[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Notices]
[Pages 47652-47655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19434]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\10\ See supra notes 3 and 5.
---------------------------------------------------------------------------
[[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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\20\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78s(b)(2).
[[Page 47655]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
---------------------------------------------------------------------------
\22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19434 Filed 8-5-10; 8:45 am]
BILLING CODE 8010-01-P