[Federal Register: September 15, 2008 (Volume 73, Number 179)]
[Notices]
[Page 53300-53303]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se08-123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58489; File No. SR-NASDAQ-2008-073]
Self-Regulatory Organizations; the NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Trade Shares of 12 Funds of the WisdomTree Trust Pursuant to Unlisted
Trading Privileges
September 8, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 29, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. Nasdaq has
designated the proposed rule change as constituting a rule change under
section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposal effective upon filing with the Commission.
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\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 C.F.R. 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq is filing a proposed rule change to trade, pursuant to
unlisted trading privileges (``UTP''), shares (``Shares'') of 12 funds
(each a ``Fund'') of the WisdomTree Trust (``Trust'') under Nasdaq Rule
4420(o) (Managed Fund Shares). The text of the proposed rule change is
available from Nasdaq's Web site at http://nasdaq.cchwallstreet.com, at
Nasdaq's principal office, 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, Nasdaq 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 these statements may be examined at the places specified in
Item III below. Nasdaq had prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to trade the Funds on a UTP basis under Nasdaq Rule
4420(o), which governs the trading of ``Managed Fund Shares'' on the
Exchange. The Shares will be offered by the 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\
The Commission recently approved the listing and trading of these same
Funds by NYSE Arca, Inc. on its exchange.\6\
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\5\ See Post-Effective Amendment No. 14 to Registration
Statement on Form N-1A for the Trust (File Nos. 333-132380 and 811-
21864) (``Registration Statement''). The descriptions of the Funds
and the Shares contained herein are based on information in the
Registration Statement.
\6\ See Securities Exchange Act Release No. 57801 (May 8, 2008),
73 FR 27878 (May 14, 2008) (order approving SR-NYSEArca-2008-31).
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Description of the Shares and the Funds
WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'')
is the investment adviser to each Fund.\7\ WisdomTree Asset Management
is not affiliated with any broker-dealer. Mellon Capital Management
serves as the sub-adviser for the Current Income Fund. The Dreyfus
Corporation serves as the subadviser to each International Currency
Income Fund. The Bank of New York is the administrator, custodian, and
transfer agent for each Fund. ALPS Distributors, Inc. serves as the
distributor for the Funds.
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\7\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is
the parent company of WisdomTree Asset Management.
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The Current Income Fund
The Current Income Fund seeks to earn current income while
preserving capital and maintaining liquidity by investing primarily in
very short term, high-quality money market securities denominated in
U.S. dollars. Eligible investments include commercial paper, time
deposits and certificates of deposits, asset-backed securities,
government bills, government notes, corporate notes, and repurchase
agreements. The Current Income Fund intends to maintain an average
portfolio maturity of 90 days or less and will not purchase any money
market security with a remaining maturity of more than 397 calendar
days.
The International Currency Income Funds
Each of the Australian Dollar Fund, British Pound Sterling Fund,
Canadian Dollar Fund, Euro Fund, and Japanese Yen Fund: (i) Seeks to
earn current income reflective of money market rates available to
foreign investors in the specified country or region, and (ii) seeks to
maintain liquidity and preserve capital measured in the currency of the
specified country or region. Each of these Funds intends to invest
primarily in very short term, investment grade money market securities
denominated in the non-U.S. currency specified in its name. Eligible
investments include short-term securities issued by non-U.S.
governments, agencies or instrumentalities, bank debt obligations and
time deposits, bankers' acceptances, commercial paper, short-term
corporate debt obligations, mortgage backed securities, and asset-
backed securities.
Each of the Brazilian Real Fund, Chinese Yuan Fund, Indian Rupee
Fund, New Zealand Dollar Fund, South African Rand Fund, and South
Korean Won Fund seeks: (i) To earn current income reflective of money
market rates available to foreign investors in the specified country;
and (ii) to provide exposure to changes in the value of the designated
non-U.S. currency relative to the U.S. Dollar. Each of these Funds
intends to achieve exposure to the non-U.S. market designated by its
name using the following strategy. Each of the Funds will invest
primarily in short term U.S. money market securities. In
[[Page 53301]]
addition, each such Fund will invest a smaller portion of its assets in
forward currency contracts and swaps designed to provide exposure to
exchange rates and/or money market instruments available to foreign
investors in the non-U.S. market designated in the Fund's name. The
combination of U.S. 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.\8\
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\8\ Each of these Funds may pursue its objectives through direct
investments in money market instruments issued by entities in the
applicable non-U.S. 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 any of these Funds pursues direct investment,
eligible investments will 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, short-term corporate debt
obligations, mortgage-backed securities, and asset-backed
securities.
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Each International Currency Income Fund generally will maintain a
weighted average portfolio maturity of 90 days or less and will not
purchase any money market instrument with a remaining maturity of more
than 397 calendar days.
None of the Funds will invest in non-U.S. equity securities.
The Shares
Each Fund issues and redeems Shares on a continuous basis at net
asset value (``NAV'')\9\ only in large blocks of shares, typically
50,000 shares or more (``Creation Units''), in transactions with
authorized participants. Each International Currency Income Fund may
issue and redeem Creation Units in exchange for a designated basket of
non-U.S. currency and an amount of U.S. cash, a basket of non-U.S.
money market instruments and a designated amount of cash, or simply a
designated amount of cash. In addition, creations and redemptions of
the Current Income Fund, the Brazilian Real Fund, Chinese Yuan Fund,
Indian Rupee Fund, New Zealand Dollar Fund, South African Rand Fund,
and South Korean Won Fund are usually in exchange for a basket of U.S.
money market instruments and/or a designated amount of cash. Once
created, Shares of the Funds trade on the secondary market in amounts
less than a Creation Unit. For more information regarding the Shares
and the Funds, including investment strategies, risks, creation and
redemption procedures, fees, portfolio holdings disclosure policies,
distributions and taxes, see the Registration Statement.
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\9\ The NAV of each Fund's shares generally is calculated once
daily Monday through Friday as of the close of regular trading (the
``NAV Calculation Time''). NAV per share is calculated by dividing a
Fund's net assets by the number of Shares outstanding. For more
information regarding the valuation of Fund investments in
calculating a Fund's NAV, see the Registration Statement.
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Availability of Information
The Funds' Web site (http://www.wisdomtree.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the Prospectus for each Fund that may be downloaded. The Web
site will include additional quantitative information updated on a
daily basis, including, for each 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''); \10\ 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. On each business day before commencement of the Regular
Market Session on the Exchange,\11\ the Funds will disclose on their
Web site the identities and quantities of the securities and other
assets that will form the basis for the calculation of NAV for each
Fund at the end of the business day (``Disclosed Portfolio'').\12\ The
Web site and information will be publicly available at no charge.
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\10\ The Bid/Ask Price of a Fund is determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Funds and their service
providers.
\11\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 7 a.m. to 9:30
a.m.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15
p.m.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. to 8
p.m.).
\12\ Under accounting procedures followed by the Funds, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Notwithstanding the
foregoing, portfolio trades that are executed prior to the opening
of the Exchange on any business day may be booked and reflected in
the NAV on such business day. Accordingly, the Funds will be able to
disclose at the beginning of the business day the portfolio that
will form the basis for the NAV calculation at the end of the
business day.
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Investors interested in a particular Fund can also obtain the
Trust's Statement of Additional Information (``SAI''), each Fund's
Shareholder Reports, and its Form N-CSR and Form N-SAR, filed twice a
year. The Trust's SAI and Shareholder Reports are available free upon
request from the Trust, and those documents and the Form N-CSR and Form
N-SAR may be viewed on-screen or downloaded from the Commission's Web
site (http://www.sec.gov).
Information regarding market price and volume is and will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. The NAV of
each Fund will normally be determined as of the close of the Regular
Market Session on Nasdaq (ordinarily 4 p.m. Eastern Time or ``ET'') on
each business day. The previous day's closing price and trading volume
information will be published daily in the financial section of
newspapers. Quotations and last-sale information for the Shares will be
available through the facilities of the Consolidated Tape Association
(``CTA''). In addition, the Intraday Indicative Value \13\ will be
disseminated at least every 15 seconds during the Regular Market
Session through the facilities of the CTA.
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\13\ The Intraday Indicative Value is also sometimes referred to
as the ``Portfolio Indicative Value'' with respect to these
securities and is based on the current value of the components of
the Disclosed Portfolio.
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Initial and Continued Listing
The Shares will be subject to Rule 4420(o), which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that for initial and/or continued
listing, the Shares must be in compliance with Rule 10A-3 under the
Act.\14\
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\14\ See 17 CFR 240.10A-3.
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Trading Halts
Nasdaq will halt trading in Shares under the conditions specified
in Nasdaq Rules 4120 and 4121. The conditions for a halt include a
regulatory halt by the listing market. UTP trading in Shares will also
be governed by provisions of Nasdaq Rule 4120(b) relating to temporary
interruptions in the calculation or wide dissemination of the Intraday
Indicative Value, among other values.
If Nasdaq becomes aware that the NAV or the Disclosed Portfolio
with respect to a Share is not disseminated to all market participants
at the same time,
[[Page 53302]]
it will halt trading in such series until such time as the net asset
value or the Disclosed Portfolio is available to all market
participants.
Additionally, Nasdaq may cease trading Shares if other unusual
conditions or circumstances exist which, in the opinion of Nasdaq, make
further dealings on Nasdaq detrimental to the maintenance of a fair and
orderly market. Nasdaq will also follow any procedures with respect to
trading halts as set forth in Nasdaq Rule 4120(c). Finally, Nasdaq will
stop trading Shares if the listing market delists them.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares 7
a.m. until 8 p.m.\15\ The minimum trading increment for Shares on
Nasdaq will be $0.01.
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\15\ See Nasdaq Rule 4420.
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (including exchange-traded
funds) to monitor trading in the Shares and the Exchange represents
that these procedures are adequate to address any concerns about the
trading of the Shares on Nasdaq. Trading of the Shares through Nasdaq
will be subject to FINRA's surveillance procedures for equity
securities in general and exchange-traded funds in particular.\16\ The
Exchange may obtain information via the Intermarket Surveillance Group
(``ISG'') from other exchanges who are members or affiliate members of
the ISG.\17\
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\16\ FINRA surveils trading on Nasdaq pursuant to a regulatory
services agreement. Nasdaq is responsible for FINRA's performance
under this regulatory services agreement.
\17\ For a list of the current members and affiliate members of
ISG, see http://www.isgportal.com.
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Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in baskets of shares (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2310, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value is disseminated; (4) the requirement that
members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
(5) the risks involved in trading the Shares during the Pre-Market and
Post-Market Sessions when an updated Intraday Indicative Fund value
will not be calculated or publicly disseminated; and (6) trading
information.
The Exchange notes that investors purchasing Shares directly from a
Fund will receive a prospectus. Members purchasing Shares from a Fund
for resale to investors will deliver a prospectus to such investors.
The Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act.
In addition, the Information Circular will reference that the Funds
are subject to various fees and expenses described in the Registration
Statement. The Information Circular will also reference that the CFTC
has regulatory jurisdiction over the trading of futures contracts.
The Information Circular will also disclose the trading hours of
the Shares of the Funds and that the NAV for the Shares will be
calculated after 4 p.m. (ET) each trading day. The Circular will
disclose that information about the Shares of each Fund and the
corresponding Indexes will be publicly available on the Funds' Web
site.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with section 6(b)
of the Act \18\ in general and section 6(b)(5) of the Act \19\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. Nasdaq believes that its rules and
procedures governing the trading of the Shares pursuant to UTP are also
consistent with the goals section 6(b)(5) and the protection of
investors.
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\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(5).
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In addition, Nasdaq believes that the proposal is consistent with
Rule 12f-5 under the Act \20\ because it deems each Share to be an
equity security, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity
securities.\21\
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\20\ 17 CFR 240.12f-5.
\21\ See e-mail from Jonathon F. Cayne, Assistant General
Counsel, Nasdsaq to Mitra Mehr, Special Counsel, Division of Trading
and Markets, Commission on September 8, 2008, clarifying text.
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) Impose any significant burden on competition; and
(iii) Become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest, it
has become effective pursuant to section 19(b)(3)(A) of the Act \22\
and Rule 19b-4(f)(6) thereunder.\23\
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 23 17 CFR 240.19b-4(f)(6). The Commission notes that Nasdaq
has satisfied the five day pre-filing notice requirement.
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Nasdaq has asked the Commission to waive the 30-day operative
delay. The Commission believes that such waiver is consistent with the
protection of investors and the public interest because such waiver
should benefit investors by creating, without undue delay, additional
competition in the market for the Shares. The Commission has previously
approved the listing and trading of the Shares on another exchange \24\
and finds that the proposed rule change does not present any novel or
significant regulatory issues. Therefore, the Commission designates the
proposed rule change as operative upon filing.\25\
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\24\ See supra note 6.
\25\ For purposes only of waiving the operative date of this
proposal, the Commission has considered the rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change the
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Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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 e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2008-073 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-073. This
file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Room on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing will also be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NASDAQ-2008-073 and should be submitted on or before
October 6, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21392 Filed 9-12-08; 8:45 am]
BILLING CODE 8010-01-P