[Federal Register Volume 80, Number 36 (Tuesday, February 24, 2015)]
[Notices]
[Pages 9818-9828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03661]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74290; File No. SR-NYSEArca-2015-05]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of Shares of 
WisdomTree Put Write Strategy Fund Under Commentary .01 to NYSE Arca 
Equities Rule 5.2(j)(3)

February 18, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the

[[Page 9819]]

``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, 
on February 3, 2015, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the WisdomTree Trust under Commentary .01 to NYSE Arca Equities 
Rule 5.2(j)(3) (``Investment Company Units''): The WisdomTree Put Write 
Strategy Fund. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
WisdomTree Put Write Strategy Fund (``Fund'') under Commentary .01 to 
NYSE Arca Equities Rule 5.2(j)(3), which governs the listing and 
trading of Investment Company Units on the Exchange.\4\ The Fund will 
be an index-based exchange traded fund (``ETF''). The Shares will 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 and has filed a 
registration statement on Form N-1A (``Registration Statement'') with 
the Commission on behalf of the Fund.\5\
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    \4\ NYSE Arca Equities Rule 5.2(j)(3)(A) provides that an 
Investment Company Unit is a security that represents an interest in 
a registered investment company that holds securities comprising, or 
otherwise based on or representing an interest in, an index or 
portfolio of securities (or holds securities in another registered 
investment company that holds securities comprising, or otherwise 
based on or representing an interest in, an index or portfolio of 
securities).
    \5\ See Post-Effective Amendment No. 381 to Registration 
Statement on Form N-1A for the Trust, dated December 15, 2014 (File 
Nos. 333-132380 and 811-21864). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
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    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
will be the investment adviser (``Adviser'') to the Fund.\6\ Mellon 
Capital Management will serve as sub-adviser for the Fund (``Sub-
Adviser'').\7\ State Street Bank and Trust Company will be the 
administrator, custodian and transfer agent for the Trust. Foreside 
Fund Services, LLC will serve as the distributor for the Fund 
(``Distributor'').\8\
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    \6\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \7\ The Sub-Adviser is responsible for day-to-day management of 
the Fund and, as such, typically makes all decisions with respect to 
portfolio holdings. The Adviser has ongoing oversight 
responsibility.
    \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. 28171 (October 27, 2008) (File No. 812-13458) 
(``Exemptive Order''). Investments made by the Fund will comply with 
the conditions in the Exemptive Order.
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Description of the Shares and the Fund
    As discussed in more detail below, the Fund's investment objective 
is to seek investment results that, before fees and expenses, closely 
correspond to the price and yield performance of the CBOE S&P 500 Put 
Write Index (``Index''). The Index was developed and is maintained by 
the Chicago Board Options Exchange, Inc. (``CBOE'' or the ``Index 
Provider''). None of the Trust, the Adviser, the Sub-Adviser, State 
Street Bank and Trust Company, or the Distributor is affiliated with 
the Index Provider.
    Commentary .01(b)(1) to Rule 5.2(j)(3) provides that, if the 
applicable index is maintained by a fund advisor or a broker-dealer, 
such fund advisor or broker-dealer shall erect a ``fire wall'' around 
the personnel who have access to information concerning changes and 
adjustments to the index, and the index shall be calculated by a third 
party who is not a broker-dealer or fund advisor.\9\ The Index Provider 
is not registered as an investment adviser or broker-dealer and is not 
affiliated with any broker-dealers. The Adviser is not registered as, 
or affiliated with, any broker-dealer.\10\ The Sub-Adviser is 
affiliated with multiple broker-dealers and has implemented a ``fire 
wall'' with respect to such broker-dealers and their personnel 
regarding access to information concerning the composition and/or 
changes to the Index.\11\ In addition, Sub-Adviser personnel who make 
decisions regarding the Fund's portfolio are subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the Fund's portfolio.
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    \9\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-adviser 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.
    \10\ The Adviser and the Index Provider have represented that a 
fire wall exists around the respective personnel who have access to 
information concerning changes and adjustments to the Index.
    \11\ The Exchange represents that the Adviser and Sub-Adviser, 
and their related personnel, are subject to 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.
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    In the event (a) the Adviser or Sub-Adviser becomes registered as a 
broker-

[[Page 9820]]

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, it will implement a fire wall with respect to its 
relevant personnel or broker-dealer affiliate 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.
    The Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .01(a)(A) to NYSE Arca Equities Rule 
5.2(j)(3), applicable to the listing of Investment Company Units based 
upon an index of ``US Component Stocks.'' \12\ Specifically, Commentary 
.01(a)(A) to NYSE Arca Equities Rule 5.2(j)(3) sets forth the 
requirements to be met by components of an index or portfolio of US 
Component Stocks. Because, as discussed in more detail herein, the 
Index will consist primarily of S&P 500 Index put options (``SPX 
Puts''), rather than US Component Stocks, the Index does not satisfy 
the requirements of Commentary .01(a)(A).\13\
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    \12\ NYSE Arca Equities Rule 5.2(j)(3) provides that the term 
``US Component Stock'' shall mean an equity security that is 
registered under Sections 12(b) or 12(g) of the Act and an American 
Depositary receipt, the underlying equity securities of which is 
registered under Sections 12(b) or 12(g) of the Act.
    \13\ The Exchange notes that the S&P 500 Index has been 
previously approved by the Commission under Section 19(b)(2) of the 
Act in connection with the listing and trading of index options and 
Portfolio Depositary Receipts, as well as other securities. See, 
e.g., Securities Exchange Act Release Nos. 19907 (June 24, 1983), 48 
FR 30814 (July 5, 1983) (approving the listing and trading of 
options on the S&P 500 Index); 31591 (December 18, 1992), 57 FR 
60253 (December 18, 1992) (approving the listing and trading of 
Portfolio Depositary Receipts based on the S&P 500 Index). NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .01(a)(A)(5) provides that all 
securities in the applicable index or portfolio shall be US 
Component Stocks listed on a national securities exchange and shall 
be NMS Stocks as defined in Rule 600 under Regulation NMS of the 
Act. Each component stock of the S&P 500 Index is a US Component 
Stock that is listed on a national securities exchange and is an NMS 
Stock. Options are excluded from the definition of NMS Stock. The 
Fund and the Index meet all of the requirements of the listing 
standards for Investment Company Units in Rule 5.2(j)(3) and the 
requirements of Commentary .01, except the requirements in 
Commentary .01(a)(A)(1)-(5), as the Index consists of options on US 
Component Stocks. The S&P 500 Index consists of US Component Stocks 
and satisfies the requirements of Commentary .01(a)(A)(1)-(5).
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WisdomTree Put Write Strategy Fund
Index Methodology
    The Fund's investment objective is to seek investment results that, 
before fees and expenses, closely correspond to the price and yield 
performance of the Index. The Index tracks the value of a passive 
investment strategy, which consists of overlaying ``SPX Puts'' over a 
money market account, invested in one and three-month Treasury bills 
(``PUT Strategy'').\14\ The SPX Puts are struck at-the-money and are 
sold on a monthly basis, usually the third Friday of the month (i.e., 
the ``Roll Date''), which matches the expiration date of the SPX 
Puts.\15\ All SPX Puts are standardized options traded on the Chicago 
Board Options Exchange.
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    \14\ The put-write strategy of selling cash-secured SPX Puts has 
the potential to appeal to investors who wish to add income and 
attempt to boost risk-adjusted returns, in return for risking under-
performance during bull markets. An investor who engages in a cash-
secured (i.e., collateralized) put sales strategy sells (or 
``writes'') a put option contract and at the same time deposits the 
full cash amount necessary for a possible purchase of underlying 
shares in the investor's brokerage account. Additional information 
on the methodology used to calculate the Index can be found at: 
http://www.cboe.com/micro/put/PutWriteMethodology.pdf.
    \15\ The base date for the Index is June 1, 1988 (``Base 
Date''), when the value of the Index was 100. The daily historical 
value for the Index recently was extended back to June 30, 1986, on 
which date the Index value was 89.91. Daily historical value of the 
Index is available at www.CBOE.com/PUT and from Bloomberg and other 
price quote vendors.
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    At each Roll Date, any settlement loss from the expiring SPX Puts 
is financed by the Treasury bill account and a new batch of at-the-
money SPX Puts is sold. The revenue from their sale is added to the 
Treasury bill account. In March quarterly cycle months, the three-month 
Treasury bills are deemed to mature, and so the total cash available is 
reinvested at the three-month Treasury bill rate. In other months, the 
revenue from the sale of SPX Puts is invested separately at the one-
month Treasury bill rate.
    The number of SPX Puts sold is chosen to ensure ``Full 
Collateralization''.\16\ The strike price of the new SPX Puts that are 
sold is the strike price of listed SPX Puts that is closest to but not 
greater than the last value of the S&P 500 Index reported before 11:00 
a.m. Eastern time (``ET''). For example, if the last S&P 500 Index 
value reported before 11:00 a.m. ET is 1233.10 and the closest listed 
SPX Put strike price below 1233.10 is 1230 then 1230 strike SPX Puts 
are sold.
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    \16\ Full Collateralization means that at the expiration of the 
SPX Puts, the total value of the Treasury bill investments must be 
equal to the maximum possible loss from final settlement of the SPX 
Puts or the product of the number of SPX Puts sold and the at-the-
money strike price.
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    The SPX Puts are deemed to be sold at a price equal to the volume-
weighted average price (``VWAP'') of SPX Puts with that strike price 
during the half-hour period beginning at 11:30 a.m. ET.\17\ If no 
transactions occur at the new SPX Put strike price between 11:30 a.m. 
and 12:00 p.m. ET, then the new SPX Puts will be deemed sold at the 
last bid price reported before 12:00 p.m. ET.
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    \17\ The CBOE calculates the VWAP in a two-step process: First, 
the Fund will exclude trades in the new call option between 11:30 
a.m. and 1:30 p.m. ET that are identified as having been executed as 
part of a ``spread'', and then the Fund will calculate the weighted 
average of all remaining transaction prices of the new call option 
between 11:30 a.m. and 1:30 p.m. ET, with weights equal to the 
fraction of total non-spread volume transacted at each price during 
this period. The source of the transaction prices used in the 
calculation of the VWAP will be the CBOE's Market Data Retrieval 
(``MDR'') System. Time and sales information from CBOE's MDR System 
is disseminated through the Options Price Reporting Authority and is 
publicly available through price quote vendors.
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    At expiration, the SPX Puts are settled against a Special Opening 
Quotation (``SOQ'') of the S&P 500 Index. The SOQ is a special 
calculation of the S&P 500 Index that is compiled from the opening 
prices of component stocks underlying the S&P 500 Index. The SOQ 
calculation is performed when all 500 stocks underlying the S&P 500 
Index have opened for trading, and is usually determined before 11:00 
a.m. ET.\18\ The final settlement price of the expiring SPX Puts is 
equal to the difference between their strike price and the SOQ, not to 
exceed zero.
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    \18\ If the third Friday of the month is an exchange holiday, 
the SPX Puts are settled against the SOQ on the previous business 
day and the new SPX Puts are selected on that day as well.
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    The CBOE calculates the Index value in real-time every fifteen 
seconds during each trading day excluding roll days. On any given date, 
the Index represents the mark-to-market value of the base date $100 
invested in the Put Strategy.
Fund's Investment Methodology
    Under normal circumstances,\19\ the Fund will invest not less than 
80% of

[[Page 9821]]

its assets in SPX Puts and short-term U.S. Treasury securities.\20\ The 
Fund's investment strategy will be designed to sell a sequence of one-
month, at-the-money, SPX Puts and invest cash at one and three-month 
Treasury bill rates. The number of SPX Puts sold will vary from month 
to month, but will be limited to permit the amount held in the Fund's 
investment in Treasury bills to finance the maximum possible loss from 
final settlement of the SPX Puts.\21\
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    \19\ The terms ``under normal circumstances'' and ``normal 
market conditions'' include, but are 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 systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance. In response to 
adverse market, economic, political, or other conditions the Fund 
reserves the right to invest in U.S. government securities, other 
``money market instruments'' (as defined below), and cash, without 
limitation, as determined by the Adviser or Sub-Adviser. In the 
event the Fund engages in these temporary defensive strategies that 
are inconsistent with its investment strategies, the Fund's ability 
to achieve its investment objectives may be limited.
    \20\ The Treasury securities in which the Fund may invest will 
include variable rate Treasury securities, whose rates are adjusted 
daily (or at such other increment as may later be determined by the 
Department of the Treasury) to correspond with the rate paid on one-
month or three-month month [sic] Treasury securities, as applicable.
    \21\ The number of SPX Puts sold will be chosen to ensure Full 
Collateralization, see note 16, supra.
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    The SPX Puts will be struck at-the-money and will be sold on a 
monthly basis on the Roll Date, (i.e., the same Roll Date at [sic] that 
used by the Index), which matches the expiration date of the SPX Put 
options. At each Roll Date, any settlement loss from the expiring SPX 
Puts will be financed by the Fund's Treasury bill investments and a new 
batch of at-the-money SPX Puts will be sold. The revenue from their 
sale will be added to the Treasury bill account. In March quarterly 
cycle months, the three-month Treasury bills will be deemed to mature, 
and so the total cash available will be reinvested at the three-month 
Treasury bill rate. In other months, the revenue from the sale of puts 
will be invested separately at the one-month Treasury bill rate.
    The strike price of the new SPX Puts that are sold will be the 
strike price of listed SPX Puts that is closest to but not greater than 
the last value of the S&P 500 Index reported before 11:00 a.m. ET. For 
example, if the last S&P 500 Index value reported before 11:00 a.m. ET 
is 1233.10 and the closest listed SPX Put strike price below 1233.10 is 
1230 then 1230 strike SPX Puts will be sold.
    The SPX Puts will be deemed to be sold at a price equal to the VWAP 
of SPX Puts with that strike during the half-hour period beginning at 
11:30 a.m. ET.\22\ If no transactions occur at the new put strike price 
between 11:30 a.m. and 12:00 p.m. ET, then the new put options will be 
deemed sold at the last bid price reported before 12:00 p.m. ET.
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    \22\ The Fund will calculate the VWAP in the same manner as is 
used by CBOE to calculate the VWAP to determine the Index value. See 
note 17, supra.
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    At expiration, the SPX Puts will be settled against a SOQ of the 
S&P 500 Index. The Fund will calculate the SOQ in the same manner as is 
used by CBOE to determine the Index value.
Secondary Investment Strategies
    The Fund may invest its remaining assets in short-term, high 
quality securities issued or guaranteed by the U.S. government (in 
addition to U.S. Treasury securities) and non-U.S. governments, and 
each of their agencies and instrumentalities; U.S. government sponsored 
enterprises; repurchase agreements backed by U.S. government and non-
U.S. government securities; money market mutual funds; and deposit and 
other obligations of U.S. and non-U.S. banks and financial institutions 
(``money market instruments'') \23\ and derivative instruments or other 
investments, as described below. The Fund may invest up to 20% of its 
net assets (in the aggregate) in one or more of the following 
investments not included in the Index, but which the Adviser or Sub-
Adviser believes will help the Fund to track the Index. For example, 
there may be instances in which the Adviser or Sub-Adviser may choose 
to purchase or sell financial instruments not in the Index which the 
Adviser or Sub-Adviser believes are appropriate to substitute for one 
or more Index components in seeking to replicate, before fees and 
expenses, the performance of the Index. To effect this investment 
strategy, the Fund may invest in S&P 500 ETF put options,\24\ total 
return swaps on the Index,\25\ S&P 500 Index futures (including E-mini 
S&P 500 Futures), or options on S&P 500 Index futures,\26\ whose 
collective performance is intended to correspond to the Index.\27\ The 
Fund, may invest up to 10% of its assets in over-the-counter S&P 500 
Index put options (``OTC S&P 500 Index put options''). The foregoing 
investments shall include buying the applicable derivative instrument 
or selling the applicable derivative instrument (i.e., writing the 
applicable put option) and investing the proceeds.
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    \23\ All money market instruments acquired by the Fund will be 
rated investment grade, except that a Fund may invest in unrated 
money market instruments that are deemed by the Adviser or Sub-
Adviser to be of comparable quality to money market securities rated 
investment grade. The term ``investment grade,'' for purposes of 
money market instruments only, is intended to mean securities rated 
A1 or A2 by one or more nationally recognized statistical rating 
organizations.
    \24\ An index option gives its holder the right, but not the 
obligation, to buy or sell a basket of stocks, at an agreed upon 
price at or before a certain date. An ETF option gives its holder 
the right, but not the obligation, to buy or sell an exchange-traded 
product, such as shares in an ETF, at an agreed upon price, at or 
before a certain date.
    \25\ To the extent practicable, the Fund will invest in swaps 
cleared through the facilities of a centralized clearing house. The 
Fund may also invest in money market instruments that may serve as 
collateral for the swap agreements. The Adviser or Sub-Adviser will 
also attempt to mitigate the Fund's respective credit risk by 
transacting only with large, well-capitalized institutions using 
measures designed to determine the creditworthiness of the 
counterparty. The Adviser or Sub-Adviser will take various steps to 
limit counterparty credit risk as described in the Registration 
Statement. The Fund will enter into over-the-counter non-centrally 
cleared instruments only with financial institutions that meet 
certain credit quality standards and monitoring policies. The Fund 
may also use various techniques to minimize credit risk, including 
early termination or reset and payment, using different 
counterparties, and limiting the net amount due from any individual 
counterparty. The Fund generally will collateralize over-the-counter 
non-centrally cleared instruments with cash and/or certain 
securities. Such collateral will generally be held for the benefit 
of the counterparty in a segregated tri-party account at the 
custodian to protect the counterparty against non-payment by the 
Fund. In the event of a default by the counterparty, and the Fund is 
owed money in the over-the-counter non-centrally cleared instruments 
transaction, the Fund will seek withdrawal of the collateral from 
the segregated account and may incur certain costs exercising its 
right with respect to the collateral.
    \26\ The Fund will limit its direct investments in futures and 
options on futures to the extent necessary for the Adviser to claim 
the exclusion from regulation as a ``commodity pool operator'' with 
respect to the Fund under Rule 4.5 promulgated by the Commodity 
Futures Trading Commission (``CFTC''), as such rule may be amended 
from time to time. Under Rule 4.5 as currently in effect, the Fund 
would limit its trading activity in futures and options on futures 
(excluding activity for ``bona fide hedging purposes,'' as defined 
by the CFTC) such that it will meet one of the following tests: (i) 
Aggregate initial margin and premiums required to establish its 
futures and options on futures positions will not exceed 5% of the 
liquidation value of the Fund's portfolio, after taking into account 
unrealized profits and losses on such positions; or (ii) aggregate 
net notional value of its futures and options on futures positions 
will not exceed 100% of the liquidation value of the Fund's 
portfolio, after taking into account unrealized profits and losses 
on such positions. The exchange-listed futures contracts in which 
the Fund may invest will be listed on exchanges in the U.S. Each of 
the exchange-listed futures contracts in which the Fund may invest 
will be listed on exchanges that are members of the Intermarket 
Surveillance Group (``ISG'').
    \27\ For example, the Fund may invest in total return swaps that 
create positions equivalent to investments in SPX Puts and U.S. 
Treasury securities. In a total return swap the underlying asset to 
the swap agreement is typically an equity index, loans or bonds. The 
Fund's investments in total return swap agreements will be backed by 
investments in U.S. government securities in an amount equal to the 
exposure of such contracts.
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    The Fund may invest up to 20% of its assets in other exchange 
traded products (``ETPs''), such as other ETFs, as well as in non-
exchange-traded registered open-end investment companies (i.e., mutual 
funds).\28\
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    \28\ The Fund may invest in shares of both taxable and tax-
exempted money market funds. When used herein, ETPs may include, 
without limitation, Investment Company Units (as described in NYSE 
Arca Equities Rule 5.2(j)(3)); Index-Linked Securities (as described 
in NYSE Arca Equities Rule 5.2.(j)(6)); Portfolio Depositary 
Receipts (as described in NYSE Arca Equities Rule 8.100); Trust-
Issued Receipts (as described in NYSE Arca Equities Rule 8.200); 
Commodity-Based Trust Shares (as described in NYSE Arca Equities 
Rule 8.201); Currency Trust Shares (as described in NYSE Arca 
Equities Rule 8.202); Commodity Index Trust Shares (as described in 
NYSE Arca Equities Rule 8.203); Trust Units (as described in NYSE 
Arca Equities Rule 8.500); Managed Fund Shares (as described in NYSE 
Arca Equities Rule 8.600), and closed-end funds. The ETPs in which 
the Fund may invest all will be listed and traded on U.S. registered 
exchanges. The Fund may invest in the securities of ETPs registered 
under the 1940 Act consistent with the requirements of Section 
12(d)(1) of the 1940 Act or any rule, regulation or order of the 
Commission or interpretation thereof. The Fund will only make such 
investments in conformity with the requirements of Section 817 of 
the Internal Revenue Code of 1986. The ETPs in which the Fund may 
invest will primarily be index-based ETFs that hold substantially 
all of their assets in securities representing a specific index. The 
Fund will not invest in leveraged (e.g., 2X, -2X, 3X, or -3X) ETPs.

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[[Page 9822]]

    The Fund may invest in securities (other than U.S. Treasury 
securities, described above) that have variable or floating interest 
rates which are readjusted on set dates (such as the last day of the 
month or calendar quarter) in the case of variable rates or whenever a 
specified interest rate change occurs in the case of a floating rate 
instrument. Variable or floating interest rates generally reduce 
changes in the market price of securities from their original purchase 
price because, upon readjustment, such rates approximate market rates. 
Accordingly, as interest rates decrease or increase, the potential for 
capital appreciation or depreciation is less for variable or floating 
rate securities than for fixed rate obligations.
Investment Restrictions
    The Fund may hold up to an aggregate of 15% of its net assets in 
illiquid assets (calculated at the time of investment), including Rule 
144A securities deemed illiquid by the Adviser or Sub-Adviser.\29\ The 
Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid assets. Illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.\30\
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    \29\ The Fund's Sub-Adviser is responsible for complying with 
the Fund's restrictions on investing in illiquid assets. In doing 
that, the Sub-Adviser makes ongoing determinations about the 
liquidity of Rule 144A securities that the Fund may invest in. In 
reaching liquidity decisions, the Sub-Adviser may consider the 
following factors: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers and the mechanics of transfer).
    \30\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933 (15 U.S.C. 
77a).
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    The Fund will not invest in any non-U.S. equity securities. The 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage.\31\
---------------------------------------------------------------------------

    \31\ The Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of a fund, including a fund's use 
of derivatives, may give rise to leverage, causing a fund to be more 
volatile than if it had not been leveraged. To mitigate leveraging 
risk, the Adviser will segregate or earmark liquid assets or 
otherwise cover the transactions that give rise to such risk. See 15 
U.S.C. 80a-18; Investment Company Act Release No. 10666 (April 18, 
1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, 
Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset 
Management, L.P., Commission No-Action Letter (July 2, 1996).
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    In order to reduce interest rate risk, the Fund will generally 
maintain a weighted average portfolio maturity of 180 days or less on 
average (not to exceed 18 months) and will not purchase any money 
market instrument with a remaining maturity of more than 397 calendar 
days. The ``average portfolio maturity'' of a Fund is the average of 
all current maturities of the individual securities in the Fund's 
portfolio. The Fund's actual portfolio duration may be longer or 
shorter depending on market conditions.
    The Fund intends to qualify each year as a regulated investment 
company (a ``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended.\32\ The Fund will invest its respective 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. 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 Fund's 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 Fund's portfolio. For these purposes, the Fund may treat 
repurchase agreements collateralized by U.S. government securities as 
U.S. government securities.\33\
---------------------------------------------------------------------------

    \32\ 26 U.S.C. 851.
    \33\ 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.
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    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 their respective agencies and instrumentalities or government-
sponsored enterprises).\34\
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    \34\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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Creation and Redemption of Shares
    According to the Registration Statement, the Fund will issue and 
redeem Shares on a continuous basis at net asset value (``NAV''),\35\ 
only in large blocks of Shares (``Creation Units''), in transactions 
with Authorized Participants. Creation Units generally will consist of 
100,000 Shares, though this may change from time to time. Creation 
Units are not expected to consist of less than 50,000 Shares.
---------------------------------------------------------------------------

    \35\ 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. ET (the 
``NAV Calculation Time''). NAV per Share will be calculated by 
dividing the Fund's net assets by the number of Fund Shares 
outstanding.
---------------------------------------------------------------------------

    The consideration for purchase of a Creation Unit of the Fund 
generally will consist of either (i) the in-kind deposit of a 
designated portfolio of securities (the ``Deposit Securities'') per 
Creation Unit and the ``Cash Component'' (defined below), computed as 
described below or (ii) the cash value of the Deposit Securities 
(``Deposit Cash'') and the ``Cash Component,'' computed as described 
below. Because non-exchange traded derivatives and certain listed 
derivatives are not currently eligible for in-kind transfer, they will 
be substituted with an amount of cash of equal value (i.e., Deposit 
Cash) when the Fund processes purchases of Creation Units

[[Page 9823]]

in-kind. Specifically, the Fund will not accept exchange-traded or 
over-the-counter options, exchange traded futures (or options on 
futures), and total return swaps as Deposit Securities.
    When accepting purchases of Creation Units for cash, the Fund may 
incur additional costs associated with the acquisition of Deposit 
Securities that would otherwise be provided by an in-kind purchase. 
Together, the Deposit Securities or Deposit Cash, as applicable, and 
the Cash Component constitute the ``Fund Deposit,'' which represents 
the minimum initial and subsequent investment amount for a Creation 
Unit of the Fund. The Cash Component is an amount equal to the 
difference between the NAV of the Shares (per Creation Unit) and the 
market value of the Deposit Securities or Deposit Cash, as applicable. 
The Cash Component serves the function of compensating for any 
difference between the NAV per Creation Unit and the market value of 
the Deposit Securities or Deposit Cash, as applicable.
    A portfolio composition file, to be sent via the National 
Securities Clearing Corporation (``NSCC''), will be made available on 
each business day, prior to the opening of business on the Exchange 
(currently 9:30 a.m. ET) containing a list of the names and the 
required amount of each security in the Deposit Securities to be 
included in the current Fund Deposit for the Fund (based on information 
about the Fund's portfolio at the end of the previous business day). In 
addition, on each business day, the estimated Cash Component, effective 
through and including the previous business day, will be made available 
through NSCC.
    The Fund Deposit will be applicable for purchases of Creation Units 
of the Fund until such time as the next-announced Fund Deposit is made 
available. In addition, the composition of the Deposit Securities may 
change as, among other things, corporate actions and investment 
decisions by the Adviser are implemented for the Fund's portfolio.
    All purchase orders must be placed by an ``Authorized 
Participant.'' An Authorized Participant must be either a broker-dealer 
or other participant in the Continuous Net Settlement System 
(``Clearing Process'') of the NSCC or a participant in The Depository 
Trust Company (``DTC'') with access to the DTC system, and must execute 
an agreement with the Distributor that governs transactions in the 
Fund's Creation Units. In-kind portions of purchase orders will be 
processed though the Clearing Process when it is available.
    Shares of the Fund may be redeemed only in Creation Units at their 
NAV next determined after receipt of a redemption request in proper 
form by the Fund through the Distributor and only on a business day. 
The Fund, trough the NSCC, will make available immediately prior to the 
opening of business on each business day, the list of the names and 
quantities of the Fund's portfolio securities that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form on that day (``Fund Securities''). Redemption 
proceeds for a Creation Unit will be paid either in-kind or in cash or 
a combination thereof, as determined by the Trust. With respect to in-
kind redemptions of the Fund, redemption proceeds for a Creation Unit 
will consist of Fund Securities plus cash in an amount equal to the 
difference between the NAV of the Shares being redeemed, as next 
determined after a receipt of a request in proper form, and the value 
of the Fund Securities (the ``Cash Redemption Amount''). In the event 
that the Fund Securities have a value greater than the NAV of the 
Shares, a compensating cash payment equal to the differential will be 
required to be made by or through an Authorized Participant by the 
redeeming shareholder. Notwithstanding the foregoing, at the Trust's 
discretion, an Authorized Participant may receive the corresponding 
cash value of the securities in lieu of the in-kind securities 
representing one or more Fund Securities.\36\ Because non-exchange 
traded derivatives and certain listed derivatives are not eligible for 
in-kind transfer, they will be substituted with an amount of cash of 
equal value when the Fund processes redemptions of Creation Units in-
kind. Specifically, the Fund will transfer the corresponding cash value 
of exchange-traded options, exchange-traded futures, exchange-traded 
options on futures contracts, and total return swap agreements in lieu 
of in-kind securities.
---------------------------------------------------------------------------

    \36\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in cash, such transactions will be 
effected in the same manner for all Authorized Participants.
---------------------------------------------------------------------------

    The right of redemption may be suspended or the date of payment 
postponed: (i) For any period during which the NYSE is closed (other 
than customary weekend and holiday closings); (ii) for any period 
during which trading on the NYSE is suspended or restricted; (iii) for 
any period during which an emergency exists as a result of which 
disposal of the Shares or determination of the Fund's NAV is not 
reasonably practicable; or (iv) in such other circumstances as 
permitted by the Commission.
    For an order involving a Creation Unit to be effectuated at the 
Fund's NAV on a particular day, it must be received by the Distributor 
by or before the deadline for such order (``Order Cut-Off Time''). The 
Order Cut-Off Time for creation and redemption orders for the Fund will 
be 4:00 p.m. ET. Order for creations or redemptions of Creation Units 
for cash generally must be submitted by 4:00 p.m. ET. A standard 
creation or redemption transaction fee (as applicable) will be imposed 
to offset transfer and other transaction costs that may be incurred by 
the Fund.
    According to the Registration Statement, the Fund Securities 
received on a redemption will generally correspond pro rata, to the 
extent practicable, to the securities in the Fund's portfolio. Fund 
Securities received on redemption may not be identical to Deposit 
Securities that are applicable to creations of Creation Units.
Net Asset Value
    According to the Registration Statement, the Fund will calculate 
its NAV at the close of the regular trading session of each business 
day (normally 4:00 p.m. ET) using the values of the Fund's portfolio 
securities. The Fund will calculate its NAV by: (i) Taking the current 
market value of its total assets; (ii) subtracting any liabilities; and 
(iii) dividing that amount by the total amount of Shares outstanding.
    In valuing its securities, the Fund will use market quotes or 
official closing prices if they are readily available. In cases where 
quotes are not readily available, the Fund may value securities based 
on fair values developed using methods approved by the Fund's Board of 
Trustees (``Board''), as discussed below. When valuing fixed income 
securities with remaining maturities of 60 days or less, the Fund may 
use the security's amortized cost, which approximates the security's 
market value.
    According to the Adviser, fixed income securities, including 
without limitation, U.S. government securities and other money market 
instruments that are fixed income securities, will generally be valued 
based on the midpoint of bid-ask prices received from independent 
pricing services as of the announced closing time for trading in fixed-
income instruments in the market in which they trade. In

[[Page 9824]]

determining the value of a fixed-income investment, pricing services 
determine valuations for normal institutional-size trading units of 
such securities using valuation models or matrix pricing, which 
incorporates yield and/or price with respect to bonds that are 
considered comparable in characteristics such as rating, interest rate 
and maturity date and quotations from securities dealers to determined 
current value.
    Exchange traded assets (including without limitation, SPX Puts, 
listed futures contracts and options on futures, options on ETFs, and 
ETPs) will be valued at the last reported sale price or the official 
closing price on that exchange where the security or other instrument 
is primarily traded on the day that the valuation is made. Mutual funds 
will be valued daily at their respective NAVs. Money market funds are 
typically priced once each business day and their prices are available 
through the applicable fund's Web site or from major market vendors.
    With respect to derivative instruments, if, however, neither the 
last sales price nor the official closing price is available, each of 
these derivative instruments will be valued based on the midpoint of 
bid-ask prices.
    Non-exchange-traded derivatives, including total return swaps and 
OTC S&P 500 Index put options will normally be valued on the basis of 
quotes obtained from brokers and dealers or pricing services using data 
reflecting the closing of the principal markets for those assets. 
Prices from independent pricing services will also include prices based 
on valuation models or matrix pricing to determine current value. 
Prices obtained from independent pricing sources typically use 
information provided by market makers or bond dealers or estimates of 
market values obtained by reference to yield data relating to 
investments or securities with similar characteristics, including 
rating, interest rate, maturity date, option adjusted spread models, 
prepayment projections, interest rate spreads and yield surveys. Matrix 
pricing is an estimated price or value for a fixed income security. 
Matrix pricing is considered a form of fair value pricing, discussed 
below. In the event that current market valuations are not readily 
available or such valuations do not reflect current market value, the 
Trust's procedures require the Trust's Pricing Committee to determine 
an asset's fair value if a market price is not readily available in 
accordance with the 1940 Act.\37\ In determining such value, the 
Trust's Pricing Committee may consider, among other things, (i) price 
comparisons among multiple sources, (ii) a review of corporate actions 
and news events, and (iii) a review of relevant financial indicators 
(e.g., movement in interest rates and market indices). In these cases 
the Fund's NAV may reflect certain portfolio assets' fair values rather 
than their market prices. Fair value pricing involves subjective 
judgments and it is possible that the fair value determination for a 
security is materially different than the value that could be realized 
upon the sale of the security.
---------------------------------------------------------------------------

    \37\ The Trust's Board has established a Pricing Committee that 
is composed of personnel of the Adviser. The Pricing Committee is 
responsible for the valuation and revaluation of any portfolio 
investments for which market quotations are not readily available. 
The Pricing Committee has implemented procedures designed to prevent 
the use and dissemination of material, non-public information 
regarding valuation and revaluation of any portfolio investment.
---------------------------------------------------------------------------

Availability of Information
    The Trust's Web site (www.wisdomtree.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include additional quantitative information updated on a daily 
basis, including, for the Fund: (1) The prior business day's reported 
NAV, mid-point of the bid/ask spread at the time of calculation of such 
NAV (the ``Bid/Ask Price''),\38\ 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.
---------------------------------------------------------------------------

    \38\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
---------------------------------------------------------------------------

    On each business day, before commencement of trading in Shares in 
the Core Trading Session \39\ on the Exchange, the Trust will disclose 
on its 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; market value of the holding; and the percentage weighting 
of the holding in the Fund's portfolio. The Web site information will 
be publicly available at no charge.
---------------------------------------------------------------------------

    \39\ The Core Trading Session is 9:30 a.m. to 4:00 p.m. ET.
---------------------------------------------------------------------------

    In addition, a portfolio composition file, which will include the 
security names and quantities of securities and other assets required 
to be delivered in exchange for the Fund's Shares, together with 
estimates and actual cash components, will be publicly disseminated 
prior to the opening of the Exchange via the NSCC. The portfolio will 
represent one Creation Unit of the Fund. Authorized Participants may 
refer to the portfolio composition file for information regarding SPX 
Puts, short-term U.S. Treasury Securities, money market instruments, 
and any other instrument that may comprise the Fund's portfolio on a 
given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR may be viewed on screen or downloaded from 
the Commission's Web site at www.sec.gov. Information regarding market 
price and trading volume for the Shares will be continually available 
on a real-time basis throughout the day on brokers' computer screens 
and other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers. Quotation and 
last sale information for the Shares and any ETPs it [sic] which it 
invests will be available via the Consolidated Tape Association 
(``CTA'') high-speed line. Quotation and last sale information for U.S. 
exchange-listed options contracts cleared by The Options Clearing 
Corporation will be available via the Options Price Reporting 
Authority. The intra-day, closing and settlement prices of exchange-
traded portfolio assets, including investment companies, futures and 
options will be readily available from the securities exchanges and 
futures exchanges trading such securities and futures, as the case may 
be, automated quotation systems, published or other public sources, or 
online information services such as Bloomberg or Reuters. Such price 
information on fixed income portfolio

[[Page 9825]]

securities, including money market instruments, and other Fund assets 
traded in the over-the-counter markets, including bonds and money 
market instruments is available from major broker-dealer firms or 
market data vendors, as well as from automated quotation systems, 
published or other public sources, or online information services. In 
addition, the value of the Index will be published by one or more major 
market data vendors every 15 seconds during the NYSE Arca Core Trading 
Session of 9:30 a.m. ET to 4:00 p.m. ET. Information about the Index 
constituents, the weighting of the constituents, the Index's 
methodology and the Index's rules will be available at no charge on the 
Index Provider's Web site at www.CBOE.com.
    In addition, the Intraday Indicative Value (``IIV'') as defined in 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(c) will be widely 
disseminated at least every 15 seconds during the Core Trading Session 
by one or more major market vendors.\40\ All Fund holdings will be 
included in calculating the IIV.
---------------------------------------------------------------------------

    \40\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIV's 
taken from the CTA or other data feeds.
---------------------------------------------------------------------------

    The dissemination of the IIV is intended to allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and to approximate that value throughout the trading day. The 
intra-day, closing and settlement prices of the portfolio securities 
and other Fund investments, including futures and exchange-traded 
equities, ETPs and exchange-traded options, will also be readily 
available from the exchanges trading such instruments, automated 
quotation systems, published or other public sources, and, with respect 
to swap transactions, from third party pricing sources, or on-line 
information services such as Bloomberg or Reuters. The intra-day, 
closing and settlement prices of debt securities and money market 
instruments will be readily available from published and other public 
sources or on-line information services. Price information regarding 
investment company securities, including ETFs, will be available from 
on-line information services and from the Web site for the applicable 
investment company security.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosures policies, 
distributions and taxes is included in the Registration Statement. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
Initial and Continued Listing
    The Shares will be conform to the initial and continued listing 
criteria under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2), except 
that the Index will not meet the requirements of NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .01(a)(A)(1-5) in that the Index will 
consist of options based on US Component Stocks (i.e., SPX Puts), 
rather than US Component Stocks. The Index will include a minimum of 20 
components and therefore, would meet the numerical requirements of NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .01(a)(A)(4) (a minimum of 13 
index or portfolio components). The Exchange represents that, for 
initial and/or continued listing, the Fund will be in compliance with 
Rule 10A-3 \41\ under the Act, as provided by NYSE Arca Equities Rule 
5.3. A minimum of 100,000 Shares for the Fund will be outstanding at 
the commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and will be made available to 
all market participants at the same time.
---------------------------------------------------------------------------

    \41\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund. Shares of each Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the financial instruments of the 
Fund; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.
    If the IIV, Index value or the value of the Index components is not 
being disseminated as required, the Exchange may halt trading during 
the day in which the disruption occurs; if the interruption persists 
past the day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption. 
The Exchange will obtain a representation from the Fund that the NAV 
for the Fund will be calculated daily and will be made available to all 
market participants at the same time. Under NYSE Arca Equities Rule 
7.34(a)(5), if the Exchange becomes aware that the NAV for the Fund is 
not being disseminated to all market participants at the same time, it 
will halt trading in the Shares until such time as the NAV is available 
to all market participants.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. ET in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange represents that the trading in the Shares will be 
subject to the existing trading surveillances, administered by the 
Financial Industry Regulatory Authority (``FINRA'') on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\42\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
---------------------------------------------------------------------------

    \42\ 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.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, exchange-listed

[[Page 9826]]

equity securities, futures contracts, and exchange-traded options 
contracts with other markets and other entities that are members of the 
ISG, and FINRA, on behalf of the Exchange, may obtain trading 
information regarding trading in the Shares, exchange-listed equity 
securities, futures contracts and exchange-traded options contracts 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares, exchange-listed 
equity securities, futures contracts and exchange-traded options 
contracts from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.\43\ All exchange-listed equity securities, futures 
contracts (and options on futures) and listed options held by the Fund 
will be traded on U.S. exchanges, all of which are members of ISG or 
are exchanges with which the Exchange has in place a comprehensive 
surveillance sharing agreement. In addition, FINRA, on behalf of the 
Exchange, is able to access, as needed, trade information for certain 
fixed income securities held by the Fund reported to FINRA's Trade 
Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \43\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the portfolio for the Fund may trade on exchanges that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading of Shares in the Fund, the 
Exchange will inform its ETP Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV or Index value will not be calculated or 
publicly disseminated; (4) how information regarding the IIV and Index 
value will be disseminated; (5) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (6) 
trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. ET each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \44\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .01, except that the Index will consist of SPX Puts, which 
are based on an index of US Component Stocks, rather than US Component 
Stocks themselves. The Shares will be subject to the existing trading 
surveillances, administered by FINRA on behalf of the Exchange, which 
are designed to deter and detect violations of Exchange rules and 
applicable federal securities laws relating to trading on the Exchange. 
FINRA and the Exchange, as applicable, may each obtain information via 
ISG from other exchanges that are members of ISG, and in the case of 
the Exchange, from other market or entities with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.
    The Index Provider is not registered as an investment adviser or 
broker-dealer and is not affiliated with any broker-dealers. The 
Adviser is not registered as, or affiliated with, any broker-dealer. 
The Sub-Adviser is affiliated with multiple broker-dealers and has 
implemented a ``fire wall'' with respect to such broker-dealers and 
their personnel regarding access to information concerning the 
composition and/or changes to the Index. In addition, Sub-Adviser 
personnel who make decisions regarding the Fund's portfolio are subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the Fund's portfolio. The Adviser and 
the Index Provider have represented that a fire wall exists around the 
respective personnel who have access to information concerning changes 
and adjustments to the Index. All exchange-listed equity securities, 
ETPs, options and futures contracts held by the Fund will be traded on 
U.S. exchanges, all of which are members of ISG or are exchanges with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.
    Under normal market conditions, not less than 80% of the Fund's 
total assets will be comprised of SPX Puts and short-term U.S. Treasury 
securities, although the Fund may also invest in other U.S. government 
and money market instruments and in derivative instruments such as 
listed futures contracts and options on futures, each on the S&P 500 
Index (including E-mini S&P 500 Futures), S&P 500 ETF put options and 
total return swap agreements on the Index, designed to create a 
position in put options and short-term U.S. Treasury securities. The 
Fund may invest up to 10% of its net assets in OTC S&P 500 Index put 
options. The Fund's investments in listed futures contracts and total 
return swap agreements will be backed by investments in U.S. government 
securities in an amount equal to the exposure of such contracts. The 
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 or Sub-Adviser, 
consistent with Commission guidance. The Fund therefore will not use 
derivative instruments to enhance leverage. The Fund will not invest in 
non-U.S. equity securities.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily every day the 
NYSE is open, and that the NAV will be made available to all market 
participants at the same time. In addition, a large amount of publicly 
available information will be publicly available regarding the Fund and 
the Shares, thereby promoting market transparency.
    Moreover, the IIV will be widely disseminated by one or more major 
market data vendors at least every 15

[[Page 9827]]

seconds during the Exchange's Core Trading Session. On each business 
day, before commencement of trading in the Shares in the Core Trading 
Session on the Exchange, the Fund will disclose on its Web site the 
portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day. 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 quotations and last sale information will be 
available via the CTA high-speed line. Information relating to U.S. 
exchange-listed options is available via the Options Price Reporting 
Authority. Quotation and last sale information for the Shares and any 
ETPs it which it invests will be available via the CTA high-speed line. 
Quotation and last sale information for U.S. exchange-listed options 
contracts cleared by The Options Clearing Corporation will be available 
via the Options Price Reporting Authority. The intra-day, closing and 
settlement prices of exchange-traded portfolio assets, including 
investment companies, futures and options will be readily available 
from the securities exchanges and futures exchange trading such 
securities and futures, as the case may be, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Such price information on fixed 
income portfolio securities, including money market instruments, and 
other Fund assets traded in the over-the-counter markets, including 
bonds and money market instruments is available from major broker-
dealer firms or market data vendors, as well as from automated 
quotation systems, published or other public sources, or online 
information services. The Web site for the Fund will include the 
prospectus for the Fund and additional data relating to NAV and other 
applicable quantitative information. Moreover, prior to 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. Trading in Shares of the Fund will be halted if the 
circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been 
reached or because of market conditions or for reasons that, in the 
view of the Exchange, make trading the Shares inadvisable. In addition, 
as noted above, investors will have ready access to information 
regarding the Fund's holdings, the IIV, the Fund's portfolio, and 
quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Shares will be subject to the 
existing trading surveillances, administered by FINRA on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
federal securities laws applicable to trading on the Exchange. FINRA, 
on behalf of the Exchange, will communicate as needed regarding trading 
in the Shares, exchange-traded equity securities, ETPs, futures 
contract and exchange-traded options contracts with other market and 
other entities that are members of ISG, and FINRA, on behalf of the 
Exchange, may obtain trading information in the Shares, exchange-traded 
equity securities, ETPs, futures contracts and exchange-traded options 
contracts from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares, 
exchange-traded equity securities, ETPs, futures contracts and 
exchange-traded options contracts from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the IIV, and quotation and last sale information for 
the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of Investment Company Unit that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

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

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

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will: 
(a) By order approve or disapprove such proposed rule change; or (b) 
institute proceedings to determine whether the proposed rule change 
should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an Email to [email protected]. Please include 
File Number SR-NYSEArca-2015-05 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2015-05. 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

[[Page 9828]]

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-2015-05 and should 
be submitted on or before March 17, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\

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    \45\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-03661 Filed 2-23-15; 8:45 am]
BILLING CODE 8011-01-P