[Federal Register Volume 79, Number 125 (Monday, June 30, 2014)]
[Notices]
[Pages 36851-36853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15200]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72453; File No. SR-NYSEArca-2014-68]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Reflect Changes
to the Name of, and the Means of Seeking the Investment Objective
Applicable to, the PIMCO Real Return Exchange-Traded Fund
June 24, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on June 12, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
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 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. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to reflect changes to the name of, and the
means of seeking the investment objective applicable to, the PIMCO Real
Return Exchange-Traded Fund (the ``Fund''). The Commission has approved
the listing and trading of shares of the Fund on the Exchange under
NYSE Arca Equities Rule 8.600. Shares of the Fund have not yet
commenced trading on the Exchange. 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,
[[Page 36852]]
of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has approved listing and trading on the Exchange of
shares (``Shares'') of the PIMCO Real Return Exchange-Traded Fund
(``Fund''), which are offered by PIMCO ETF Trust (the ``Trust''),\4\
under NYSE Arca Equities Rule 8.600, which governs the listing and
trading of Managed Fund Shares. The Shares of the Fund have not yet
commenced trading on the Exchange.
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\4\ See Securities Exchange Act Release No. 71125 (December 18,
2013), 78 FR 77743 (December 24, 2013) (SR-NYSEArca-2013-106) (order
approving listing and trading on the Exchange of the PIMCO
Diversified Income Exchange-Traded Fund, PIMCO Real Return Exchange-
Traded Fund, and PIMCO Low Duration Exchange-Traded Fund) (``Prior
Order''). See also Securities Exchange Act Release No. 70774
(October 30, 2013), 78 FR 66396 (November 5, 2013) (SR-NYSEArca-
2013-106) (``Prior Notice,'' and together with the Prior Order, the
``Prior Release'').
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The Shares are offered by the Trust, a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\5\ The
investment manager to the Fund is Pacific Investment Management Company
LLC (``PIMCO'' or the ``Adviser'').
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\5\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). On October 31, 2013, the
Trust filed with the Commission an amendment to its registration
statement on Form N-1A under the Securities Act of 1933 (15 U.S.C.
77a) (``Securities Act''), and under the 1940 Act relating to the
Fund (File Nos. 333-155395 and 811-22250) (``Registration
Statement''). The description of the operation of the Trust and the
Fund herein is based, in part, on the Registration Statement. In
addition, the Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act. See Investment
Company Act Release No. 28993 (File No. 812-13571) (``Exemptive
Order'').
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In this proposed rule change, the Exchange proposes to reflect
changes to the name of the Fund and to the description of the
investments the Adviser will utilize in seeking the Fund's investment
objective, as described below.\6\
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\6\ The changes described herein will be effective upon filing
with the Commission of a supplement to the Trust's Registration
Statement. See note 5, supra.
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The Adviser proposes that the name of the Fund be changed from that
stated in the Prior Release to the PIMCO Inflation-Linked Active
Exchange-Traded Fund. The Adviser represents that it is changing the
name of the Fund to better reflect the nature of the Fund's revised
investment strategy.
In addition, the Adviser proposes that the Fund may invest up to
20% of its total assets in securities and instruments that are
economically tied to emerging market countries, subject to the Fund's
investment limitations relating to particular asset classes set forth
in the Prior Release.\7\ The Prior Release stated that the Fund may
invest up to 10% of its total assets in securities and instruments that
are economically tied to emerging market countries, subject to the
Fund's investment limitations relating to particular asset classes set
forth in the Prior Release.\8\ The Adviser represents that the proposed
increase in the Fund's total assets that may be invested in securities
and instruments that are economically tied to emerging market countries
will afford the Fund the opportunity to invest in a broader range of
financial instruments related to emerging markets and, therefore, may
facilitate the Fund's meeting its investment objective.\9\ The
Commission previously has approved listing and trading on the Exchange
of shares of actively-managed exchange-traded funds under NYSE Arca
Equities Rule 8.600 that may invest up to 20% of the applicable fund's
total assets in emerging market debt securities.\10\
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\7\ As stated in the Prior Release, according to the
Registration Statement, PIMCO will have broad discretion to identify
countries that it considers to qualify as emerging markets. In
making investments in emerging market securities, the Fund will
emphasize those countries with relatively low gross national product
per capita and with the potential for rapid economic growth.
Emerging market countries are generally located in Asia, Africa, the
Middle East, Latin America and Eastern Europe. PIMCO will select the
country and currency composition based on its evaluation of relative
interest rates, inflation rates, exchange rates, monetary and fiscal
policies, trade and current account balances, legal and political
developments and any other specific factors it believes to be
relevant. While emerging markets corporate debt securities
(excluding commercial paper) generally must have $200 million or
more par amount outstanding and significant par value traded to be
considered as an eligible investment for the Fund, at least 80% of
issues of such securities held by the Fund must have $200 million or
more par amount outstanding at the time of investment.
\8\ See note 4, supra.
\9\ According to the Registration Statement, the Fund's
investment objective will be to seek maximum real return, consistent
with preservation of capital and prudent investment management.
\10\ See, e.g., Securities Exchange Act Release Nos. 69061
(March 7, 2013), 78 FR 15990 (March 13, 2013) (SR-NYSEArca-2013-01)
(order approving listing and trading on the Exchange of Shares of
the Newfleet Multi-Sector Income Fund under NYSE Arca Equities Rule
8.600); 68863 (February 7, 2013), 78 FR 10222 (February 13, 2013)
(SR-NYSEArca-2012-142) (order approving listing and trading on the
Exchange of Shares of the Guggenheim Enhanced Total Return ETF under
NYSE Arca Equities Rule 8.600).
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Finally, the Prior Release stated the effective duration of the
Fund normally will vary within three years (plus or minus) of the
effective portfolio duration of the securities comprising the Barclays
Capital U.S. TIPS Index, as calculated by PIMCO, which as of January
31, 2013, as converted, was 6.16 years.\11\ The Adviser proposes to
change this representation to provide that the effective duration of
the Fund normally will vary within three years (plus or minus) of the
effective portfolio duration, as calculated by PIMCO, of the securities
comprising the BofAMerrill 1-Year Constant Maturity US TIPS Index
(``Index''). The effective portfolio duration of the securities
comprising the Index, as calculated by PIMCO, was approximately 0.95
years as of April 30, 2014. The effective duration of the Index will be
calculated using the same conversion factors as the Fund. The Adviser
represents that it wishes to reduce the interest rate sensitivity of
the Fund's investments.
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\11\ The Prior Release stated that, according to the
Registration Statement, effective duration takes into account that
for certain bonds expected cash flows will fluctuate as interest
rates change and is defined in nominal yield terms, which is market
convention for most bond investors and managers. The Prior Release
stated that the effective duration of the Barclays Capital U.S. TIPS
Index will be calculated using the same conversion factors as the
Fund.
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The Adviser represents that there is no change to the Fund's
investment objective.
The Fund will comply with all initial and continued listing
requirements under NYSE Arca Equities Rule 8.600.
Except for the changes noted above, all other facts presented and
representations made in the Prior Release remain unchanged.
All terms referenced but not defined herein are defined in the
Prior Release.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \12\ 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.
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\12\ 15 U.S.C. 78f(b)(5).
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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 Adviser represents that there is no change to the Fund's
investment objective. The Fund will comply with all initial and
continued listing requirements under NYSE Arca Equities Rule 8.600. The
Adviser represents that the proposed increase from up to 10% to up to
20% of its total assets in securities and
[[Page 36853]]
instruments that are economically tied to emerging market countries
(subject to the Fund's investment limitations relating to particular
asset classes set forth in the Prior Release) will afford the Fund the
opportunity to invest in a broader range of financial instruments
related to emerging markets and, therefore, may facilitate the Fund's
meeting its investment objective. The Adviser further represents that
the proposed change to the index used by the Fund as a measure of
duration is appropriate in that the Adviser wishes to reduce the
interest rate sensitivity of the Fund's investments in seeking the
Fund's investment objective.\13\ The effective duration of the Index
will be calculated using the same conversion factors as the Fund. As a
result of this change, the Adviser represents that it wishes to reduce
the interest rate sensitivity of the Fund's investments.
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\13\ Duration is a measure used to determine the sensitivity of
a security's price to changes in interest rates. The longer a
security's duration, the more sensitive it will be to interest
rates.
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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 the Fund will comply with all initial and
continued listing requirements under NYSE Arca Equities Rule 8.600. In
addition, the Adviser represents that it is changing the name of the
Fund to better reflect the nature of the Fund's revised investment
strategy. The Adviser represents that the proposed increase in the
Fund's total assets that may be invested in securities and instruments
that are economically tied to emerging market countries will afford the
Fund the opportunity to invest in a broader range of financial
instruments related to emerging markets and, therefore, may facilitate
the Fund's meeting its investment objective. The Adviser represents
that the change to the index used by the Fund as a measure of duration
should result in overall Fund investments that are less sensitive to
changes in interest rates. The Adviser represents that there is no
change to the Fund's investment objective. Except for the changes noted
above, all other representations made in the Prior Release remain
unchanged.
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 purposes of the Act. The proposed increase from
up to 10% to up to 20% of the Fund's total assets that may be invested
in securities and instruments that are economically tied to emerging
market countries will permit the Fund to invest in instruments that are
economically tied to emerging market countries up to a level consistent
with certain other actively-managed exchange-traded funds \14\ and will
enhance competition among issues of Managed Fund Shares that invest in
fixed income securities.
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\14\ See note 10, supra.
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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
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, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\15\ and Rule 19b-4(f)(6)(iii) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend 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 email to [email protected]. Please include
File Number SR-NYSEArca-2014-68 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-68. 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 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-NYSEArca-2014-68 and should
be submitted on or before July 21, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15200 Filed 6-27-14; 8:45 am]
BILLING CODE 8011-01-P