries, 
subject to applicable limitations set forth herein.
    In furtherance of the Unhedged Foreign Bond Fund 80% policy, or 
with respect to the Fund's other investments, the Unhedged Foreign Bond 
Fund may invest in derivative instruments.\19\
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    \19\ See supra, note 13.
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    The Unhedged Foreign Bond Fund may invest in securities denominated 
in foreign currencies, engage in foreign currency transactions on a 
spot (cash) basis or forward basis and may invest in foreign currency 
futures and exchange-traded or OTC options contracts.\20\
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    \20\ See Amendment No. 2, supra note 6.
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    The Unhedged Foreign Bond Fund may, without limitation, seek to 
obtain market exposure to the securities in which it primarily invests 
by entering into a series of purchase and sale contracts or by using 
other investment techniques (such as buy backs or dollar rolls). The 
Fund may purchase or sell securities on a when-issued, delayed 
delivery, or forward commitment basis and may engage in short 
sales.\21\
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    \21\ See id. at 16-17.
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Unhedged Foreign Bond Fund--Other (Non-Principal) Investments

    The Unhedged Foreign Bond Fund may invest up to 10% of its total 
assets in preferred stock, convertible securities, and other equity-
related securities. The Fund may invest in variable and floating rate 
securities that are not Fixed Income Instruments.\22\ The Fund may 
invest in floaters and inverse floaters that are not Fixed Income 
Instruments and may engage in credit spread trades.\23\
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    \22\ See id. at 17.
    \23\ See id.
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    The Unhedged Foreign Bond Fund may invest in trade claims, 
privately placed and unregistered securities, and exchange-traded and 
OTC-traded structured products, including credit-linked securities, 
commodity-linked notes, hybrid or ``indexed'' securities, event-linked 
bonds, and structured notes. The Fund may invest in Brady Bonds.
    The Unhedged Foreign Bond Fund may enter into repurchase agreements 
on instruments other than Fixed Income Instruments.\24\ The Fund may 
enter into reverse repurchase agreements on instruments other than 
Fixed Income Instruments subject to the Fund's limitations on 
borrowings.\25\
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    \24\ See id.
    \25\ See id.
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Global Advantage Bond Fund--Principal Investments

    The Global Advantage Bond Fund will seek total return exceeding 
that of its benchmarks, consistent with prudent investment management. 
The Fund will seek to achieve its investment objective by investing, 
under normal circumstances, at least 80% of its assets in Fixed Income 
Instruments and derivatives based on Fixed Income Instruments that are 
economically tied to at least three countries, which may include 
foreign countries and may also include the U.S. (the ``Global Advantage 
Bond Fund 80% policy'').
    The Global Advantage Bond Fund may invest in both investment-grade 
debt securities and high-yield securities (junk bonds) subject to a 
maximum of 15% of its total assets in securities rated below B by 
Moody's, S&P, or Fitch, or, if unrated, determined by PIMCO to be of 
comparable quality.
    In furtherance of the Global Advantage Bond Fund 80% policy, or 
with respect to the Fund's other investments, the Global Advantage Bond 
Fund may invest in derivative instruments.\26\
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    \26\ See supra, note 13.
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    The Global Advantage Bond Fund may invest, without limitation, in 
securities denominated in foreign currencies and in U.S. dollar-
denominated securities of foreign issuers. The Fund may engage in 
foreign currency transactions on a spot (cash) basis or forward basis 
and may invest in foreign currency futures and exchange-traded and OTC 
options contracts.\27\
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    \27\ See Amendment No. 2, supra note 6 at 18.
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    The Global Advantage Bond Fund may, without limitation, seek to 
obtain market exposure to the securities in which it primarily invests 
by entering into a series of purchase and sale contracts or by using 
other investment techniques (such as buy backs or dollar rolls). The 
Global Advantage Bond Fund may purchase or sell securities on a when-
issued, delayed delivery, or forward commitment basis and may engage in 
short sales.\28\
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    \28\ See id.
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Global Advantage Bond Fund--Other (Non-Principal) Investments

    The Global Advantage Bond Fund may invest up to 10% of its total 
assets in preferred stock, convertible securities, and other equity-
related securities. The Fund may invest in variable and floating rate 
securities that are not Fixed Income Instruments.\29\ The Fund may 
invest in floaters and inverse floaters that are not Fixed Income 
Instruments \30\ and may engage in credit spread trades.
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    \29\ See id. at 19.
    \30\ See id.
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    The Global Advantage Bond Fund may invest in trade claims, 
privately placed and unregistered securities, and exchange-traded and 
OTC-traded structured products, including credit-linked securities, 
commodity-linked notes, hybrid or ``indexed'' securities, event-linked 
bonds, and structured notes. The Fund may invest in Brady Bonds.
    The Global Advantage Bond Fund may enter into repurchase agreements 
on instruments other than Fixed Income Instruments.\31\ The Fund may 
enter into reverse repurchase agreements on instruments other than 
Fixed Income Instruments subject to the Fund's limitations on 
borrowings.\32\
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    \31\ See id.
    \32\ See id.
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International Advantage Bond Fund--Principal Investments

    The International Advantage Bond Fund will seek total return 
exceeding that of its benchmarks, consistent with prudent investment 
management. The Fund will seek to achieve its investment objective by 
investing, under normal circumstances, at least 80% of its assets in 
Fixed Income Instruments and derivatives based on Fixed Income 
Instruments that are economically tied to foreign countries, 
representing at least three foreign countries (the ``International 
Advantage Bond Fund 80% policy'').
    The International Advantage Bond Fund may invest in both 
investment-grade debt securities and high-yield securities subject to a 
maximum of 15% of its total assets in securities rated below B by 
Moody's, S&P, or Fitch, or, if unrated, determined by PIMCO to be of 
comparable quality.
    In furtherance of the International Advantage Bond Fund 80% policy, 
or with respect to the Fund's other investments, the International 
Advantage Bond Fund may invest in derivative instruments.\33\
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    \33\ See supra, note 13.
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    The International Advantage Bond Fund may invest, without 
limitation, in securities denominated in foreign currencies and in U.S. 
dollar-denominated securities of foreign issuers. The Fund may engage 
in foreign currency transactions on a spot (cash)

[[Page 49547]]

basis or forward basis and may invest in foreign currency futures and 
exchange-traded and OTC options contracts.\34\
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    \34\ See Amendment No. 2, supra note 6 at 20.
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    The International Advantage Bond Fund may, without limitation, seek 
to obtain market exposure to the securities in which it primarily 
invests by entering into a series of purchase and sale contracts or by 
using other investment techniques (such as buy backs or dollar rolls). 
The Fund may purchase or sell securities on a when-issued, delayed 
delivery, or forward commitment basis and may engage in short 
sales.\35\
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    \35\ See id. at 21.
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International Advantage Bond Fund--Other (Non-Principal) Investments

    The International Advantage Bond Fund may invest up to 10% of its 
total assets in preferred stock, convertible securities, and other 
equity-related securities.
    The International Advantage Bond Fund may invest in variable and 
floating rate securities that are not Fixed Income Instruments.\36\ The 
Fund may invest in floaters and inverse floaters that are not Fixed 
Income Instruments \37\ and may engage in credit spread trades.
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    \36\ See id.
    \37\ See id.
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    The International Advantage Bond Fund may invest in trade claims, 
privately placed and unregistered securities, and exchange-traded and 
OTC-traded structured products, including credit-linked securities, 
commodity-linked notes, hybrid or ``indexed'' securities, event-linked 
bonds, and structured notes. The Fund may invest in Brady Bonds.
    The International Advantage Bond Fund may enter into repurchase 
agreements on instruments other than Fixed Income Instruments.\38\ The 
Fund may enter into reverse repurchase agreements on instruments other 
than Fixed Income Instruments subject to the Fund's limitations on 
borrowings.\39\
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    \38\ See id.
    \39\ See id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\40\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendments No. 1 and No. 2, is 
consistent with Section 6(b)(5) of the Exchange Act,\41\ 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 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 Funds 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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    \40\ 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).
    \41\ 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 
Exchange Act,\42\ 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 CTA high-speed 
line.
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    \42\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    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.\43\ Price 
information relating to equity securities traded OTC will be available 
from major market data vendors. Information regarding the previous 
day's closing price and trading volume information for the Shares will 
be published daily in the financial section of newspapers.\44\ Intra-
day and closing price information regarding equity securities traded on 
a national securities exchange, including common stocks, preferred 
stocks, securities convertible into stocks, closed-end funds, exchange 
traded funds, and other equity-related securities, will be available 
from the exchange on which such securities are traded.\45\ Intra-day 
and closing price information regarding exchange-traded options 
(including options on futures) and futures will be available from the 
exchange on which such instruments are traded.\46\ Intra-day and 
closing price information regarding Fixed Income Instruments also will 
be available from major market data vendors. Price information relating 
to forwards will be available from major market data vendors.\47\
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    \43\ See Amendment No. 2, supra note 6, at 32.
    \44\ See id.
    \45\ See id. at 31.
    \46\ See id. at 31-32.
    \47\ See id. at 32.
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    In addition, the 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 Core Trading 
Session.\48\ The dissemination of the PIV, together with the Disclosed 
Portfolio, may allow investors to determine an approximate value of the 
underlying portfolio of each of the Funds on a daily basis and to 
provide an estimate of that value throughout the trading day.\49\
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    \48\ Several major market data vendors display or make widely 
available PIV taken from the CTA or other data feeds. See id.
    \49\ See id.
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    On each Business Day, before commencement of trading in Shares in 
the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the 
Exchange, each of the Funds will disclose on the Trust's Web site the 
Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) 
that will form the basis for each of the Fund's calculation of NAV at 
the end of the Business Day.\50\ The Trust's Web site 
(www.pimcoetfs.com), which will be publicly available prior to the 
public offering of Shares, will include a form of the prospectus for 
each of the Funds that may be downloaded. The Trust's Web site will 
include additional quantitative information updated on a daily basis, 
including, for each of the Funds, (1) daily trading volume, the prior 
business day's reported closing price, NAV and mid-point of the bid/ask 
\51\ spread at the time of calculation of the NAV (the ``Bid/Ask 
Price''), 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.
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    \50\ See id. at 30.
    \51\ The Bid/Ask Price of each of the Funds will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of that Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by each of the 
Funds and their service providers. See id.
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    Further, the Commission 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. On each Business Day, before commencement of trading in Shares 
in the Core Trading Session (9:30 a.m. E.T.

[[Page 49548]]

to 4:00 p.m. E.T.) on the Exchange, each of the Funds will disclose on 
the Trust's Web site the Disclosed Portfolio as defined in NYSE Arca 
Equities Rule 8.600(c)(2) that will form the basis for each of the 
Fund's calculation of NAV at the end of the Business Day.\52\ The 
Commission notes that the Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.\53\
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    \52\ See id. On a daily basis, the Funds will disclose on the 
Funds' Web site the following information regarding each portfolio 
holding, as applicable to the type of holding: Ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding, such as the type of swap); the 
identity of the security, commodity, index, or other asset or 
instrument underlying the holding, if any; for options, the option 
strike price; quantity held (as measured by, for example, par value, 
notional value, or number of shares, contracts, or units); maturity 
date, if any; coupon rate, if any; effective date, if any; market 
value of the holding; and the percentage weighting of the holding in 
a Fund's portfolio. Under accounting procedures followed by the 
Funds, trades made on the prior business day (``T'') will be booked 
and reflected in NAV on the current business day (``T+1''). 
Accordingly, the Funds 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. See id. at 30-31.
    \53\ See id. at 33.
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    In addition, a basket composition file--which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for a Fund's Shares, together with estimates and actual cash 
components--will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket will represent one Creation Unit 
of each of the Funds.\54\
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    \54\ See id. at 31.
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    The Commission notes that the Reporting Authority (as defined in 
NYSE Arca Equities Rule 8.600(c)(4)) 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.\55\ 
Further, personnel who make decisions on the 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.
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    \55\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Exchange represents that the Adviser is not registered as a 
broker-dealer, but is affiliated with a broker-dealer, and will 
implement a firewall with respect to such broker-dealer regarding 
access to information concerning the composition of or changes to a 
Fund's portfolio.\56\ The Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
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    \56\ See supra note 8 and accompanying text.
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    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares.\57\ Trading in Shares 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. These may include: (1) The extent to which trading is not 
occurring in the securities or the financial instruments constituting 
the Disclosed Portfolio of the Fund; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares will be subject 
to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares may be halted.
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    \57\ See NYSE Arca Equities Rule 7.12.
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    The Exchange has represented that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity 
securities.\58\
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    \58\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
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    In support of this proposal, the Exchange has made the following 
additional representations:
    (1) Each Fund's Shares will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600.
    (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 federal securities 
laws applicable to trading on the Exchange.\59\
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    \59\ The Financial Industry Regulatory Authority (``FINRA'') 
surveils trading on the Exchange pursuant to a regulatory services 
agreement. The Exchange is responsible for FINRA's performance under 
this regulatory services agreement. See Amendment No. 2, supra note 
6, at 33.
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    (3) FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, exchange-traded options, exchange-
traded equities, futures, and options on futures with other markets or 
other entities that are members of the ISG, and FINRA may obtain 
trading information regarding trading in the Shares, exchange-trade 
options, exchange-traded equities, futures, and options on futures from 
such markets or entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, exchange-traded options, 
exchange-traded equities, futures, and options on futures from markets 
or other entities that are members of ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement. FINRA, on 
behalf of the Exchange, is able to access, as needed, trade information 
for certain fixed income securities held by the Funds reported to 
FINRA's Trade Reporting and Compliance Engine.
    (4) Not more than 10% of the net assets of a Fund in the aggregate 
invested in exchange-traded equity securities shall consist of equity 
securities, including stocks into which a convertible security is 
converted, whose principal market is not a member of the ISG or is a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. Further, not more than 10% of the net 
assets of a Fund in the aggregate invested in futures contracts or 
exchange-traded options contracts shall consist of futures contracts or 
exchange-traded options contracts whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.\60\
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    \60\ See id. at 34.
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    (5) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (6) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated PIV will not be calculated or publicly 
disseminated; (4) how information regarding the PIV is disseminated; 
(5) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.

[[Page 49549]]

    (7) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\61\ as provided by NYSE Arca 
Equities Rule 5.3.\62\
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    \61\ 17 CFR 240.10A-3.
    \62\ See Amendment No. 2, supra note 6, at 33.
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    (8) Each Fund's investments, including investments in derivative 
instruments, will be subject to all of the restrictions under the 1940 
Act, including restrictions with respect to illiquid assets; that is, 
the limitation that a Fund may hold up to an aggregate amount of 15% of 
its net assets in illiquid assets (calculated at the time of 
investment), including Rule 144A securities deemed illiquid by the 
Adviser, consistent with Commission guidance.
    (9) A minimum of 100,000 Shares for each Fund will be outstanding 
at the commencement of trading on the Exchange.
    This order is based on all of the Exchange's representations, 
including those set forth above and in the Notice.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Exchange Act.

IV. Solicitation of Comments on Amendment No. 2

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 2 is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-57 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2014-57. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2014-57, and should 
be submitted on or before September 11, 2014.

V. Accelerated Approval of Proposed Rule Change as Modified by 
Amendment Nos. 1 and 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendments No. 1 and No. 2, prior to the 
thirtieth day after the date of publication of notice of Amendment No. 
2 in the Federal Register. In Amendment No. 2, the Exchange included 
additional information regarding the underlying investments of the 
Funds which assisted the Commission in analyzing the trading of the 
Shares on the Exchange. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act, to approve the proposed rule 
change, as modified by Amendments No. 1 and No. 2, on an accelerated 
basis.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\63\ that the proposed rule change, as modified by 
Amendments No. 1 and No. 2, (SR-NYSEArca-2014-57), be, and it hereby 
is, approved on an accelerated basis.
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    \63\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\64\
Kevin M. O'Neill,
Deputy Secretary.
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    \64\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-19806 Filed 8-20-14; 8:45 am]
BILLING CODE 8011-01-P


