[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]
[Notices]
[Pages 33457-33461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13110]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69657; File No. SR-NASDAQ-2013-079]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of a Proposed Rule Change, as Modified by Amendment
No. 1 Thereto, Relating to the WisdomTree Global Corporate Bond Fund
and the WisdomTree Emerging Markets Corporate Bond Fund
May 29, 2013.
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 May 17, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') 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 NASDAQ. On May 20,
2013, the Exchange filed Partial Amendment No. 1 to the proposed rule
change.\3\ The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1 thereto,
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Partial Amendment No. 1, the Exchange corrected a
typographical error by moving the word ``indicative'' from just
before ``NAV'' to just before ``intra-day'' such that the sentence,
as modified, reads: ``The Adviser represents that it does not
believe that the ability of the Funds' agent to calculate NAV and an
indicative intra-day value (``IIV'') for each Fund, and disseminate
such IIV every 15 seconds throughout the trading day, has been
impeded by the Funds' current Rule 144A holdings limited to 15% of
net assets.''
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is filing with the Commission a proposed rule change
relating to the WisdomTree Global Corporate Bond Fund (the ``Global
Fund'') and the WisdomTree Emerging Markets Corporate Bond Fund (the
``Emerging Markets Fund,'' and collectively with the Global Fund, the
``Funds'') of the WisdomTree Trust (the ``Trust'') listed under NASDAQ
Rule 5735 (Managed Fund Shares). The shares of the Fund are
collectively referred to herein as the ``Shares.''
The Exchange requests that the proposal be approved on an
accelerated basis.
The text of the proposed rule change is available from NASDAQ's Web
site at http://nasdaq.cchwallstreet.com/Filings/, 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 IV below. NASDAQ has prepared summaries, set
[[Page 33458]]
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
The Exchange proposes to reflect changes to the means of achieving
the investment objectives of each of the Funds. The Commission has
approved the listing and trading of Shares of each of the Funds under
NASDAQ Rule 5735, which governs the listing and trading of Managed Fund
Shares on the Exchange.\4\ The Exchange believes the proposed rule
change raises no significant issues not previously addressed in the
Prior Approval Orders. The Funds are actively managed exchange traded
funds (``ETFs''). The Shares are offered by the Trust, which was
established as a Delaware statutory trust on December 15, 2005. The
Trust, which is registered with the Commission as an investment
company, has filed a registration statement on Form N-1A with the
Commission on behalf of each of the Funds (each, a ``Registration
Statement'').\5\
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\4\ The Commission approved NASDAQ Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Commission previously approved
the listing and trading of the Shares of each of the Funds. See
Securities Exchange Act Release Nos. 66489 (February 29, 2012), 77
FR 13379 (March 6, 2012) (SR-NASDAQ-2012-004) (order approving
listing and trading of WisdomTree Emerging Markets Corporate Bond
Fund) (``Emerging Markets Fund Order''); and 68073 (October 19,
2012), 77 FR 65237 (October 25, 2012) (SR-NASDAQ-2012-98) (order
approving listing and trading of WisdomTree Global Corporate Bond
Fund) (``Global Fund Order,'' and collectively the ``Prior Approval
Orders'').
\5\ See Post-Effective Amendment Nos. 99 to Registration
Statement on Form N-1A for the Trust, dated February 8, 2012 (File
Nos. 333-132380 and 811-21864) (relating to the Emerging Markets
Fund); and 139 to Registration Statement on Form N-1A for the Trust,
dated October 26, 2012 (relating to the Global Fund). The
descriptions of the Funds and the Shares contained herein are based,
in part, on information in the applicable Registration Statement for
each Fund.
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Description of the Shares and the Fund
WisdomTree Asset Management, Inc. (``WisdomTree Asset Management'')
is the investment adviser (``Adviser'') to the Funds. Western Asset
Management Company serves as sub-adviser for the Funds (``Sub-
Adviser'').\6\
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\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. 28171 (October 27, 2008) (File No. 812-13458)
(``Exemptive Order'').
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In this proposed rule change, the Exchange proposes to amend the
description of the measures the Sub-Adviser may utilize to implement
each of the Fund's investment objectives.\7\ The Emerging Markets Fund
Order defined Corporate and Quasi-Sovereign Debt as fixed income
securities of emerging market countries, such as bonds, notes or other
debt obligations, including loan participation notes (``LPNs''), as
well as other instruments, such as derivative instruments,
collateralized by money market securities, as defined therein. Quasi-
Sovereign Debt referred specifically to fixed income securities or debt
obligations that are issued by companies or agencies that may receive
financial support or backing from a local government. The Global Fund
Order defined Global Corporate Debt to include fixed income securities,
such as bonds, notes, or other debt obligations, including LPNs, as
well as debt instruments denominated in U.S. dollars or local
currencies. Global Corporate Debt also included fixed income securities
or debt obligations issued by companies or agencies that may receive
financial support or backing from local governments, as well as money
market securities as defined therein.\8\
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\7\ The changes described herein, including the risks associated
with investing in 144A securities, will be reflected in each Fund's
Registration Statement, as amended, and become effective upon the
filing thereof with the Commission, following approval of this
proposal. See supra note 5. The Adviser represents that the Adviser
and Sub-Adviser have managed and will continue to manage the Funds
in the manner prescribed in the Prior Approval Orders, and will not
implement the changes described herein until the instant proposed
rule change has been approved.
\8\ See supra note 4.
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Under the Prior Approval Orders, the Funds are permitted to hold up
to 15% of their respective net assets in illiquid securities
(calculated at the time of investment), including (1) Rule 144A
securities and (2) loan interests (such as loan participations and
assignments, but not including LPNs).\9\ Under the 1940 Act and rules
thereunder, the Funds are required to monitor their respective
portfolio's liquidity on an ongoing basis to determine whether, in
light of current circumstances, an adequate level of liquidity is being
maintained, and to 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 were
held in illiquid securities.\10\
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\9\ 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).
\10\ Illiquid securities were defined in the Emerging Markets
Fund Order to include securities that cannot be sold or disposed of
within seven days in the ordinary course of business at
approximately the amount at which a fund has valued such securities.
Illiquid securities were defined in the Global Fund Order to 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. See Prior
Approval Orders, supra note 4.
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The Exchange seeks to make a change to the representations made by
the Adviser reflected in the Prior Approval Orders to increase the
amount of Rule 144A securities that each Fund may hold. Under the
proposed amendment, each Fund may continue to hold up to an aggregate
amount of 15% of its net assets in illiquid securities (calculated at
the time of investment), including (1) Rule 144A securities deemed
illiquid by the Adviser or Sub-Adviser, and (2) loan interests
(including loan participations and assignments, but not including
LPNs).\11\ Each Fund will, however, continue to hold up to an
additional 40% of its net assets in Rule 144A securities not deemed
illiquid by the Sub-Adviser (calculated at the time of investment). The
proposed rule change would therefore exclude Rule 144A securities not
deemed illiquid by the Adviser or Sub-Adviser from the 15% limitation
on investments in illiquid securities, and limit each Fund's investment
in liquid Rule 144A securities to 40% of Fund net assets.
[[Page 33459]]
The Adviser represents that each Fund's holdings in Rule 144A
securities not deemed illiquid by the Sub-Adviser will be comprised of
issuances with more than $100 million principal outstanding.
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\11\ While the ultimate responsibility for determination of
liquidity of securities (including Rule 144A securities) lies with
each Fund's Board of Directors, the Funds' Sub-Adviser is
responsible for complying with each Fund's restrictions on investing
in illiquid securities on a day to day basis. In doing that, the
Sub-Adviser makes ongoing determinations about the liquidity of Rule
144A securities that the respective Fund may invest in. In reaching
liquidity decisions, the Adviser represents that 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 of the marketplace trades (e.g. the time needed to
dispose of the security, the method of soliciting offers, and the
mechanics of transfer). See Securities Act Release No. 6862 (April
23, 1990), 55 FR 17933, 17940 (April 30, 1990) (Resale of Restricted
Securities; Changes to Method of Determining Holding Period of
Restricted Securities Under Rules 144 and 145).
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The Adviser represents that the purpose of the proposed change
would be to permit the Sub-Adviser the flexibility to meet each Fund's
investment objectives by permitting each Fund to invest in a higher
percentage of Rule 144A securities not deemed illiquid by the Adviser
or Sub-Adviser in accordance with Commission guidance and regulations.
Rule 144A securities are securities that are not registered under the
Securities Act, but which can only be offered and sold to ``qualified
institutional buyers'' under Rule 144A of the Securities Act.\12\ The
Exchange notes that Rule 144A was adopted, in part, to promote a more
liquid resale market in unregistered securities among institutional
investors,\13\ and the Adviser represents that liquid institutional
markets for Rule 144A securities, including those Rule 144A securities
generally held by the Funds, have developed. In this regard, the
Adviser represents that most reference benchmarks for non-investment
grade corporate bonds include more than 25% Rule 144A securities.\14\
ETFs tracking such benchmarks have not, to the knowledge of the
Adviser, experienced particular secondary market liquidity issues due
to positions in Rule 144A securities. The Adviser would not expect a
materially different result for the Funds as the market for investment
grade bonds,\15\ which the Funds each hold, is typically more liquid
than the market for similar non-investment grade bonds. The Adviser
notes further that the average issue size for Rule 144A securities is
also comparable to the average issue size for registered securities
within most high yield bond indices. The Adviser represents further
that currently-listed high yield bond ETFs typically include a
significant percentage of Rule 144A securities within their respective
portfolios.\16\ Based on these representations, the Exchange believes
there is ample existing precedent, and that its proposal is consistent
with such precedent, to permit the Funds to invest in Rule 144A
securities not deemed illiquid by the Adviser or Sub-Adviser, without
the 15% limitation currently imposed by the Prior Approval Orders.
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\12\ The term ``qualified institutional buyer'' (QIB) is defined
in Rule 144A(a)(1). 17 CFR 230.144A(a)(1).
\13\ See Securities Act Release No. 6862 (April 23, 1990), 55 FR
17933 (April 30, 1990).
\14\ See, e.g., Merrill Lynch High Yield Master II index
(``Master II index''), which as of November 6, 2012, was comprised
of 32% Rule 144A securities. The Master II index is the benchmark
index for the American Century High-Yield Inv ETF (ABHIX). Also, as
of March 6, 2013, Barclays High Yield Very Liquid Index was
comprised of 43% Rule 144A securities. That index is the benchmark
for the SPDR Barclays High Yield Bond ETF (JNK).
\15\ The Global Fund intends to have 55% or more of its assets
invested in investment grade securities, though this percentage may
change from time to time in response to economic events and changes
in the credit ratings of such issuers. See Global Fund Order at
65238. The Emerging Markets Fund expects to have 65% or more of its
assets invested in investment grade securities, though this
percentage may change in response to economic events and changes to
the ratings of such issuers. See Emerging Markets Order at 13380.
The Global Fund Order defines the term ``investment grade'' to
mean securities rated in the Baa/BBB categories or above by one or
more nationally recognized statistical rating organizations
(``NRSROs''). If a security is rated by multiple NRSROs, each Fund
will treat the security as being rated in the highest rating
category received from an NRSRO. Rating categories may include sub-
categories or gradations indicating relative standing. See Global
Fund Order at note 11. The Emerging Markets Fund Order does not
define the term ``investment grade.'' However, the Adviser
represents that it intends to apply the definition of ``investment''
grade'' in the Global Fund Order to the Emerging Markets Fund.
\16\ For example, the Adviser represents that as of November 6,
2012, more than 30% of the investment portfolio of the actively-
managed Peritus High Yield ETF was comprised of Rule 144A
securities. See Securities Exchange Act Release Nos. 63329 (November
17, 2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86)
(order approving proposed rule change relating to listing and
trading of Peritus High Yield ETF); and 63041 (October 5, 2010), 75
FR 62905 (October 13, 2010) (SR-NYSEArca-2010-86) (notice of filing
of proposed rule change to list the Peritus High Yield ETF). See
also Securities Exchange Act Release No. 66818 (April 17, 2012), 77
FR 24233 (April 23, 2012) (SR-NYSEArca-2012-33) (notice of filing
and immediate effectiveness of proposed rule change regarding
Peritus High Yield ETF). The Adviser also represents that the
investment strategies of various index-based high yield ETFs permit
active use of Rule 144A securities, provided such securities are
deemed liquid. See, e.g., prospectus for SPDR Barclays Capital High
Yield Bond ETF, https://www.spdrs.com/library-content/public/SPDR_SERIES%20TRUST_SAI.pdf, which explicitly permits the fund to invest
in Rule 144A securities deemed liquid. The Adviser represents that
as of November 6, 2012, the portfolio of the SPDR Barclays High
Yield Bond ETF included approximately 37% Rule 144A securities.
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In addition, the Exchange proposes that the requirements of the
Global Fund Order be modified to permit the Global Fund to invest up to
20% of its net assets in sovereign debt.\17\ The Exchange also proposes
that the requirements of the Prior Approval Orders be modified to amend
the definitions of Global Corporate Debt and Corporate and Quasi-
Sovereign Debt, as applicable, to include both inflation-protected
debt, including fixed income securities and other debt obligations
linked to inflation rates of local economies, and variable rate or
floating rate securities 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.\18\ The Adviser represents that these
proposed changes in the permitted investments will permit the Funds to
invest in a broader range of market sectors, and will thereby help
further the Funds' investment objectives to obtain both income and
capital appreciation through direct and indirect investments in Global
Corporate Debt or Corporate and Quasi-Sovereign Debt, as applicable,
and other investments.
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\17\ The sovereign debt would not fall within the definition of
Global Corporate Debt in the Global Fund Order, and it therefore
would not be considered as part of the 80% minimum investment in
fixed income securities that are Global Corporate Debt within that
order. The Registration Statement defines ``sovereign debt'' as
``debt securities of emerging market countries,'' for purposes of
the Emerging Markets Fund, and ``as debt securities of foreign
governments,'' for purposes of the Global Fund.
\18\ 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.
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The Adviser represents that there is no change to the Funds'
respective investment objectives. The Funds will continue to comply
with all initial and continuing listing requirements under NASDAQ Rule
5735.
The Net Asset Value (``NAV'') of each Fund's Shares is calculated
each day the New York Stock Exchange is open for trading as of the
close of regular trading on that exchange, generally 4:00 p.m. Eastern
Time (the ``NAV Calculation Time''). NAV per Share is calculated by
dividing a Fund's net assets by the number of Fund Shares outstanding.
In calculating the Fund's NAV, each Fund's investments generally are
valued using market valuations. Short-term debt securities with
remaining maturities of 60 days or less generally are valued on the
basis of amortized cost, which approximates fair value. U.S. fixed
income assets may be valued as of the announced closing time for such
securities on any day that the Securities Industry and Financial
Markets Association announces an early closing time. The values of any
assets or liabilities of a Fund that are denominated in a currency
other than the U.S. dollar are converted into U.S. dollars using an
exchange rate deemed appropriate by the Fund.
In certain instances, such as when reliable market valuations are
not readily available or are not deemed to
[[Page 33460]]
reflect current market values, the Fund's investments will be valued in
accordance with the Fund's pricing policy and procedures. Such
securities may be valued using ``fair value'' pricing and may include,
but are not limited to, securities for which there are no current
market quotations or whose issuer is in default or bankruptcy,
securities subject to corporate actions (such as mergers or
reorganizations), securities subject to non-U.S. investment limits or
currency controls, and securities affected by ``significant events.''
An example of a significant event is an event occurring after the close
of the market in which a security trades but before the Fund's next NAV
Calculation Time that may materially affect the value of the Fund's
investment (e.g., government action, natural disaster, or significant
market fluctuation).
Price movements in U.S. markets that are deemed to affect the value
of foreign securities, or reflect changes to the value of such
securities, also may cause securities to be ``fair valued.'' When fair-
value pricing is employed, the prices of securities used by the Fund to
calculate its NAV may differ from quoted or published prices for the
same securities.
The Adviser represents that it does not believe that the ability of
the Funds' agent to calculate NAV and an indicative intra-day value
(``IIV'') for each Fund, and disseminate such IIV every 15 seconds
throughout the trading day, has been impeded by the Funds' current Rule
144A holdings limited to 15% of net assets. Moreover, the Adviser does
not expect that permitting the Funds to increase each of their liquid
Rule 144A holdings as requested herein will otherwise impede the
ability of the Funds' agent to calculate an NAV and an IIV, and
disseminate such IIV every 15 seconds throughout the trading day.
Except for the limited changes proposed herein, all other facts
presented and representations made in the Rule 19b-4 \19\ filings
underlying the Prior Approval Orders remain unchanged. The changes
proposed herein would be consistent with the Exemptive Order \20\ and
the 1940 Act and rules thereunder.
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\19\ 17 CFR 240.19b-4.
\20\ See supra note 6.
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2. Statutory Basis
NASDAQ believes that the proposal is consistent with Section 6(b)
of the Act \21\ in general and Section 6(b)(5) of the Act \22\ 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.
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\21\ 15 U.S.C. 78f.
\22\ 15 U.S.C. 78f(b)(5).
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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 and traded on the Exchange pursuant to the
initial and continued listing criteria in NASDAQ Rule 5735. The Funds
will not hold more than 15% of their respective net assets (calculated
at the time of investment) in illiquid securities, including (1) Rule
144A securities deemed illiquid, or (2) loan participations or
assignments (but not including LPNs). Each Fund may, however, hold up
to an additional 40% of its net assets in Rule 144A securities not
deemed illiquid by the Sub-Adviser (calculated at the time of
investment). The proposal would therefore exclude Rule 144A securities
not deemed illiquid by the Adviser or Sub-Adviser from the 15%
limitation on investments in illiquid securities, and limit each Fund's
investment in liquid Rule 144A securities to 40% of Fund net assets.
The Adviser represents that the Fund's holdings in Rule 144A securities
not deemed illiquid by the Sub-Adviser will be part of an issuance with
more than $100 million in principal outstanding.
Under the 1940 Act and rules thereunder, the Funds are required to
monitor their respective portfolio's liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and to 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 were held in illiquid securities.\23\ Moreover, while the
ultimate responsibility for determination of liquidity of securities
(including Rule 144A securities) lies with each Fund's Board of
Directors, the Funds' Sub-Adviser is responsible for complying with
each Fund's restrictions on investing in illiquid securities on a day
to day basis. In doing that, the Sub-Adviser makes ongoing
determinations about the liquidity of Rule 144A securities that the
respective 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 of the marketplace trades (e.g. the time needed to
dispose of the security, the method of soliciting offers, and the
mechanics of transfer).
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\23\ See supra note 10.
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The Global Fund will continue, under normal circumstances,\24\ to
invest not less than 80% of its net assets in Global Corporate Debt
that are fixed income securities, and the Emerging Markets Fund will
continue to invest at least 80% of its net assets in Corporate and
Quasi-Sovereign Debt that are fixed income securities. The Funds will
continue to comply with all initial and continued listing requirements
under NASDAQ Rule 5735.
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\24\ The term ``under normal circumstances'' includes, but is
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. See supra note 4 regarding SR-NASDAQ-2012-004 and SR-
NASDAQ-2012-98.
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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 there is no change to either Fund's
investment objective. The Adviser represents that the purpose of the
proposed changes would be, respectively, to (1) permit the Sub-Adviser
the flexibility to meet each Fund's investment objectives by permitting
each Fund to invest in Rule 144A securities not deemed illiquid by the
Adviser or Sub-Adviser, or (2) permit the Funds to invest in a broader
range of market sectors, and thereby help further the Fund's objectives
to obtain both income and capital appreciation through direct and
indirect investments in Global Corporate Debt or Corporate and Quasi-
Sovereign Debt, as applicable, and other investments.
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 Funds may invest more than 15% of their
respective net assets in Rule 144A securities solely if those
securities are not deemed illiquid by the Adviser or Sub-Adviser.
Investors and the public interest are protected under the proposal by
finite parameters regarding 144A securities investments: A 40% cap on
144A investment, whereby up to a total of 40% may be in not illiquid
144A securities, and a requirement that
[[Page 33461]]
holdings in not illiquid Rule 144A securities will be comprised of
issuances with more than $100 million principal outstanding. Moreover,
under the proposal the Global Fund may invest up to 20% of its net
assets in sovereign debt, because sovereign debt will not fall within
the definition of Global Corporate Debt under the Global Fund
Order.\25\ Under the proposal, each of the Global Fund and the Emerging
Markets Fund will continue to invest not less than 80% of such Fund's
respective net assets in fixed income securities, because both
inflation-protected debt and variable rate or floating rate debt \26\
will fall within the definitions of Global Corporate Debt or Corporate
and Quasi-Sovereign Debt, as applicable, under the Prior Approval
Orders. The proposed changes are intended to provide additional
flexibility to the Funds' Sub-Adviser to meet each Fund's investment
objectives.\27\
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\25\ Sovereign debt enjoys a relationship to foreign governments
that is not unlike that of Treasury debt securities and the U.S.
government. For purposes of the Global Fund, for example, sovereign
debt is specifically defined as the debt securities of foreign
governments. See supra note 16.
\26\ For variable or floating interest rates, as interest rates
decrease or increase the potential for capital appreciation or
depreciation is less than for fixed rate obligations. Moreover,
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.
\27\ Moreover, it is not expected that the proposed rule change
will impede the ability of the Funds' agent to calculate an NAV and
an IIV, and disseminate such IIV every 15 seconds throughout the
trading day.
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For the above reasons, NASDAQ believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act, and
consistent with investment protection in that each Fund's holdings of
Rule 144A securities not deemed illiquid by the Sub-Adviser would be
limited to 40% of such Fund's net assets, and the holdings in Rule 144A
securities not deemed illiquid by the Sub-Adviser will be comprised of
issuances with more than $100 million principal outstanding.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. To the contrary,
the proposed rule change is decidedly pro-competitive. The proposed
rule change will result in additional investment options to achieve the
investment objectives of the Funds, thereby facilitating the listing
and trading of additional actively-managed exchange-traded products
that will enhance competition to the benefit of investors, market
participants, and the marketplace.
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
Within 45 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 shall:
(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-NASDAQ-2013-079 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-079. 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 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-2013-079 and should
be submitted on or before June 25, 2013.
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\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13110 Filed 6-3-13; 8:45 am]
BILLING CODE 8011-01-P