[Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Notices]
[Page 29995-30003]
[DOCID:fr24my06-137]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 27324; 812-13280]

WisdomTree Investments, Inc. et al.; Notice of Application

May 18, 2006.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
2(a)(32), 5(a)(1), 22(d), 22(e), and 24(d) of the Act and rule 22c-1
under the Act, and under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under
section 12(d)(1)(J) for an

exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act.

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Summary of Application: Applicants request an order granting relief
(``ETF Relief'') to permit (a) open-end management investment
companies, the series of which consist of the component securities of
certain domestic and international equity securities indexes, to issue
shares (``Shares'') that can be redeemed only in large aggregations
(``Creation Units''), (b) secondary market transactions in Shares to
occur at negotiated prices on a national securities exchange, as
defined in section 2(a)(26) of the Act (``Exchange''), (c) dealers to
sell Shares to purchasers in the secondary market unaccompanied by a
prospectus when prospectus delivery is not required by the Securities
Act of 1933 (``Securities Act''), (d) certain series to pay redemption
proceeds, under certain circumstances, more than seven days after the
tender of a Creation Unit for redemption, and (e) certain affiliated
persons of the series to deposit securities into, and receive
securities from, the series in connection with the purchase and
redemption of Creation Units. Applicants request that the order also
grant relief (``12(d)(1) Relief'') to permit certain registered
management investment companies and unit investment trusts (``UITs'')
outside of the same group of investment companies as the series to
acquire Shares.

Applicants: WisdomTree Investments, Inc. (``WTI''), WisdomTree Asset
Management, Inc. (``WTA'' or ``Advisor''), and WisdomTree Trust
(``Trust'').

Filing Dates: The application was filed on April 19, 2006, and amended
on May 8, 2006. Applicants have agreed to file an additional amendment
during the notice period, the substance of which is reflected herein.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on June 9, 2006, and should be accompanied by proof of service on
applicants, in the form of an affidavit, or for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
who wish to be notified of a hearing may request notification by
writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicants, 48 Wall Street,
Suite 1100, New York, NY 10005.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at
(202) 551-6815, or Stacy L. Fuller, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Public Reference Desk, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-0102 (telephone<PHONE_NUMBER>).

Applicants' Representations

    1. The Trust, a Delaware business trust, is registered under the
Act as an open-end series management investment company. Applicants
currently intend to introduce 20 series (``Initial Funds'') of the
Trust and may establish additional series in the future (``Future
Funds,'' and together with the Initial Funds, ``Funds'').\1\ The
Advisor, a subsidiary of WTI, is registered as an investment adviser
under the Investment Advisers Act of 1940 (``Advisers Act'') and will
serve as the investment adviser to each Fund.\2\ Each Fund may also be
subadvised by a separate investment adviser within the meaning of
section 2(a)(20)(B) of the Act that is not otherwise an affiliated
person of the Advisor or the Funds and is registered as an investment
adviser under the Advisers Act (``Subadvisor'').\3\ ALPS Distributors,
Inc., a broker-dealer registered under the Securities Exchange Act of
1934 (``Exchange Act''), will serve as principal underwriter for the
Funds (``Distributor'').
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    \1\ All parties that currently intend to rely on the requested
order are named as applicants. Any other party that relies on the
order in the future will comply with the terms and conditions of the
application.
    \2\ Neither WTI or WTA nor any affiliated person of WTI or WTA
is or will be a broker or dealer.
    \3\ BNY Investment Advisors will serve as Subadvisor to the
Initial Funds.
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    2. Certain Funds (``Domestic Funds'') will invest in a portfolio of
equity securities (``Portfolio Securities'') selected to correspond
generally to the price and yield performance of a specified domestic
equity securities index (``Domestic Index''), while other Funds
(``International Funds'') will invest in Portfolio Securities selected
to correspond generally to the price and yield performance of an
international equity securities index (``International Index,'' and
together with Domestic Indexes, ``Indexes'').\4\ The Indexes are based
on a proprietary, rules-based methodology developed by WTI to define
the dividend-paying segments of the domestic and international markets
(``Methodology''). The Methodology, including the rules which govern
the inclusion and weighting of securities in the Indexes, will be
publicly available, including on the Funds' Web site (``Web site''),
along with the identities and weightings of the component securities of
each Index (``Component Securities'') and the Portfolio Securities of
each Fund.\5\ While WTI may change the rules of the Methodology in the
future, WTI does not intend to do so. Any change to the Methodology
would not take effect until WTI had given the public at least 60 days
advance notice of the change and had given reasonable notice of the
change to the Calculation Agent. The ``Calculation Agent'' is the
entity that, pursuant to an agreement with WTI, is solely responsible
for all Index calculation, maintenance, dissemination and
reconstitution activities.\6\ The Calculation Agent is not, and will
not be, an affiliated person, or an affiliated person of an affiliated
person, of the Funds, Advisor, Subadvisor, Distributor or promoter of
the Funds.\7\
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    \4\ Sixteen of the Initial Funds are Domestic Funds. The other
Initial Funds are International Funds.
    \5\ WTI will license the Indexes to the Advisor for use in
connection with the Funds. The license will specifically state that
the Advisor must provide the use of the Indexes to the Funds at no
cost.
    \6\ The Calculation Agent will determine the number, type and
weight of securities that comprise each Index and perform, or cause
to be performed, all other calculations that are necessary to
determine the proper constitution of each Index. The Calculation
Agent will not disclose any information about any Index's
constitution to WTI, WTA, the Subadvisor or Funds prior to the
publication of such information on the Web site. However, an
employee of WTI and/or WTA will monitor the Methodology and the
Indexes (``Index Administrator''), and other employees of WTI and/or
WTA may be appointed to assist the Index Administrator (``Index
Staff,'' and together with the Index Administrator, ``Index
Provider'').
    \7\ Bloomberg L.P. will serve as Calculation Agent for the
Initial Funds.
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    3. Applicants state that the Index Provider will not have any
responsibility for the management of the Funds. In addition, applicants
have adopted policies and procedures that, among other things, are
designed to limit or prohibit communications between the Index Provider
and other employees of WTI and WTA (``Firewalls''). Among other things,
the Firewalls prohibit the Index Provider from disseminating non-public
information about the Indexes,

including potential changes to the Methodology, to, among others, the
employees of WTA and the Subadvisor responsible for managing the Funds
(``advisory personnel''). The Firewalls also prohibit WTA advisory
personnel from sharing any non-public information about the Funds with
the Index Provider. Further, WTA and the Subadvisor have, pursuant to
rule 206(4)-7 under the Advisers Act, written policies and procedures
designed to prevent violations of the Advisers Act and the rules under
the Advisers Act. WTI, WTA, the Subadvisor and Distributor also have
adopted or will adopt a Code of Ethics as required under rule 17j-1
under the Act, which contains provisions reasonably necessary to
prevent Access Persons (as defined in rule 17j-1) from engaging in any
conduct prohibited in rule 17j-1. In addition, WTI, WTA and the
Subadvisor have adopted or will adopt policies and procedures to detect
and prevent insider trading as required under section 204A of the
Advisers Act, which are reasonably designed taking into account the
nature of their business, to prevent the misuse in violation of the
Advisers Act, Exchange Act, or rules and regulations under the Advisers
Act and Exchange Act, of material non-public information.
    4. Any Future Fund will be advised by the Advisor or an entity
controlling, controlled by or under common control with the Advisor and
be in the same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act, as the Initial Funds. Applicants will not
offer a Future Fund unless either they have requested and received with
respect to such Future Fund exemptive relief from the Commission or a
no-action position from the staff of the Commission, or the Future
Funds will be listed on an Exchange without the need for a filing under
rule 19b-4 under the Exchange Act. In addition, any Future Fund that
relies on any order granted pursuant to this application will comply
with the terms and conditions of the application, including the
following: (a) The Methodology will be publicly available, including on
the Web site; (b) once the rules of the Methodology are established,
applicants may change them only after giving the public at least 60
days advance notice of any change on the Web site; (c) applicants have
Firewalls; (d) the Calculation Agent will not be an affiliated person,
or an affiliated person of an affiliated person, of the Funds, Advisor,
Subadvisor, Distributor or promoter of the Funds; and (e) the Indexes
will be reconstituted on a fixed periodic basis no more frequently than
quarterly.
    5. The investment objective of each Fund will be to provide
investment results that generally correspond, before fees and expenses,
to the price and yield performance of the relevant Index. The intra-day
value of each Index will be disseminated every 15 seconds throughout
the trading day over the Consolidated Tape on each day that the Funds
are open, which includes any day that the Funds are required by to be
open under section 22(e) of the Act (``Business Day''). In seeking to
achieve its investment objective, each Fund will utilize either a
replication or a representative sampling strategy. A Fund using a
replication strategy generally will invest in the Component Securities
of the relevant Index in the same approximate proportions as in the
relevant Index. In certain circumstances, such as when a Component
Security is illiquid or there are practical difficulties or substantial
costs involved in holding every security in an Index, a Fund may use a
representative sampling strategy pursuant to which it will invest in
some but not all of the Component Securities.\8\ Applicants anticipate
that a Fund that utilizes a representative sampling strategy will not
track the performance of its Index with the same degree of accuracy as
an investment vehicle that invests in every Component Security in the
same weighting as the Index. Applicants expect that each Fund will have
a tracking error relative to the performance of its Index of no more
than 5%.
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    \8\ Each Fund will invest at least 95% of its assets in
Component Securities. Each Fund may invest up to 5% of its assets in
securities, which are not Component Securities but which the Advisor
or Subadvisor believes will help the Fund track its Underlying
Index, including futures, options and swap contracts, cash and cash
equivalents, and other investment companies, including other
exchange-traded funds within the limits of section 12(d)(1) of the
Act. International Funds will have no less than 90% of their assets
in Component Securities and may invest up to 10% of their assets in
securities that are not Component Securities. In order to reduce any
potential for tracking error, the Advisor or Subadvisor will invest
such assets in securities that have aggregate investment
characteristics (such as market capitalization) and fundamental
characteristics (such as return variability, earnings valuation and
yield) similar to those of the relevant Index. None of the Indexes
will include depository receipts (e.g., American Depository
Receipts) as Component Securities. However, the Advisor or
Subadvisor may include depository receipts on the list of Deposit
Securities (as defined below) when holding the depository receipt
will improve liquidity, tradability or settlement for an
International Fund and may treat the depository receipt of a
Component Security as a Component Security for purposes of
applicants' representations related to the percentage of assets of
an International Fund that will be invested in Component Securities.
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    6. Shares of the Funds will be sold at a price of between $25 and
$250 per Share in Creation Units of between 25,000 and 200,000 Shares.
All orders to purchase Creation Units must be placed with the
Distributor by or through an ``Authorized Participant,'' an entity that
has entered into an agreement with the Distributor and that is either
(a) a participant in the continuous net settlement system of the
National Securities Clearing Corporation, a clearing agency registered
with the Commission or (b) a participant in the Depository Trust
Company (``DTC,'' and such participant, ``DTC Participant''). Creation
Units generally will be issued in exchange for an in-kind deposit of
securities and cash, though a Fund may sell Creation Units on a cash-
only basis in limited circumstances. An investor wishing to purchase a
Creation Unit from a Fund will have to transfer to the Fund a
``Creation Deposit'' consisting of: (a) A portfolio of securities that
has been selected by the Advisor or Subadvisor to correspond generally
to the performance of the relevant Index (``Deposit Securities''), and
(b) a cash payment to equalize any differences between the market value
of the Deposit Securities per Creation Unit and the net asset value
(``NAV'') per Creation Unit (``Cash Requirement'').\9\ An investor
purchasing a Creation Unit from a Fund will be charged a fee
(``Transaction Fee'') to prevent the dilution of the interests of the
remaining shareholders resulting from the Fund incurring costs in
connection with the purchase of the Creation Units.\10\ Each Fund will
disclose the maximum Transaction Fee in its prospectus (``Prospectus'')
and the method of calculating the Transaction Fee in its statement of
additional information (``SAI''). None of the Funds will impose a sales
load, sales charge or fee under rule 12b-1 under the Act.
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    \9\ On each Business Day, prior to the opening of trading on the
Exchange where the Fund's Shares are listed (``Listing Exchange''),
the Advisor or Subadvisor will make available the list of the names
and the required number of shares of each Deposit Security required
for the Creation Deposit for the Fund. That Creation Deposit will
apply to all purchases of Creation Units until a new Creation
Deposit for the Fund is announced. Each Fund reserves the right to
permit or require the substitution of an amount of cash in lieu of
depositing some or all of the Deposit Securities. The Listing
Exchange will disseminate every 15 seconds throughout the trading
day over the Consolidated Tape an amount representing, on a per
Share basis, the sum of the current value of the Deposit Securities
and the estimated Cash Requirement.
    \10\ When a Fund permits a purchaser to substitute cash for
Deposit Securities, the purchaser may be assessed a higher
Transaction Fee to offset the brokerage and other transaction costs
incurred by the Fund to purchase the requisite Deposit Securities.

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    7. Orders to purchase Creation Units of a Fund will be placed with
the Distributor who will be responsible for transmitting orders to the
Funds. The Distributor will maintain a record of Creation Unit
purchases. The Distributor will be responsible for issuing
confirmations of acceptance and furnishing Prospectuses to purchasers
of Creation Units.
    8. Persons purchasing Creation Units from a Fund may hold the
Shares or sell some or all of them in the secondary market. Shares of
the Funds will be listed on a Listing Exchange, such as the American
Stock Exchange LLC, New York Stock Exchange and Nasdaq Stock Market,
Inc. (``Nasdaq''), and traded in the secondary market in the same
manner as other equity securities. It is expected that one or more
members of the Listing Exchange will act, with respect to Nasdaq,\11\
as a market maker (``Market Maker'') or, with respect to any other
Exchange, as a specialist (``Specialist''), and maintain a market on
the Exchange for the Shares. The price of Shares traded on an Exchange
will be based on a current bid/offer market. Purchases and sales of
Shares in the secondary market will be subject to customary brokerage
commissions and charges.
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    \11\ The listing requirements established by Nasdaq require that
at least two Market Makers be registered in Shares in order for the
Shares to maintain a listing on Nasdaq. Registered Market Makers
must make a continuous two-sided market in a listing or face
regulatory sanctions.
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    9. Applicants expect that purchasers of Creation Units will include
institutional investors and arbitrageurs. The Market Maker or
Specialist, in providing for a fair and orderly secondary market for
Shares, also may purchase Creation Units for use in its market-making
activities. Applicants expect that secondary market purchasers of
Shares will include both institutional and retail investors.\12\
Applicants expect that the price at which the Shares trade will be
disciplined by arbitrage opportunities created by the ability to
continually purchase or redeem Creation Units at their NAV, which
should ensure that the Shares will not trade at a material discount or
premium in relation to their NAV.
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    \12\ Shares will be registered in book-entry form only. DTC or
its nominee will be the registered owner of all outstanding Shares.
DTC or DTC Participants will maintain records reflecting the
beneficial owners of Shares.
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    10. Shares will not be individually redeemable. Shares will only be
redeemable in Creation Units from a Fund. To redeem, an investor will
have to accumulate enough Shares to constitute a Creation Unit.
Redemption orders must be placed by or through an Authorized
Participant. An investor redeeming a Creation Unit generally will
receive (a) a portfolio of securities designated to be delivered for
Creation Unit redemptions on the date that the request for redemption
is submitted (``Redemption Securities''), which may not be identical to
the Deposit Securities required to purchase Creation Units on that
date, and (b) a ``Cash Redemption Payment,'' consisting of an amount
calculated in the same manner as the Cash Requirement. An investor may
receive the cash equivalent of a Redemption Security in certain
circumstances, such as if the investor is constrained from effecting
transactions in the security by regulation or policy. A redeeming
investor will pay a Transaction Fee, which is calculated in the same
manner as a Transaction Fee payable in connection with purchases of
Creation Units.
    11. Applicants state that neither the Trust nor any Fund will be
marketed or otherwise held out as a traditional open-end investment
company or mutual fund. Rather, applicants state that each Fund will be
marketed as an ``exchange-traded fund,'' ``investment company,''
``fund'' and ``trust.'' All marketing materials that refer to
redeemability or describe the method of obtaining, buying or selling
Shares will prominently disclose that Shares are not individually
redeemable and that Shares may be acquired or redeemed from the Fund in
Creation Units only. The same type of disclosure will be provided in
the Prospectus, SAI, shareholder reports and investor educational
materials issued or circulated in connection with Shares. The Funds
will provide copies of their annual and semi-annual shareholder reports
to DTC Participants for distribution to beneficial owners of Shares.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act
granting an exemption from sections 2(a)(32), 5(a)(1), 22(d), 22(e),
and 24(d) of the Act and rule 22c-1 under the Act, under section
12(d)(1)(J) granting an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act, and under sections 6(c) and 17(b) of the Act
granting an exemption from sections 17(a)(1) and 17(a)(2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class of persons,
securities or transactions, from any provision of the Act, if and to
the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
Section 12(d)(1)(J) of the Act provides that the Commission may exempt
any person, security or transaction, or any class or classes thereof,
from any of the provisions of section 12(d)(1) if the exemption is
consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to exempt a proposed
transaction from section 17(a) if evidence establishes that the terms
of the transaction, including the consideration to be paid or received,
are reasonable and fair and do not involve overreaching on the part of
any person concerned, and the proposed transaction is consistent with
the policies of the registered investment company and the general
provisions of the Act.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a
management investment company that is offering for sale or has
outstanding any redeemable security of which it is the issuer. Section
2(a)(32) of the Act defines a redeemable security as any security,
other than short-term paper, under the terms of which the holder, upon
its presentation to the issuer, is entitled to receive approximately
his proportionate share of the issuer's current net assets, or the cash
equivalent. Because Shares will not be individually redeemable,
applicants request an order that would permit the Trust to register as
an open-end management investment company and issue Shares that are
redeemable in Creation Units only. Applicants state that investors may
purchase Shares in Creation Units and redeem Creation Units from each
Fund. Applicants further state that because the market price of Shares
will be disciplined by arbitrage opportunities, investors should be
able to sell Shares in the secondary market at prices that do not vary
substantially from their NAV.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer
from selling a redeemable security, which is currently being offered to
the public by or through a principal underwriter, except at a current
public offering price described in the prospectus. Rule 22c-1 under the
Act generally requires that a dealer selling, redeeming or repurchasing
a redeemable security do so only at a price based on its NAV.
Applicants state that secondary market trading in Shares will take
place at

negotiated prices, not at a current offering price described in the
Prospectus, and not at a price based on NAV. Thus, purchases and sales
of Shares in the secondary market will not comply with section 22(d) of
the Act and rule 22c-1 under the Act. Applicants request an exemption
under section 6(c) from these provisions.
    5. Applicants assert that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Shares.
Applicants maintain that the provisions of section 22(d), as well as
those of rule 22c-1, appear to have been designed to (a) prevent
dilution caused by certain riskless trading schemes by principal
underwriters and contract dealers, (b) prevent unjust discrimination or
preferential treatment among buyers, and (c) ensure an orderly
distribution of investment company shares by eliminating price
competition from dealers offering shares at less than the published
sales price and repurchasing shares at more than the published
redemption price.
    6. Applicants believe that none of these purposes will be thwarted
by permitting Shares to trade in the secondary market at negotiated
prices. Applicants state that (a) secondary market trading in Shares
does not involve the Funds as parties and cannot result in dilution of
an investment in Shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
Shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants contend that the proposed distribution
system will be orderly because arbitrage activity will ensure that the
difference between the market price of Shares and their NAV remains
narrow.

Section 22(e) of the Act

    7. Section 22(e) generally prohibits a registered investment
company from suspending the right of redemption or postponing the date
of payment of redemption proceeds for more than seven days after the
tender of a security for redemption. The principal reason for the
requested exemption is that settlement of redemptions for the
International Funds is contingent not only on the settlement cycle of
the United States market, but also on currently practicable delivery
cycles in local markets for underlying foreign securities held by the
International Funds. Applicants state that local market delivery cycles
for transferring certain foreign securities to investors redeeming
Creation Units, together with local market holiday schedules, will
under certain circumstances require a delivery process in excess of
seven calendar days for the International Funds. Applicants request
relief under section 6(c) of the Act from section 22(e) to allow the
International Funds to pay redemption proceeds up to 12 calendar days
after the tender of a Creation Unit for redemption. At all other times
and except as disclosed in the relevant Prospectus and/or SAI,
applicants expect that each International Fund will be able to deliver
redemption proceeds within seven days.\13\ With respect to Future Funds
based on an International Index, applicants seek the same relief from
section 22(e) only to the extent that circumstances similar to those
described in the application exist.
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    \13\ Rule 15c6-1 under the Exchange Act requires that most
securities transactions be settled within three business days of the
trade. Applicants acknowledge that no relief obtained from the
requirements of section 22(e) will affect any obligations applicants
may have under rule 15c6-1.
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    8. Applicants state that section 22(e) was designed to prevent
unreasonable, undisclosed and unforeseen delays in the payment of
redemption proceeds. Applicants assert that the requested relief will
not lead to the problems that section 22(e) was designed to prevent.
Applicants state that the SAI will disclose those local holidays (over
the period of at least one year following the date of the SAI), if any,
that are expected to prevent the delivery of redemption proceeds in
seven calendar days, and the maximum number of days needed to deliver
the proceeds for the relevant International Fund.

Section 24(d) of the Act

    9. Section 24(d) of the Act provides, in relevant part, that the
prospectus delivery exemption provided to dealer transactions by
section 4(3) of the Securities Act does not apply to any transaction in
a redeemable security issued by an open-end investment company.
Applicants request an exemption from section 24(d) to permit dealers
selling Shares to rely on the prospectus delivery exemption provided by
section 4(3) of the Securities Act.\14\
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    \14\ Applicants state that they do not seek relief from the
prospectus delivery requirement for non-secondary market
transactions, such as purchases of Shares from the Funds or an
underwriter. Applicants state that the Prospectus will caution
persons purchasing Creation Units that some activities on their
part, depending on the circumstances, may result in their being
deemed statutory underwriters and subject them to the prospectus
delivery and liability provisions of the Securities Act. For
example, a broker-dealer firm and/or its client may be deemed a
statutory underwriter if it takes Creation Units after placing an
order with the Distributor, breaks them down into the constituent
Shares and sells them directly to its customers, or if it chooses to
couple the creation of new Shares with an active selling effort
involving solicitation of secondary market demand for Shares. The
Prospectus will state that whether a person is an underwriter
depends upon all the facts and circumstances pertaining to that
person's activities. The Prospectus also will state that dealers who
are not ``underwriters'' but are participating in a distribution (as
contrasted to ordinary secondary market trading transactions), and
thus dealing with Shares that are part of an ``unsold allotment''
within the meaning of section 4(3)(C) of the Securities Act, would
be unable to take advantage of the prospectus delivery exemption
provided by section 4(3) of the Securities Act.
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    10. Applicants state that Shares will be listed on a Listing
Exchange and will be traded in a manner similar to other equity
securities, including the shares of closed-end investment companies.
Applicants note that dealers selling shares of closed-end investment
companies in the secondary market generally are not required to deliver
a prospectus to the purchaser. Applicants contend that Shares, as a
listed security, merit a reduction in the compliance costs and
regulatory burdens resulting from the imposition of prospectus delivery
obligations in the secondary market. Because Shares will be exchange-
listed, prospective investors will have access to several types of
market information about Shares. Applicants state that information
regarding market price and volume will be continually available on a
real-time basis throughout the day on computer screens of brokers and
other electronic services. The previous day's closing price and volume
information for Shares also will be published daily in the financial
section of newspapers. In addition, the Web site will include, for each
Fund, the prior Business Day's NAV, the reported closing price of a
Share, and a calculation of the premium or discount of the closing
price against such NAV, as well as data in chart format displaying the
frequency distribution of discounts and premiums of the closing price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters.
    11. Investors also will receive a short product description
(``Product Description''), describing a Fund and its Shares. Applicants
state that, while not intended as a substitute for a Prospectus, the
Product Description will contain information about Shares that is
tailored to meet the needs of investors purchasing Shares in the
secondary market. The Product Description will prominently disclose
that the Indexes are created and sponsored by an affiliated person of
the Advisor.

Section 12(d)(1) of the Act

    12. Section 12(d)(1)(A) of the Act prohibits a registered
investment company from acquiring securities of an investment company
if such securities represent more than 3% of the total outstanding
voting stock of the acquired company, more than 5% of the total assets
of the acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter or
any broker or dealer (``Broker'') that is registered under the Exchange
Act from knowingly selling the investment company's shares to another
investment company if the sale will cause the acquiring company to own
more than 3% of the acquired company's voting stock, or if the sale
will cause more than 10% of the acquired company's voting stock to be
owned by investment companies generally.
    13. Applicants request an exemption to permit registered management
investment companies (``Acquiring Management Companies'') and unit
investment trusts (``Acquiring Trusts,'' and together with the
Acquiring Management Companies, ``Acquiring Funds'') that are not
advised or sponsored by the Advisor or an entity controlling,
controlled by or under common control with the Advisor, and not part of
the same ``group of investment companies,'' as defined in section
12(d)(1)(G)(ii), as the Funds, to acquire Shares beyond the limits of
section 12(d)(1)(A). Acquiring Funds exclude registered investment
companies that are, or in the future may be, part of the same group of
investment companies within the meaning of section 12(d)(1)(G)(ii) of
the Act as the Funds. The requested exemption would also permit the
Funds, their principal underwriters and any Broker knowingly to sell
shares of the Funds to an Acquiring Fund in excess of the limits of
section 12(d)(1)(B). Applicants request that the relief sought apply to
(a) each Fund, (b) each Acquiring Fund that enters into a written
agreement with a Fund (``Acquiring Fund Agreement''), and (c) any
Broker.\15\
---------------------------------------------------------------------------

    \15\ An Acquiring Fund may rely on the requested order only to
invest in the Funds and not in any other investment company.
---------------------------------------------------------------------------

    14. Each Acquiring Management Company will be advised by an
investment adviser within the meaning of section 2(a)(20)(A) of the Act
(the ``Acquiring Fund Advisor'') and may be advised by one or more
investment advisers within the meaning of section 2(a)(20)(B) of the
Act (each, an ``Acquiring Fund Subadvisor''). Any investment adviser to
an Acquiring Fund will be registered or exempt from registration under
the Advisers Act. Each Acquiring Trust will be sponsored by a sponsor
(``Sponsor'').
    15. Applicants submit that the proposed conditions to the requested
relief adequately address the concerns underlying the limits in section
12(d)(1), which include concerns about undue influence, excessive
layering of fees and overly complex structures. Applicants believe that
the requested exemption is consistent with the public interest and the
protection of investors.
    16. Applicants believe that neither the Acquiring Funds nor an
Acquiring Fund Affiliate would be able to exert undue influence over
the Funds.\16\ To limit the control that an Acquiring Fund may have
over a Fund, applicants propose a condition prohibiting the Acquiring
Fund Advisor, Sponsor, any person controlling, controlled by or under
common control with the Acquiring Fund Advisor or Sponsor, and any
investment company or issuer that would be an investment company but
for section 3(c)(1) or 3(c)(7) of the Act that is advised or sponsored
by the Acquiring Fund Advisor, Sponsor, or any person controlling,
controlled by or under common control with an Acquiring Fund Advisor or
Sponsor (``Acquiring Fund's Advisory Group'') from controlling
(individually or in the aggregate) a Fund within the meaning of section
2(a)(9) of the Act. The same prohibition would apply to any Acquiring
Fund Subadvisor, any person controlling, controlled by or under common
control with the Acquiring Fund Subadvisor, and any investment company
or issuer that would be an investment company but for section 3(c)(1)
or 3(c)(7) of the Act (or portion of such investment company or issuer)
advised or sponsored by the Acquiring Fund Subadvisor or any person
controlling, controlled by or under common control with the Acquiring
Fund Subadvisor (``Acquiring Fund's Subadvisory Group'').
---------------------------------------------------------------------------

    \16\ The ``Acquiring Fund Affiliates'' are the Acquiring Fund
Advisor, Acquiring Fund Subadvisor(s), Sponsor, promoter or
principal underwriter of an Acquiring Fund, and any person
controlling, controlled by or under common control with any of these
entities.
---------------------------------------------------------------------------

    17. Applicants also propose conditions 9-14, stated below, to limit
the potential for undue influence by an Acquiring Fund over a Fund.
Condition 9 precludes an Acquiring Fund and Acquiring Fund Affiliates
from causing any potential investment by the Acquiring Fund in a Fund
to influence the terms of any services or transactions between the
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund
Affiliate.\17\ Condition 12 precludes an Acquiring Fund or Acquiring
Fund Affiliate (except to the extent it is acting in its capacity as an
investment adviser to a Fund) from causing a Fund to purchase a
security in any offering of securities during the existence of any
underwriting or selling syndicate of which a principal underwriter is
an Underwriting Affiliate (``Affiliated Underwriting'').\18\
---------------------------------------------------------------------------

    \17\ The ``Fund Affiliates'' are the Advisor, Subadvisor(s),
promoter and principal underwriter of a Fund, and any person
controlling, controlled by or under common control with any of these
entities.
    \18\ An ``Underwriting Affiliate'' is a principal underwriter in
any underwriting or selling syndicate that is an officer, director,
member of an advisory board, Acquiring Fund Advisor, Acquiring Fund
Subadvisor, Sponsor, or employee of the Acquiring Fund, or a person
which any such officer, director, member of an advisory board,
Acquiring Fund Advisor, Acquiring Fund Subadvisor, Sponsor, or
employee is an affiliated person, except any person whose
relationship to the Fund is covered by section 10(f) of the Act is
not an Underwriting Affiliate.
---------------------------------------------------------------------------

    18. Applicants represent that as an additional assurance that
Acquiring Funds understand the implications of an investment in a Fund
under the requested order, any Acquiring Fund that intends to invest in
a Fund in reliance on the requested order will be required to enter
into an Acquiring Fund Agreement with the Fund. The Acquiring Fund
Agreement will ensure that the Acquiring Fund understands and agrees to
comply with the terms and conditions of the requested order. The
Acquiring Fund Agreement also will include an acknowledgement from the
Acquiring Fund that it may rely on the order only to invest in the
Funds and not in any other investment company. Applicants note that a
Fund may choose to reject any direct purchase of Creation Units by an
Acquiring Fund.\19\
---------------------------------------------------------------------------

    \19\ A Fund would retain its right to reject any initial
investment by an Acquiring Fund in excess of the limit in section
12(d)(1)(A)(i) by declining to execute the Acquiring Fund Agreement
with the Acquiring Fund.
---------------------------------------------------------------------------

    19. Applicants do not believe the proposed arrangement will involve
excessive layering of fees. The board of directors or trustees of any
Acquiring Management Company, including a majority of the disinterested
directors or trustees, will find that the advisory fees charged to the
Acquiring Management Company are based on services provided that will
be in addition to, rather than duplicative of, services provided under
the advisory contract(s) of any Fund in which the Acquiring Management
Company may invest. In

addition, an Acquiring Fund Advisor or a Sponsor or trustee of an
Acquiring Trust (``Trustee'') will waive fees otherwise payable to it
by the Acquiring Fund in an amount at least equal to any compensation
(including fees received pursuant to any plan adopted by a Fund under
rule 12b-1 under the Act) received from the Fund by the Acquiring Fund
Advisor, Sponsor or Trustee or an affiliated person of the Acquiring
Fund Advisor, Sponsor or Trustee, in connection with the investment by
the Acquiring Fund in the Fund (other than advisory fees). Applicants
state that any sales charges or service fees charged with respect to
shares of an Acquiring Fund will not exceed the limits applicable to a
fund of funds set forth in Conduct Rule 2830 of the NASD (``Rule
2830'').
    20. Applicants submit that the proposed arrangement will not create
an overly complex structure. Applicants note that no Fund may acquire
securities of any investment company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in
section 12(d)(1)(A). Applicants also represent that the Acquiring Fund
Agreement will require any Acquiring Fund that exceeds the 5% or 10%
limitations in section 12(d)(1)(A)(ii) and (iii) to disclose in its
prospectus that it may invest in Funds, and to disclose in ``plain
English'' in its prospectus the unique characteristics of the Acquiring
Funds investing in Funds, including but not limited to the expense
structure and any additional expenses of investing in the Funds.

Sections 17(a)(1) and (2) of the Act

    21. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person, from selling any security to or purchasing any security
from the company. Section 2(a)(3) of the Act defines ``affiliated
person'' to include any person directly or indirectly owning,
controlling or holding with power to vote 5% or more of the outstanding
voting securities of the other person, any person 5% or more of whose
outstanding voting securities are directly or indirectly owned,
controlled or held with the power to vote by the other person, and any
person directly or indirectly controlling, controlled by or under
common control with the other person. Section 2(a)(9) of the Act
provides that a control relationship will be presumed where one person
owns more than 25% of another person's voting securities. Applicants
request two exemptions under sections 6(c) and 17(b) from section
17(a).
    22. First, applicants request an exemption from 17(a) to permit (a)
persons who are affiliated persons of a Fund solely by virtue of
holding with the power to vote 5% or more, or more than 25%, of a
Fund's, or two or more Funds', Shares (``First-Tier Affiliates'') and
(b) affiliated persons of First-Tier Affiliates who are not otherwise
affiliated with the Fund, and persons who are affiliated persons of a
Fund solely by virtue of holding with the power to vote 5% or more, or
more than 25%, of the outstanding voting securities of other registered
investment companies (or series thereof), which are not Funds, advised
by the Advisor (``Second-Tier Affiliates'') to purchase and redeem
Creation Units through in-kind transactions. Applicants contend that no
useful purpose would be served by prohibiting the First- and Second-
Tier Affiliates from purchasing or redeeming Creation Units through in-
kind transactions. The deposit procedure for in-kind purchases and the
redemption procedure for in-kind redemptions will be the same for all
purchases and redemptions. Deposit Securities and Redemption Securities
will be valued in the same manner as the Portfolio Securities.
Therefore, applicants state, the in-kind purchases and redemptions for
which relief is requested will afford no opportunity for the affiliated
persons of a Fund, or the affiliated persons of such affiliated
persons, described above, to effect a transaction detrimental to other
holders of Shares. Applicants also believe that these in-kind purchases
and redemptions will not result in self-dealing or overreaching of the
Fund.
    23. Second, applicants request an exemption from section 17(a) to
permit a Fund, which is an affiliated person of an Acquiring Fund
because the Acquiring Fund holds 5% or more of the Fund's Shares, to
sell its Shares to, and redeem its Shares from, the Acquiring Fund.\20\
Applicants state that any consideration paid for Shares in transactions
with a Fund will be based on the Fund's NAV. Applicants also state that
any transactions directly between the Funds and the Acquiring Funds
will be consistent with the policies of each Acquiring Fund. Applicants
further state that the purchase of Creation Units by an Acquiring Fund
will be accomplished in accordance with the investment restrictions of
the Acquiring Fund and will be consistent with the investment policies
set forth in the Acquiring Fund's registration statement. Applicants
note that the Acquiring Fund Agreement will require each Acquiring Fund
to represent that any purchase of Creation Units will be accomplished
in compliance with the investment restrictions of the Acquiring Fund
and will be consistent with the investment policies set forth in the
Acquiring Fund's registration statement.
---------------------------------------------------------------------------

    \20\ Applicants expect that most Acquiring Funds will purchase
Shares in the secondary market and will not transact in Creation
Units with a Fund.
---------------------------------------------------------------------------

Applicants' Conditions

    Applicants agree that any order granting the ETF Relief will be
subject to the following conditions:
    1. Applicants will not register a Future Fund by means of filing a
post-effective amendment to the Trust's registration statement or by
any other means, unless either (a) applicants have requested and
received with respect to such Future Fund, either exemptive relief from
the Commission or a no-action letter from the Division of Investment
Management of the Commission; or (b) the Future Fund will be listed on
an Exchange without the need for a filing pursuant to rule 19b-4 under
the Exchange Act.
    2. As long as the Trust operates in reliance on the requested
order, the Shares will be listed on a Listing Exchange.
    3. Neither the Trust (with respect to any Fund) nor any Fund will
be advertised or marketed as an open-end investment company or a mutual
fund. Each Fund's Prospectus will prominently disclose that Shares are
not individually redeemable shares and will disclose that the owners of
Shares may acquire those Shares from a Fund and tender those Shares for
redemption to a Fund in Creation Units only. Any advertising material
that describes the purchase or sale of Creation Units or refers to
redeemability will prominently disclose that Shares are not
individually redeemable and that owners of Shares may acquire those
Shares from a Fund and tender those Shares for redemption to a Fund in
Creation Units only.
    4. The Web site for each Fund, which will be publicly accessible at
no charge, will contain the following information, on a per Share
basis, for each Fund: (a) The prior Business Day's NAV and the reported
closing price, and a calculation of the premium or discount of such
price against such NAV; and (b) data in chart format displaying the
frequency distribution of discounts and premiums of the daily closing
price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. In addition, the Product Description for
each Fund will state that the Web site for the Fund has information
about the premiums and

discounts at which the Fund's Shares have traded.
    5. The Prospectus and annual report for each Fund will also
include: (a) The information listed in condition 4(b), (i) in the case
of the Prospectus, for the most recently completed year (and the most
recently completed quarter or quarters, as applicable) and (ii) in the
case of the annual report, for the immediately preceding five years, as
applicable; and (b) the following data, calculated on a per Share basis
for one, five and ten year periods (or life of the Fund), (i) the
cumulative total return and the average annual total return based on
NAV and closing price, and (ii) the cumulative total return of the
relevant Index.
    6. Before a Fund may rely on the order, the Commission will have
approved, pursuant to rule 19b-4 under the Exchange Act, a Listing
Exchange rule requiring Listing Exchange members and member
organizations effecting transactions in Shares to deliver a Product
Description to purchasers of Shares.
    7. Each Fund's Prospectus and Product Description will clearly
disclose that, for purposes of the Act, Shares are issued by the Funds
and that the acquisition of Shares by investment companies is subject
to the restrictions of section 12(d)(1) of the Act, except as permitted
by an exemptive order that permits registered investment companies to
invest in a Fund beyond the limits of section 12(d)(1), subject to
certain terms and conditions, including that the registered investment
company enter into an agreement with the Fund regarding the terms of
the investment.
    Applicants agree that any order of the Commission granting the
12(d)(1) Relief will be subject to the following conditions:
    8. The members of an Acquiring Fund's Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of an Acquiring Fund's
Subadvisory Group will not control (individually or in the aggregate) a
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding Shares of a Fund, an Acquiring Fund's
Advisory Group or an Acquiring Fund's Subadvisory Group, each in the
aggregate, becomes a holder of more than 25% of the outstanding Shares
of the Fund, it will vote its Shares in the same proportion as the vote
of all other Shareholders of the Fund's Shares. This condition will not
apply to the Acquiring Fund's Subadvisory Group with respect to a Fund
for which the Acquiring Fund Subadvisor or a person controlling,
controlled by or under common control with the Acquiring Fund
Subadvisor acts as the investment adviser within the meaning of section
2(a)(20)(A) of the Act.
    9. No Acquiring Fund or Acquiring Fund Affiliate will cause any
existing or potential investment by the Acquiring Fund in a Fund to
influence the terms of any services or transactions between the
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund
Affiliate.
    10. The board of directors or trustees of an Acquiring Management
Company, including a majority of the independent directors or trustees,
will adopt procedures reasonably designed to assure that the Acquiring
Fund Advisor and any Acquiring Fund Subadvisor are conducting the
investment program of the Acquiring Management Company without taking
into account any consideration received by the Acquiring Management
Company or an Acquiring Fund Affiliate from a Fund or a Fund Affiliate
in connection with any services or transactions.
    11. Once an investment by an Acquiring Fund in the securities of a
Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the board
of trustees of the Funds (``Board''), including a majority of the
independent trustees, will determine that any consideration paid by the
Fund to the Acquiring Fund or an Acquiring Fund Affiliate in connection
with any services or transactions: (a) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Fund; (b) is within the range of consideration that the
Fund would be required to pay to another unaffiliated entity in
connection with the same services or transactions; and (c) does not
involve overreaching on the part of any person concerned. This
condition does not apply with respect to any services or transactions
between a Fund and its investment adviser(s), or any person
controlling, controlled by or under common control with such investment
adviser(s).
    12. No Acquiring Fund or Acquiring Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to a Fund)
will cause a Fund to purchase a security in any Affiliated
Underwriting.
    13. The Board, including a majority of the independent trustees,
will adopt procedures reasonably designed to monitor any purchases of
securities by the Fund in an Affiliated Underwriting once an investment
by an Acquiring Fund in the securities of the Fund exceeds the limit of
section 12(d)(1)(A)(i) of the Act, including any purchases made
directly from an Underwriting Affiliate. The Board will review these
purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Acquiring Fund in the Fund. The Board will consider, among other
things: (a) Whether the purchases were consistent with the investment
objectives and policies of the Fund; (b) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (c) whether the
amount of securities purchased by the Fund in Affiliated Underwritings
and the amount purchased directly from an Underwriting Affiliate have
changed significantly from prior years. The Board will take any
appropriate actions based on its review, including, if appropriate, the
institution of procedures designed to assure that purchases of
securities in Affiliated Underwritings are in the best interests of the
Fund's shareholders.
    14. The Fund will maintain and preserve permanently in an easily
accessible place a written copy of the procedures described in the
preceding condition, and any modifications to such procedures, and will
maintain and preserve for a period of not less than six years from the
end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings once an investment by an Acquiring Fund in the securities
of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act,
setting forth from whom the securities were acquired, the identity of
the underwriting syndicate's members, the terms of the purchase, and
the information or materials upon which the determinations of the Board
were made.
    15. Before investing in a Fund in excess of the limits in section
12(d)(1)(A), each Acquiring Fund and the Fund will execute an Acquiring
Fund Agreement stating, without limitation, that their boards of
directors or trustees and their investment advisers, or Sponsor and
Trustee, as applicable, understand the terms and conditions of the
order, and agree to fulfill their responsibilities under the order. At
the time of its investment in Shares of a Fund in excess of the limit

in section 12(d)(1)(A)(i), an Acquiring Fund will notify the Fund of
the investment. At such time, the Acquiring Fund will also transmit to
the Fund a list of the names of each Acquiring Fund Affiliate and
Underwriting Affiliate. The Acquiring Fund will notify the Fund of any
changes to the list of the names as soon as reasonably practicable
after a change occurs. The Fund and the Acquiring Fund will maintain
and preserve a copy of the order, the agreement, and the list with any
updated information for the duration of the investment and for a period
of not less than six years thereafter, the first two years in an easily
accessible place.
    16. The Acquiring Fund Advisor, Sponsor or Trustee, as applicable,
will waive fees otherwise payable to it by the Acquiring Fund in an
amount at least equal to any compensation (including fees received
pursuant to any plan adopted by a Fund under rule 12b-1 under the Act)
received from a Fund by the Acquiring Fund Advisor, Sponsor or Trustee,
or an affiliated person of the Acquiring Fund Advisor, Sponsor or
Trustee, other than any advisory fees paid to the Acquiring Fund
Advisor, Sponsor or Trustee, or its affiliated person by the Fund, in
connection with the investment by the Acquiring Fund in the Fund. Any
Acquiring Fund Subadvisor will waive fees otherwise payable to the
Acquiring Fund Subadvisor, directly or indirectly, by the Acquiring
Management Company in an amount at least equal to any compensation
received from a Fund by the Acquiring Fund Subadvisor, or an affiliated
person of the Acquiring Fund Subadvisor, other than any advisory fees
paid to the Acquiring Fund Subadvisor or its affiliated person by the
Fund, in connection with the investment by the Acquiring Management
Company in the Fund made at the direction of the Acquiring Fund
Subadvisor. In the event that the Acquiring Fund Subadvisor waives
fees, the benefit of the waiver will be passed through to the Acquiring
Management Company.
    17. Any sales charges and/or service fees charged with respect to
shares of an Acquiring Fund will not exceed the limits applicable to a
fund of funds as set forth in Rule 2830.
    18. No Fund will acquire securities of any investment company or
company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section 12(d)(1)(A) of the Act.
    19. Before approving any investment advisory contract under section
15 of the Act, the board of directors or trustees of each Acquiring
Management Company, including a majority of the independent directors
or trustees, will find that the advisory fees charged under the
advisory contract are based on services provided that will be in
addition to, rather than duplicative of, services provided under the
advisory contract(s) of any Fund in which the Acquiring Management
Company may invest. These findings and the basis upon which they are
made will be recorded fully in the minute books of the appropriate
Acquiring Management Company.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-7912 Filed 5-23-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 80, Number 212 (Tuesday, November 3, 2015)]
[Notices]
[Pages 67830-67833]
[FR Doc No: 2015-27909]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76292; File No. SR-NYSEMKT-2015-81]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Rule 123D--
Equities To Specify That Exchange Systems May Open One or More
Securities Electronically if a Designated Market Maker Registered in a
Security or Securities Cannot Facilitate the Opening of Trading as
Required by Exchange Rules

October 28, 2015.
    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 October 23, 2015, NYSE MKT LLC (the ``Exchange'' or ``NYSE MKT'')
filed with the Securities and Exchange Commission (``SEC'' or
``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 amend Rule 123D--Equities to specify that
Exchange systems may open one or more securities electronically if a
Designated Market Maker registered in a security or securities cannot
facilitate the opening of trading as required by Exchange rules. The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend Rule 123D--Equities (``Rule 123D'')
to specify that Exchange systems may open one or more securities
electronically if a Designated Market Maker (``DMM'') registered in a
security or securities cannot facilitate the open of trading as
required by Exchange rules.\3\
---------------------------------------------------------------------------

    \3\ The proposed amendment contemplates that a DMM's inability
to open securities either manually or electronically would be
related to business continuity disruptions such as the physical
closing of the Exchange Trading Floor or equipment and connectivity
breakdowns that prevent the DMM from opening a security either
manually or electronically. When a DMM is unable to open securities
manually or electronically, the DMM's affirmative obligations under
Rule 104 would not apply.
---------------------------------------------------------------------------

    Currently, Rule 123D provides that openings may be effected
manually or electronically. However, the current rule contemplates that
openings would be facilitated by a DMM, as provided for in Rule
104(a)(2)--Equities. The Exchange proposes to re-number Rule 123D to
provide that current Rule 123D(1) would be re-numbered as Rule 123D(a),
and the heading would be amended to be referred to as ``Openings.'' \4\
Proposed Rule 123D(a)(1) would include the current first paragraph of
Rule 123D(1).
---------------------------------------------------------------------------

    \4\ The Exchange would also delete the terms ``Delayed'' and
``Halts in trading'' from the current Rule 123D(1) heading. The
Exchange further proposes to add a new sub-paragraph (b) to Rule
123D, before the current second paragraph of Rule 123D(1), which
would be named ``Delayed Openings/Halts in Trading.'' The Exchange
proposes further non-substantive amendments to re-number current
Rule 123D(2) as 123D(c). As discussed below, the Exchange proposes
to delete current Rule 123D(3) and (4).
---------------------------------------------------------------------------

    The Exchange proposes to add a new paragraph (a)(2) to Rule 123D to
provide that, if a DMM cannot facilitate the open of trading for one or
more securities for which the DMM is registered, the Exchange would
open those securities electronically on a quote or a trade as provided
for in paragraphs (a)(3)--(a)(6) of the proposed Rule. Proposed Rule
123D(a)(2) would further provide that manually-entered Floor interest
would not participate in any open effected electronically by the
Exchange and if previously entered, would be ignored. Finally, proposed
Rule 123D(a)(2) would provide that, unless otherwise specified,
references to an open or opening in proposed Rules 123D (a)(3)--(a)(6)
would also mean a reopening following a trading halt or pause.
    Proposed Rule 123D(a)(3) would specify when the Exchange would open
a security on a trade and would provide that the Exchange would open a
security on a trade if there is buy and sell interest that can trade a
round lot or more at a price that is no greater than or no less than a
specified range (``Opening Price Range'') away from the last sale price
on the Exchange (``Reference Price''). Proposed Rule 123D(a)(3) would
further provide that the Exchange would determine the Opening Price
Range parameters upon advance notice to market participants.
    Unlike DMMs, who have the obligation to trade for their own account
to supply liquidity as needed to facilitate openings,\5\ the Exchange
would not supply any liquidity when effecting an electronic open.
Without the addition of liquidity to offset an imbalance, pricing the
opening based on a significant imbalance could result in an opening
price that may not be reasonably related to the last sale price on the
Exchange. To avoid opening a security at a price too far away from the
last sale, the Exchange proposes to establish numerical guidelines to
provide parameters regarding the price a security may open when the
Exchange opens such security on a trade. The Exchange proposes to
establish the

Opening Price Range parameters from time to time upon advance notice to
market participants, which is similar to how other markets function.\6\
---------------------------------------------------------------------------

    \5\ See Rule 104(a)(2)--Equities & 104(f)(ii)--Equities.
    \6\ See, e.g., Nasdaq Stock Market LLC (``Nasdaq'') Rule
4752(b)[sic](2)(E) (Nasdaq management sets and modifies benchmarks
and thresholds for the Nasdaq Opening Cross from time to time upon
prior notice to market participants); NYSE Arca Equities, Inc.
(``NYSE Arca Equities'') Rule 1.1(s)(A) (NYSE Arca Equities sets and
modifiers price collar thresholds for the Market Order Auction from
time to time upon prior notice to ETP Holders).
---------------------------------------------------------------------------

    Proposed Rule 123D(a)(3)(A)--(C) would specify how orders would
participate if the Exchange opens a security on a trade. Proposed Rule
123D(a)(3)(A) would provide that if all interest guaranteed to
participate in an opening trade under Rule 115A(b) \7\ could trade at a
price consistent with the Opening Price Range, the opening trade would
be at the price at which all such interest could trade. Proposed Rule
123D(a)(3)(B) would provide that if there are only Market Orders on
both sides of the market, the opening price would be the Reference
Price.
---------------------------------------------------------------------------

    \7\ Rule 115A(b)--Equities provides that when arranging an
opening or reopening price, except as provided for in Rule
115A(b)(2)--Equities which concerns opening a security on a quote,
market interest would be guaranteed to participate in the opening or
reopening transaction and have precedence over limit interest that
is priced equal to the opening or reopening price of a security and
DMM interest. For purposes of the opening or reopening transaction,
market interest includes (1) market and Market on Open (``MOO'')
orders, (2) tick-sensitive market and MOO orders to buy (sell) that
are priced higher (lower) than the opening or reopening price, (3)
limit interest to buy (sell) that is priced higher (lower) than the
opening or reopening price, and (iv) Floor broker interest entered
manually by the DMM. See Rule 115A(b)(1)(A)--Equities. For purposes
of the opening or reopening transaction, limit interest would
include (2) limited-priced interest, including--Quotes, Limit on
Open (``LOO'') orders, and G orders; and (ii) tick-sensitive market
and MOO orders that are priced equal to the opening or reopening
price of a security. See Rule 115A(b)(1)(C)--Equities. In addition,
G orders that are priced equal to the opening or reopening price of
a security would yield to all other limit interest priced equal to
the opening or reopening price of a security except DMM interest.
---------------------------------------------------------------------------

    Because the Exchange would open a security within specified
guidelines, not all interest that is intended for the open may
participate in such an open. Proposed Rule 123D(a)(3)(C) would
therefore provide that if interest that is otherwise guaranteed to
participate in an opening trade under Rule 115A(b)--Equities would
cause an opening price to be outside the Opening Price Range, such
interest would not be guaranteed to participate in the opening trade.
In that case, the Exchange proposes that the opening trade would be at
the price at which the maximum volume of shares is tradable that is
closest to the Reference Price and that orders would be allocated in
the following priority, which is based on the priority of orders set
forth in Rule 115A(b)--Equities:
     Proposed Rule 123D(a)(3)(C)(i) would provide that Market
and Market-on-Open (``MOO'') orders would trade first in time priority,
provided that, during a Short Sale Period, sell short market orders and
MOO orders would be adjusted to a Permitted Price \8\ and would be
considered limit orders for purposes of determining allocation
priority.
---------------------------------------------------------------------------

    \8\ As set forth in Rule 440B--Equities, a short sale price test
is activated if the price of a listed security declines by 10% or
more from the previous day's last sale on the listing market and
continues through the end of the following trading day (the ``Short
Sale Period''). Pursuant to Rule 440B(e)--Equities, Exchange systems
will re-price short sale orders that are limited to the current
national best bid (``NBB'') or lower and short sale market orders by
one minimum price increment above the NBB (the ``Permitted Price'').
The Permitted Price for securities for which the NBB is $1 or more
is $.01 above the NBB; the Permitted Price for securities for which
the NBB is below $1 is $.0001 above the NBB.
---------------------------------------------------------------------------

     Proposed Rule 123D(a)(3)(C)(ii) would provide that Stop
Orders that would be elected based on the opening price would trade
second in time priority. As further proposed, during a Short Sale
Period, sell short Stop Orders that are priced to a Permitted Price
that would be lower than the opening price would trade after all other
Stop Orders and before all other interest priced equal to or lower than
the opening price.
     Proposed Rule 123D(a)(3)(C)(iii) would provide that Limit
Orders (including Reserve Orders) to buy (sell) and e-Quotes (including
Reserve e-Quotes) to buy (sell) priced higher (lower) than the opening
price would trade third on parity by agent under Rule 72(c)--
Equities.\9\
---------------------------------------------------------------------------

    \9\ Rule 72(c)--Equities describes the allocation of executions
on the Exchange and Rule 72(c)(ii)--Equities provides that for
purposes of share allocation in an execution, each single Floor
broker, the DMM and orders collectively represented in Exchange
systems shall constitute individual participants. Rule 72(c)(iv)--
Equities provides that executed volume shall be allocated to each
participant on parity.
---------------------------------------------------------------------------

     Proposed Rule 123D(a)(3)(C)(iv) would provide that G-
quotes \10\ to buy (sell) priced higher (lower) than the opening price
will trade fourth on parity by agent under Rule 72(c)--Equities.
---------------------------------------------------------------------------

    \10\ Section 11(a)(1) of the Act, 15 U.S.C. 78k(a)(1), generally
prohibits a member of a national securities exchange from effecting
transactions on that exchange for its own account, the account of an
associated person, or any account over which it or an associated
person exercises discretion. Subsection (G) of Section 11(a)(1)
provides an exemption allowing an exchange member to have its own
floor broker execute a proprietary transaction (``G order''). A G-
Quote is an electronic method for Floor brokers to represent G
orders. G orders on NYSE yield priority, parity and precedence based
on size to all other non-G orders.
---------------------------------------------------------------------------

     Finally, proposed Rule 123D(a)(3)(C)(v) would provide that
all other limit interest that is priced equal to the opening price will
trade last and be allocated consistent with Rule 115A(b)(1)--Equities.
    Proposed Rule 123D(a)(4) would describe when the Exchange would
open a security electronically on a quote. First, proposed Rule
123D(a)(4)(A) would provide that if interest of less than a round lot
pairs off at a price within the Opening Price Range, the Exchange would
open on a quote. In this circumstance, after opening on a quote,
interest of less than a round lot would trade at the price closest to
the Reference Price (or at the Reference Price if the only interest is
market orders), but would not be reported as an opening trade.
    Proposed Rule 123D(a)(4)(B) would provide that the Exchange would
open a security electronically on a quote if interest of any size pairs
off at a price below (above) the lower (upper) boundary of the Opening
Price Range, in which case, such paired-off interest would not trade.
    Proposed Rule 123D(a)(4)(C) would provide that the Exchange would
open a security electronically on a quote if there is no interest that
can be quoted on either or both sides of the market. The proposed Rule
would further specify that if an opening quote has a zero bid and/or a
zero offer, it would not constitute an ``Opening Price'' as defined in
Section I(I) of the Regulation NMS Plan to Address Extraordinary Market
Volatility (the ``Plan'').\11\ Accordingly, if the Exchange were to
open on a quote with a zero bid and/or a zero offer, it would not
calculate a midpoint of the quote for purposes of calculating Price
Bands as provided for in Section V(B)(1) of the Plan.
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 67091, 77 FR 33498
(June 6, 2012) (File No. 4-631).
---------------------------------------------------------------------------

    Proposed Rule 123D(a)(5) would specify which information would be
provided in advance of an opening or reopening. In order to provide
transparency regarding the opening process, the Exchange proposes that
during an opening effected by the Exchange, Order Imbalance Information
pursuant to Rule 15(c)--Equities would be published.\12\ However,
because the

Exchange would not open a security at a price outside of specified
ranges, the Exchange would not issue pre-opening indications in a
security pursuant to either Rule 15(a)--Equities or 123D.\13\ The
Exchange further proposes that it would publish pre-opening indications
pursuant to Rule 123D(b) for a re-opening following a regulatory halt.
---------------------------------------------------------------------------

    \12\ Order Imbalance Information reflects real-time order
imbalances that accumulate prior to the opening transaction on the
Exchange and the price at which interest eligible to participate in
the opening transaction may be executed in full. Order Imbalance
Information disseminated pursuant to Rule 15(c)--Equities includes
all interest eligible for execution in the opening transaction of
the security in Exchange systems, i.e., electronic interest,
including Floor broker electronic interest, entered into Exchange
systems prior to the opening. Order Imbalance Information is
disseminated on the Exchange's proprietary data feeds. See Rule
15(c)(1)--Equities.
    \13\ See Proposed Rule 123D(a)(2) (F) [sic]. Rule 123D(1)
requires the dissemination of one or more indications in connection
with any delayed opening where a security has not opened or been
quoted by 10 a.m. In addition, Rule 123D(1) provides that
dissemination of one or more indication is mandatory for an opening
which will result in a ``significant'' price change from the
previous close. For securities priced under $10, such indications
are mandatory if the price change is one dollar of more; for
securities between $10 and $99.99, indications are required for
price movements of the lesser of 10% or three dollars; and for
securities over $100, indications are required for price movements
of five dollars or more.
---------------------------------------------------------------------------

    Proposed Rule 123D(a)(6) would describe under which circumstances
the Exchange would cancel orders after opening on a trade or quote. A
proposed in new Rule 123D(a)(6)(A), all unexecuted Market Orders, MOO
Orders, and LOO Orders would be cancelled. This would be new behavior
following an Exchange-facilitated open because under a DMM-facilitated
open, all Market and MOO Orders are guaranteed to participate and
therefore there would not be any unexecuted Market Orders or MOO Orders
following an opening. Proposed Rule 123D(a)(6)(B) would provide that
after an opening on a trade, buy (sell) Limit Orders priced higher
(lower) than the opening price would be cancelled. Lastly, proposed
Rule 123D(a)(6)(C) would provide that if interest would have paired off
at a price below (above) the lower (upper) boundary of the Opening
Price Range, after opening on a quote, sell (buy) Limit Orders would be
cancelled. The Exchange proposes to cancel only the side of the orders
that would cause an opening price to be outside of the Opening Price
Range parameters; the other side would not be cancelled and would be
included in the opening quote.
    The Exchange also proposes to delete current Rule 123D(4), which
sets forth a non-regulatory trading halt condition designated
``Structured Products.'' Rule 123D(4) was adopted to permit the halting
of trading of exchange traded funds (``ETFs'') and structured products
on the Exchange to facilitate the closing of the Exchange's former
trading floor in connection with the acquisition of the Exchange by
NYSE Euronext in 2008. Orders in ETFs and structured products subject
to the trading halt condition are routed from the Exchange to its
affiliate NYSE Arca, Inc. (``NYSE Arca'').\14\ The condition permits
the Exchange to halt ETFs or structured products that remain listed on
the Exchange.\15\ All Exchange-listed ETFs and structured products have
transferred to NYSE Arca and are no longer traded on the Exchange,
rendering Rule 123D(4) moot.\16\
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 58824 (October 21,
2008), 73 FR 63754 (October 27, 2008) (SR-NYSEALTR-2008-02). See
also Securities Exchange Act Release No. 58705 (October 1, 2008), 73
FR 58995 (October 8, 2008) (SR-Amex-2008-63).
    \15\ See id.
    \16\ The Exchange also proposes to amend current Rule 123D(2) to
replace single quotation marks with double quotation marks around
the term ``Equipment Changeover'' and to delete current Rule
123D(3), which is marked ``Reserved.''
---------------------------------------------------------------------------

    Because of the technology changes associated with the proposed rule
change, the Exchange proposes to announce the implementation date via
Trader Update.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\17\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\18\ in particular, because it
is designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest. The
Exchange believes that permitting the Exchange to electronically open
trading would remove impediments to and perfect the mechanism of a free
and open market and a national market system by ensuring an orderly
open if the registered DMM cannot manually or electronically facilitate
the open of trading as required under Rule 104(a). Similarly, the
proposal promotes just and equitable principles of trade and removes
impediments to and perfects the mechanism of a free and open market by
providing customers and the investing public with the certainty of an
open in circumstances where business continuity disruptions or other
emergencies would prevent the assigned DMMs from opening a security.
For the same reasons, the proposal is also designed to protect
investors as well as the public interest.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed amendment to Rule
123D(a)(3) to provide that openings effected by the Exchange would be
within a proposed numerical guideline would remove impediments to and
perfect the mechanism of a free and open market because, similar to how
Nasdaq and NYSE Arca Equities function, it would enable the Exchange to
set parameters for an opening to assure that the potential prices that
a security may open would not be significantly away from the Reference
Price. Similarly, the Exchange believes that excluding interest
eligible for the open that would cause an execution to occur outside
the Opening Price Range parameters, even if such interest would
otherwise be required to be included in an open effected by a DMM,
would remove impediments to and perfect the mechanism of a fair and
orderly market because it would assure that the Exchange could effect
the open within the proposed specified price ranges. The proposed rule
therefore promotes just and equitable principles of trade because it
provides transparency to entering firms of whether interest would be
eligible to participate in a closing transaction effected by the
Exchange.
    Finally, deleting an obsolete halt condition in Rule 123D(4)
removes impediments to and perfects the mechanism of a free and open
market by removing confusion that may result from having obsolete
references in the Exchange's rulebook. The Exchange further believes
that the proposal removes impediments to and perfects the mechanism of
a free and open market by ensuring that persons subject to the
Exchange's jurisdiction, regulators, and the investing public, can more
easily navigate and understand the Exchange's rulebook. The Exchange
believes that eliminating obsolete references would not be inconsistent
with the public interest and the protection of investors because
investors will not be harmed and in fact would benefit from increased
transparency, thereby reducing potential confusion. Removing such
obsolete references will also further the goal of transparency and add
clarity to the Exchange's rules.

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 rule change is
not intended to address competitive issues but rather enable the
Exchange to open trading where circumstances would prevent a DMM from
facilitating an open.

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

    The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \19\ and Rule 19b-4(f)(6) thereunder.\20\
Because the 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 prior to
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 and Rule 19b-
4(f)(6)(iii) thereunder.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \20\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\22\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------

    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such 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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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_ADDRESS>Please include
File Number SR-NYSEMKT-2015-81 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEMKT-2015-81. 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 also will be available
for inspection and copying at the principal offices 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 referto File Number SR-NYSEMKT-2015-
81, and should be submitted on or before November 24, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27909 Filed 11-2-15; 8:45 am]
 BILLING CODE 8011-01-P


Commander, with COTP and OCMI authority''.

Sec.  150.521  [Amended]

0
242. In Sec.  150.521(a), following the text ``inspection under Sec.
150.520'', add the text ``of this part''.

Sec.  150.540  [Amended]

0
243. In Sec.  150.540, remove the text ``Captain of the Port's'' and
add, in its place, the text ``Sector Commander, or the MSU Commander
with COTP and OCMI authority's''.

Sec.  150.602  [Amended]

0
244. Amend Sec.  150.602 as follows:
0
a. In paragraph (a), following the words ``ensure that all'', add the
word ``deepwater''; and following the text ``outlined in Sec.
150.15(w)'', add the text ``of this part''; and
0
b. In paragraph (b), following the text ``with the Commandant'', remove
the

text ``(CG-5)'' and add, in its place, the text ``(CG-5P)''; and
following the text ``may consult with the'', remove the text ``Officer
in Charge of Marine Inspection'' and add, in its place, the text
``Sector Commander, or with the local MSU Commander, with COTP and OCMI
authority''.

Sec.  150.603  [Amended]

0
245. In Sec.  160.603, following the words ``outlined in the'', add the
word ``deepwater''.

Sec.  150.605  [Amended]

0
246. In Sec.  150.605 introductory text, remove the text ``Officer in
Charge of Marine Inspection'' and add, in its place, the text ``Sector
Commander, or the MSU Commander, with COTP and OCMI authority''.

Sec.  150.606  [Amended]

0
247. Amend Sec.  150.606 as follows:
0
a. In the section heading, remove the text ``Officer in Charge of
Marine Inspection'' and add, in its place, the text ``Sector Commander,
or the MSU Commander, with COTP and OCMI authority''; and
0
b. Following the text ``necessary investigation, the'' remove the text
``OCMI'' and add, in its place, the text ``Sector Commander, or the MSU
Commander, with COTP and OCMI authority''.

Sec.  150.615  [Amended]

0
248. In Sec.  150.615(b), following the text ``Sec. Sec.  150.616 and
150.617'', add the text ``of this part''.

Sec.  150.616  [Amended]

0
249. In Sec.  150.616 following the text ``described in Sec.
150.615(a)'', add the text ``of this part''.

Sec.  150.623  [Amended]

0
250. In Sec.  150.623(b) introductory text, following the words
``deepwater port operator'', remove the word ``shall'' and add, in its
place, the word ``must''.

Sec.  150.625  [Amended]

0
251. In Sec.  150.625(b)(7), following the text ``Sec. Sec.  150.616
and 150.617'', add the text ``of this part''.

Sec.  150.805  [Amended]

0
252. In Sec.  150.805, following the text ``submit to the'', remove the
text ``Officer in Charge of Marine Inspection'' and add, in its place,
the text ``Sector Commander, or to the MSU Commander, with COTP and
OCMI authority''.

Sec.  150.812  [Amended]

0
253. In Sec.  150.812, following the text ``outlined in Sec.
150.815'', add the text ``of this part''.

Sec.  150.815  [Amended]

0
254. In Sec.  150.815(c), following the text ``information pertinent
to'', remove the text ``OCS'' and add, in its place, the text ``Outer
Continental Shelf''; and following the words ``regulated by the'',
remove the words ``Bureau of Ocean Energy Management, Regulation and
Enforcement'' and add, in their place, the words ``Bureau of Ocean
Energy Management''.
0
255. Revise Sec.  150.820 as follows:
0
a. Revise paragraph (a) to read as follows;
0
b. In paragraph (c), following the text ``required under Sec.
150.815'', add the text ``of this part''; and
0
c. Revise paragraph (d) to read as follows:

Sec.  150.820  When must a written report of casualty be submitted, and
what must it contain?

    (a) In addition to the notice of casualty under Sec.  150.815 of
this part, the owner, operator, or person in charge of a deepwater port
must submit a written report of the event to the nearest Sector
Commander, or the nearest MSU Commander, with COTP and OCMI authority
within 5 days of the casualty notice. The report may be on Form 2692,
Report of Marine Accident, Injury, or Death, or in narrative form if it
contains all of the applicable information requested in Form 2692.
Copies of Form 2692 are available from the Sector Commander, or from
the MSU Commander, with COTP and OCMI authority.
* * * * *
    (d) The operator will ensure that the written report is provided to
the nearest Bureau of Ocean Energy Management (BOEM) office when the
deepwater port is co-located with a BOEM-regulated facility.

Sec.  150.825  [Amended]

0
256. In Sec.  150.825 following the text ``Sec. Sec.  150.815 and
150.820'', add the text ``of this part''.

Sec.  150.835  [Amended]

0
257. In Sec.  150.835, following the text ``report to the'', remove the
text ``Captain of the Port'', and add, in its place, the text ``Sector
Commander, or the MSU Commander, with COTP and OCMI authority''.

Sec.  150.840  [Amended]

0
258. Amend Sec.  150.840 as follows:
0
a. In paragraph (a), following the words ``rather than on the'', add
the word ``deepwater''; and
0
b. In paragraph (c), following the text ``under Sec.  150.845'', add
the text ``of this part''.

Sec.  150.850  [Amended]

0
259. In Sec.  150.850 following the text ``required by Sec.  150.430'',
add the text ``of this part''.

Sec.  150.905  [Amended]

0
260. In Sec.  150.905(d), following the text ``boating, fishing, and'',
remove the text ``OCS'' and add, in its place, the text ``Outer
Continental Shelf''.

Sec.  150.915  [Amended]

0
261. In Sec.  150.915(c), following the text ``and Commandant'', remove
the text ``(CG-5)'' and add, in its place, the text ``(CG-5P)''.

Sec.  150.920  [Amended]

0
262. In Sec.  150.920, following the words ``under Sec.  150.915'', add
the text ``of this part''.

Sec.  150.940  [Amended]

0
263. Amend Sec.  150.940 as follows:
0
a. In paragraph (a)(1), following the text ``Table 150.940(A)'', add
the text ``of this section'';
0
b. In paragraphs (a)(1)(iii) and (a)(1)(xii), and in paragraph
(a)(2)(i), remove the word ``port's'' wherever it appears, and add, in
its place, the words ``deepwater port's''; and
0
c. In paragraph (a)(2)(ii), following the text ``(SPM) at the'', add
the text ``deepwater''.

PART 151--VESSELS CARRYING OIL, NOXIOUS LIQUID SUBSTANCES, GARBAGE,
MUNICIPAL OR COMMERCIAL WASTE, AND BALLAST WATER

0
264. The authority citation for part 151 continues to read as follows:

    Authority: 33 U.S.C. 1321, 1902, 1903, 1908; 46 U.S.C. 6101;
Pub. L. 104-227 (110 Stat. 3034); Pub. L. 108-293 (118 Stat. 1063),
Sec.  623; E.O. 12777, 3 CFR, 1991 Comp. p. 351; DHS Delegation No.
0170.1, sec. 2(77).

0
265. Amend Sec.  151.05 as follows:
0
a. Revise the definition of ``Oily mixture'' to read as follows; and
0
b. Following the definition of ``Oil tanker'', remove the second
definition of ``Oily mixture''.

Sec.  151.05  Definitions.

* * * * *
    Oily mixture means a mixture, in any form, with any oil content.
``Oily mixture'' includes, but is not limited to--

    (1) Slops from bilges;
    (2) Slops from oil cargoes (such as cargo tank washings, oily
waste, and oily refuse);
    (3) Oil residue (sludge); and
    (4) Oily ballast water from cargo or fuel oil tanks.
* * * * *

PART 164--NAVIGATION SAFETY REGULATIONS

0
266. The authority citation for part 164 continues to read as follows:

    Authority: 33 U.S.C. 1222(5), 1223, 1231; 46 U.S.C. 2103, 3703;
Department of Homeland Security Delegation No. 0170.1 (75). Sec.
164.13 also issued under 46 U.S.C. 8502. Sec. 164.61 also issued
under 46 U.S.C. 6101.

Sec.  164.03  [Amended]

0
267. In Sec.  164.03(b) in the table under the address for ``Radio
Technical Commission for Maritime Services'', remove the text ``655
Fifteenth Street NW., Suite 300, Washington, DC 20005'' and add, in its
place, the text ``(RTCM), 1611 North Kent Street, Suite 605, Arlington,
VA 22209''.

    Dated: June 19, 2013.
Kathryn A. Sinniger,
Chief, Office of Regulations and Administrative Law, U.S. Coast Guard.
[FR Doc. 2013-15094 Filed 6-28-13; 8:45 am]
BILLING CODE 9110-04-P