[Federal Register Volume 73, Number 166 (Tuesday, August 26, 2008)]
[Pages 50385-50388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19708]



[Release No. 34-58396; File No. SR-NYSEArca-2008-86]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing of the WisdomTree Dreyfus 
Emerging Markets Fund

August 20, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 11, 2008, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange''), through its wholly owned subsidiary, NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the WisdomTree Trust (the ``Trust'') under NYSE Arca Equities 
Rule 8.600 (Managed Fund Shares): WisdomTree Dreyfus Emerging Markets 
Fund (``Fund''). The shares of the Fund are collectively referred to 
herein as the ``Shares.'' The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 

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

    In its filing with the Commission, NYSE Arca included statements 
concerning the purpose of, and basis for, the proposed rule change and 

[[Page 50386]]

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 the Shares of the 
WisdomTree Dreyfus Emerging Markets Fund under NYSE Arca Equities Rule 
8.600, which governs the listing and trading of ``Managed Fund 
Shares,'' on the Exchange.\3\ The Fund will be an actively managed 
exchange traded fund. 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.\4\

    \3\ The Commission approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain funds of the PowerShares Actively 
Managed Funds Trust on the Exchange pursuant to Rule 8.600 in 
Securities Exchange Act Release No. 57619 (April 4, 2008) (SR-
NYSEArca-2008-25). The Commission approved listing and trading on 
the Exchange of twelve other actively-managed funds of the 
WisdomTree Trust in Securities Exchange Act Release No. 57801 (May 
8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31).
    \4\ See Post-Effective Amendment No. 14 to Registration 
Statement on Form N-1A for the Trust (File Nos. 333-132380 and 811-
21864) (the ``Registration Statement''). The descriptions of the 
Fund and the Shares contained herein are based on information in the 
Registration Statement.

Description of the Shares and the Fund

    WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'') 
is the investment adviser to the Fund.\5\ WisdomTree Asset Management 
is not affiliated with any broker-dealer. The Bank of New York is the 
administrator, custodian and transfer agent for the Fund. ALPS 
Distributors, Inc. serves as the distributor for the Fund.\6\

    \5\ WisdomTree Investments, Inc. (``WisdomTree Investments'') is 
the parent company of WisdomTree Asset Management.
    \6\ The Commission has issued an order granting certain 
exemptive relief to the Trust under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company Act 
Release No. 28174 (February 27, 2008) (File No. 812-13470). In 
compliance with Commentary .05 to NYSE Arca Equities Rule 8.600, 
which applies to Managed Fund Shares based on an international or 
global portfolio, the Trust's application for exemptive relief under 
the 1940 Act states that the Fund will comply with the federal 
securities laws in accepting securities for deposits and satisfying 
redemptions with redemption securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (15 U.S.C. 77a).

    The Fund seeks to earn current income reflective of money market 
rates in emerging market currencies available to foreign investors, as 
well as provide exposure to changes in the value of emerging market 
currencies relative to the U.S. Dollar. Since the Fund's investment 
objective has been adopted as a non-fundamental investment policy, the 
Fund's investment objective may be changed without a vote of 
    The Fund seeks to achieve its investment objective by investing in 
short-term securities and instruments designed to provide exposure to 
the currencies and money market rates of a specified set of emerging 
market countries. The set of countries is selected and reconstituted on 
annual basis with similar allocations to each country being established 
(in U.S. Dollar terms) at the reconstitution date and consequently 
reset each quarter. While the fund is actively managed, it will strive 
to adhere to these general parameters in both currency selection and 
approximate allocation, unless it is believed to be to the detriment of 
the fund. The reconstitution and allocation is described in more detail 
    A basket of from 5 to 12 currencies is selected at least annually 
from a pool of eligible currencies to provide a representative and 
diversified proxy for developing market currencies relative to the U.S. 
Dollar. Countries and their capital markets are first classified as 
frontier, emerging, developing, and developed markets based on a number 
of quantitative and qualitative factors to determine eligibility. Only 
the currencies of countries and capital markets classified as 
developing or emerging markets will be deemed eligible. The selection 
of the constituent currencies is then driven by the liquidity and 
tradability of the individual currencies, a country's economic and 
capital market development, and optimizing regional and economic 
diversification. The Fund attempts to invest in instruments that 
provide exposure to the most liquid currencies in the geographical 
regions in which the Fund invests. The Fund will seek to provide an 
equally-weighted exposure to these currencies. The Fund will be 
rebalanced on a quarterly basis to maintain this equal weighting. The 
basket will be reconstituted each year following a similar 
classification and selection process. Significant events, such as the 
reclassification of a country's currency from developing to developed, 
may cause the Fund to reconstitute its portfolio more frequently than 
annually. At launch, the Fund initially will select a subset of the 
following markets: Brazil, Chile, China, the Czech Republic, Hungary, 
India, Malaysia, Mexico, Poland, Russia, South Africa, South Korea, 
Taiwan, Turkey, and Thailand.\7\

    \7\ Data for the currencies of these countries is included in 
the Bank for International Settlements Triennial Central Bank 
Survey, December 2007 (``BIS Survey''). The Fund will invest in 
instruments that provide exposure to currencies selected from the 
top 42 currencies in the chart included in the BIS Survey 
(``Currency distribution of foreign exchange turnover''), reflecting 
the percentage share of average daily turnover for the applicable 
month and year.

    In addition to using the BIS Survey to assess liquidity, the Fund's 
portfolio managers also use information about transaction volume, bid-
ask spreads, and average transaction size in each currency and in 
contracts and derivatives on such currencies to assess liquidity. This 
information is obtained through market observation, through 
subscription services and from publicly available sources.
    Because the market for money market instruments in these countries 
generally is less liquid and accessible to foreign investors than 
corresponding markets in more developed economies, the Fund intends to 
achieve exposure to the applicable non-U.S. market(s) by investing 
primarily in short term U.S. money market securities and also in 
forward currency contracts and swaps. 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\

    \8\ The Fund 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 the Fund 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.

    The Fund generally will maintain a weighted average portfolio 
maturity of

[[Page 50387]]

90 days or less and will not purchase any money market instrument with 
a remaining maturity of more than 397 calendar days. The Fund will not 
invest in non-U.S. equity securities.
    The 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. Creations of the Fund are usually in exchange 
for cash and redemptions 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 Fund trade on the secondary market in amounts 
less than a Creation Unit. For more information regarding the Shares 
and the Fund, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings disclosure policies, 
distributions and taxes, see the Registration Statement.

    \9\ The NAV of the Fund's shares generally is calculated once 
daily Monday through Friday as of the close of regular trading on 
the New York Stock Exchange, generally 4:00 p.m. Eastern time (the 
``NAV Calculation Time''). NAV per share is calculated by dividing 
the Fund's net assets by the number of Fund shares outstanding. For 
more information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.

Availability of Information

    The Fund'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''),\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 trading in Shares in the Core Trading Session 
\11\ on the Exchange, the Trust will disclose on its Web site the 
identities and quantities of the portfolio of securities and other 
assets (the ``Disclosed Portfolio'') held by each Fund that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day.\12\ The Web site and information will be publicly available at no 

    \10\ The Bid/Ask Price of the 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 Fund and their service 
    \11\ The Core Trading Session is 9:30 a.m. to 4 p.m. Eastern 
    \12\ Under accounting procedures followed by the Fund, 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 
NAV on such business day. Accordingly, the Fund 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.

    In addition, an estimated value, defined in Rule 8.600 as the 
``Portfolio Indicative Value,'' that reflects an estimated intraday 
value of the Fund's portfolio, will be disseminated. The Portfolio 
Indicative Value will be based upon the current value for the 
components of the Disclosed Portfolio and will be updated and 
disseminated by the Exchange at least every 15 seconds during the Core 
Trading Session on the Exchange through the facilities of the 
Consolidated Tape Association. The dissemination of the Portfolio 
Indicative Value, together with the Disclosed Portfolio, will allow 
investors to determine the value of the underlying portfolio of the 
Fund on a daily basis and to provide a close estimate of that value 
throughout the trading day.
    Information regarding market price and volume of the Shares is and 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information will be 
published daily in the financial section of newspapers. Quotation and 
last sale information for the Shares will be available via the 
Consolidated Tape Association high-speed line.

Initial and Continued Listing

    The Shares will be subject to Rule 8.600(d), which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. A minimum of 100,000 Shares will be required to be outstanding 
at the commencement of trading. The Exchange states that this minimum 
number of Shares required to be outstanding is comparable to 
requirements that have been applied to previously listed series of 
exchange-traded funds. The Exchange believes that the proposed minimum 
number of Shares outstanding at the start of trading will be sufficient 
to provide market liquidity. The Exchange represents that, for initial 
and/or continued listing, the Shares must be in compliance with Rule 
10A-3\13\ under the Exchange Act, as provided by NYSE Arca Equities 
Rule 5.3.

    \13\ See 17 CFR 240.10A-3.

    The Exchange represents that it will obtain a representation (prior 
to listing of the Fund) from the Trust that the NAV per Share will be 
calculated daily and made available to all market participants at the 
same time.

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 the Fund. Shares of the Funds 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 comprising the Disclosed Portfolio 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. Trading in the Shares will be subject 
to Rule 8.600(d)(2)(D), which sets forth circumstances under which 
Shares of the Fund may be halted.

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. Eastern time 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. The minimum 
trading increment for Shares on the Exchange will be $0.01.


    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which includes Managed 
Fund Shares) to monitor trading in the Shares. 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 applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting

[[Page 50388]]

securities trading outside their normal patterns. 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.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG.\14\

    \14\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of ISG.

    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, 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),\15\ 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 Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 

    \15\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that the ETP Holder believes 
would be useful to make a recommendation. See Securities Exchange 
Act Release No. 54026 (June 21, 2006), 71 FR 36850 (June 28, 2006) 

    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 Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5)\16\ 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. The 
Exchange believes that the proposed rule change 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. In addition, the listing and trading 
criteria set forth in Rule 8.600 are intended to protect investors and 
the public interest.

    \16\ 15 U.S.C. 78f(b)(5).

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

    NYSE Arca 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve 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 (www.sec.gov/rules/sro.shtml ); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSEArca-2008-86 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-2008-86. 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 (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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2008-86 and should 
be submitted on or before September 16, 2008.

    \17\ CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-19708 Filed 8-25-08; 8:45 am]