SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

20549

DIVISION OF

TRADING AND MARKETS

March 25,2009

[Revised - April 2, 2009]

Kathleen H. Moriarty, Esq.

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022

Re:

. Index 10 ETF Trust

File No. TP 08-85

Dear Ms. Moriarty:

In your letter dated March 25,2009, as supplemented by conversations with the staff of

the Division of Trading and Markets ("Staff'), Index IQ ETF Trust ("Trust") on behalf of itself,

its separate investment portfolios, the NYSE Arca, Inc. ("NYSE Arca"), ALPS Distributors,Inc.,

and persons or entities engaging in transactions in Shares ofthe Initial Funds ("Initial Shares"),

requests exemptive, interpretive, or no-action advice regarding Section 11(d)(1) of the Securities

Exchange Act of 1934, as amended ("Exchange Act"), Rules lOb-lO, lOb-I?, 11dl-2, 15c1-5

and 15cl-6 under the Exchange Act, and Rules 101 and 102 of Regulation M in connection with

secondary market transactions in the Initial Shares on the NYSE Arca, or any other market on

which the hritial Shares may subsequently trade, and the creation and redemption of Creation

Units of the Initial Funds. A copy of your letter is attached with this response. By including a

copy of your correspondence, we avoid having to repeat or summarize the facts you presented.

Unless otherwise noted, capitalized terms in this letter have the same meaning as in your letter.

The Trust was organized as a Delaware statutory trust on July 1, 2008 and is authorized

to issue an unlimited number of Funds. The Trust is registered with the Commission under the

Investment Company Act of 1940, as amended, as an open-end management investment

company. The Trust has organized five Initial Funds. Each Initial Fund will utilize a particular

"fund of fund" index as identified in your letter. The Initial Funds do not try to beat the Indexes

that they track.

The Trust has listed the Initial Shares on the NYSE Arca and will offer and sell such

shares pursuant to a Registration_ Statement that was declared effective on March 20,2009. Each

Initial Fund will issue and redeem its Initial Shares only in aggregations of 50,000 shares or

multiples thereof Initial Shares will not be individually redeemable.

'Kathleen H. Moriarty, Esq.

Katten Muchin Rosenman LLP

March 25, 2009 [Revised - April 2, 2009]

Page 2 of5

Response:

Regulation M

Redeemable securities issued by an open-end management investment company are

excepted from the provisions ofRu.le 101 and 102 of Regulation M. The Commission granted

the Trust and its co-applicants exemptions from certain provisions of the Investment Company

Act of 1940 with respect to the Initial Funds in order to permit the Trust to maintain its

registration as an open-end investment company and to issue shares that are redeemable only in

Creation Unit size aggregations of Initial Shares.

Rule 101 of Regulation M

Generally, Rule 101 of Regulation M is an anti-manipulation regulation that, subject to

certain exemptions, prohibits any "distribution participant" and its "affiliated purchasers" from

bidding for, purchasing, or attempting to induce any person to bid for or purchase any security

which is the subject of a distribution until after the applicable restricted period except as

specifically permitted in the Regulation.! The provisions of Rule 101 of Regulation M apply to

underwriters, prospective underwriters, brokers, dealers, or other persons who have agreed to

participate or are participating in a distribution of securities.

On the.basis of your representations and the facts presented, particularly that the Trust is

a registered open-end management investment company that will continuously redeem at net

asset value Creation Unit size aggregations of the Initial Shares and the secondary market price

of the Initial Shares should not vary substantially from the net asset value of such Initial Shares,

which is largely based on the market value of an Initial Fund's Portfolio Holdings and will be

computed on each Business Day, the Staff hereby confirms that the Trust is excepted under

paragraph (c)(4) of Rule 101 of Regulation M, thus permitting persons who maybe deemed to be

participating in a distribution of the Initial Shares to bid for or purchase the Initial Shares during

their participation in such distribution. 2

17 CFR 242.101.

2

We note that Regulation M does not prohibit a distribution participant and its affiliated purchasers from

bidding for and purchasing Portfolio Holdings in accordance with the-exceptions contained in paragraphs

(b)(6) and (c)(I) of Rule 101. Rule IOI(b)(6)(i) excepts basket transactions in which bids or purchases are

made in the ordinary course of business in connection with a basket of20 or more securities in which a

covered security does not comprise more that 5% of the value of the basket purchased. Rule 101(b)(6)(ii)

excepts adjustments to such a basket made in the ordinary course of business as a result of a change in the

composition of a standardized index. Also, Rule 10 I(c)( I) excepts transactions in actively-traded

securities, that is, securities that have an average daily trading volume value of at least $1 million and are

issued by an issuer whose common equity securities have a public float value of at least $150 million;

provided however, that such securities are not issued by the distribution participant or an affiliate of the

distribution participant.

Kathleen H. Moriarty, Esq.

Katten Muchin Rosenman LLP

March 25, 2009 [Revised - April 2, 2009]

Page 3 of5

The Staff also confirms the interpretation ofRule 101 of Regulation M that a redemption

ofCreation Unit size aggregations of the Initial Shares and the receipt of the components of a

Redemption Basket in exchange therefor by a participant in a distribution of the Initial Shares

would not constitute an "attempt to induce any person to bid for or purchase a covered security,

during the applicable restricted period" within the meaning of Regulation M, and therefore

would not violate Regulation M.

Rule 102 of Regulation M .

Rule 102 of Regulation M prohibits issuers, selling security holders, or any affiliated

purchaser of such person from bidding for, purchasing, or attempting to induce any person to bid

for or purchase a covered security during the applicable restricted period in connection with a

distribution of securities effected by or on behalf of an issuer or selling security holder. Rule 100

of Regulation M defines "distribution" to mean any offering of securities that is distinguished

from ordinary trading transactions by the magnitude of the offering and the presence of special

selling efforts and selling methods.

. On the basis of your representations and the facts presented, particularly that the Trust is

a registered open-end management investment company that will redeem at net asset value

Creation Units of the Initial Shares, the Staff hereby confirms that the Trust is excepted ui:J.der

paragraph (d)(4) of Rule 102 of Regulation M, thus permitting the Initial Funds to redeem the

Initial Shares during the continuous offering of the Initial Shares.

Rule lOb-I?

Rule lOb-I?, with certain exceptions, requires an issuer of a class of publicly traded

securities to give notice of certain specified actions (for example, a dividend distribution, stock

split, or rights offering) relating to such class of securities in accordance with Rule 1Ob-1?(b).

On the basis of your representations and the facts presented, particularly that the

Commission has determined to grant an exemption from the Investment Company Act of 1940 to

register the Trust as an open-end management investment company notwithstanding the fact that

it issues Initial Shares with limited redeemability, the Commission hereby grants an exemption

from the requirements of Rule lOb-I? to the Trust with respect to transactions in the Initial

Shares.

Section ll(d)(l) and Rules 10b-10, lldl-2, 15cl-5, and l5cl-6

As discussed, 3 we are treating your request for relief under Section 11 (d)(1) of the

Exchange Act and Rules lOb-lO, 11dl-2, 15c1-5, and 15c1-6 thereunder as a request that the

Staff confirm that it will not recommend enforcement action to the Commission if a brokerTelephone conversation among Brian A. Bussey, Bradley Gude, and Darren Vieira, Division of Trading

and Markets, Commission and Kathleen Moriarty, Katten Muchin Rosenman LLP, on March 24,2009.

Kathleen H. Moriarty, Esq.

Katten Muchin Rosenman LLP

March 25, 2009 [Revised - April 2, 2009]

Page 4 of5

dealer treats Initial Shares of each of the Initial Funds, for purposes of the relief from Section

ll(d)(1) and Rules lOb-10, lldl-2, l5c1-5, and l5cl-6 provided in the Letter re: Derivative

Products Committee of the Securities Industry Association (November 21, 2005) ("Class Relief

Letter"), as shares ofa Qualifying ETF (as defined in the Class Relief Letter).

Based on the facts and representations set forth in your letter, and without necessarily

agreeing with your analysis, the Staffwill not recommend enforcement action to the Commission

if a broker-dealer treats Initial Shares of the Initial Funds, for purposes of the relief from Section

ll(d)(l) and Rules lOb-10, lldl-2, l5cl-5, and l5cl-6 provided in the Class Relief Letter, as

shares of a Qualifying ETF. In granting this relief, we note in particular your representations that

at least 80 percent of an Initial Fund's Portfolio Holdings is, and will be, shares of some or all of

the Prior ETFs and ETVs that are Index Constituents of the Initial Fund's stated Initial Index,

that each ofthe Prior ETFs and ETVs held by an Initial Fund itself will have either met all

conditions set forth in the Equity ETF Class Relief Letter and the Class Relief Letter, or the ETV

Class Relief Letter, respectively, or will have received individual relief from the Commission,4

and that in no case will an Initial Fund hold an equity security issued by a single issuer in excess

of20 percent of such Initial Fund's Portfolio Holdings. Accordingly, with respect to Initial

Shares ofthe Initial Funds, to the extent that a broker-dealer satisfies the other conditions in the

Class Relief Letter, It could rely on the exemptive and no-action relief contained therein.

The foregoing exemption from Rule 10b-17 under the Exchange Act, interpretations of

Rules 101 and 102 of Regulation M, and no-action positions taken under Section ll(d)(l) of the

Exchange Act, and Rules lOb-lO, lldl-2, l5cl-5, and 15cl-6 thereunder, are based solely on

your representations and the facts presented to the Staff, and are strictly limited to the application

of those to transactions involving the Initial Shares of the Initial Funds under the circumstances·

described above and in your letter. Such transactions should be discontinued, pending

presentation ofthe facts for our consideration, in the event that any material change occurs with

4

As discussed, with respect to Section l1(d)(l) and Rules 10b-lO, lldl-2, l5c1-5, and l5c1-6, we interpret

your representation to mean that each of the Prior ETFs and ETVs held by an Initial Fund itself will have

met all conditions set forth in the Class Relief Letter, will have received individual relief from the

Commission, or will be able to rely on individual relief letters even though they are not named parties. See,

e.g., Letter from Josephine J. Tao, Associate Director, Division of Trading and Markets, to Richard M.

Morris, WisdomTree Asset Management, Inc. dated May 9, 2008) ("We note that we have repeatedly

expressed our views on Exchange Act Section ll(d)(l) and Exchange Act Rules lOb-10, lldl-2, l5c1-5,

and l5c1-6 with respect to exchange-traded funds that are not tied to an index. Having stated our views,

we will no longer respond to requests for relief from Section ll(d)(l) or Rules lOb-10, lldl-2, l5c1-5, and

15c1-6 relating to exchange-traded funds that are not managed to track a particular index unless they

present novel or unusual issues."); Letter from James A. Brigagliano, Assistant Director, Division of

Market Regulation, to Michael Schmidtberger, Esq., Sidley Austin Brown & Wood LLP dated January 19,

2006 with respect to DB Commodity Index Tracking Fund and DB Commodity Services LLC ("[W]e note

that we have repeatedly expressed our views on Section ll(d)(l) and Rule lldl-2 with respect to the

extension or maintenance or the arrangement for the extension or maintenance of credit on shares of

commodity-based exchange-traded trusts that hold physical commodities or currency or that are public

commodity pools ("CBETTs"), in connection with secondary market transactions. Having stated our

views, we will no longer respond to requests for relief from Section ll(d)(l) and Rule lldl-2 relating to

new CBETTs, unless they present novel or unusual issues.").

Kathleen H. Moriarty, Esq.

Katlen Muchin Rosenman LLP

March25, 2009 [Revised - April 2, 2009]

Page 5 of5

respect to any of those facts or representations. Moreover, the foregoing exemption from Rule

lOb-l7 under the Exchange Act, interpretations of Rules 101 and l02 of Regulation M, and no­

action positions taken under Section ll(d)(l) ofthe Exchange Act, and Rules lOb-lO, lldl-2,

l5c1-5, and l5c1-6 thereunder are subject to the condition that such transactions in Initial

Shares, any Portfolio Holdings, or any related securities are not made for the purpose of creating

actual, or apparent, active trading in or raising or otherwise affecting the price ofsuch securities.

These exemptions, interpretations, and no-action positions are subject to modification or

revocation if at any time the Commission or Staff determines that such action is necessary or

appropriate in furtherance of the purposes of the Exchange Act. In addition, persons relying on

these exemptions, interpretations, and no-action positions are directed to the anti-fraud and anti­

manipulation provisions of the Exchange Act, particularly Sections 9(a), 1O(b), and Rule lOb-5

thereunder. Responsibility for compliance with these and other provisions ofthe federal or state

securities laws must rest with persons relying on these exemptions, interpretatIons, and no-action

positions. The Staff expresses no view' with respect to other questions that the proposed .

transactions may raise, including, but not limited to, the adequacy of disclosure concerning, and

the applicability of other federal and state laws to, the proposed transactions.

For the Commission, by the Division of Trading

and Markets, pursuant to delegated authority,

L~~

/ Josephine''!. Tao

Assistant Director

Katten

Katten Muchin Rosenman LLP

! "

f~

. "

"

i~~. -..!) i;

.. :.... ~J

575 Madison Avenue

New York, NY 10022·2585

212.940.8800 tel

iI..._

• '~.'

.'

212.940.8776 fax

KATHLEEN H. MORIARTY

kathleen.moriarty@kattenlaw.com

212.940.6304 direct

212.894.5504 fax

March 25,2009

Josephine J. Tao, Esq.

Assistant Director, Office of Trading Practices

Division of Trading and Markets

Securities and Exchange Commission

100 F Street, N.B.

Washington, DC 20549

Re:

Request of IndexIQ ETF Trust, et aI., for Exemptive, Interpretive or No-Action

Relief from Section 11(d)(l) of the Securities Exchange Act of 1934, as amended,

and Rules 10b-10, 10b-17, lldl-2, 15c1-5 and 15c1-6 thereunder and Rules 101 and

102 of Regulation M thereunder

DearMs Tao:

SUMMARY OF REQUEST FOR RELIEF

I am writing on behalf of IndexIQ ETF Trust ("Trust") and its separate investment

portfolios (each, a "Fund", collectively, "Funds" and, together with the Trust, "Applicants").

Applicants, on behalf of themselves, NYSE Area, Inc, ("NYSE Area") or any other national

securities exchange ("Exchange") or national securities association on or through which the

exchange traded shares ("Shares") of the Trust l may subsequently trade (with each such market

I

On March 17, 2009, the Trust listed the individual shares of its ftrst ftve (5) Funds on NYSE Area, see Part I. A of

this letter below for a description of such Funds, referred to herein collectively as "Initial Funds". The individual

shares of the Initial Funds subject to the relief requested herein are referred to herein as "Initial Shares "). NYSE

Arca has received approval from the Securities and Exchange Commission ("Commission '') pursuant to Section

19(b) of the Exchange Act of 1934, as amended ("1934 Act'') of rules applicable to the trading of Initial Shares,

see NYSE Arca Rule 5.2U)(3), PCX-02-35, July 12, 2002 as amended.

Also, Applicants, together with IndexIQ Advisors LLC ("Advisor") and ALPS Distributors, Inc. ("Distributor")

have submitted a request for exemption from the application of certain sections of the Investment Company Act of

1940, as amended ("1940 Act") and the rules promulgated thereunder in connection with the Shares (see, Fifth

Amended and Restated Application of the Applicants filed on March 10, 2009, for an Order Under Sections 6(c),

12(d)(I)(J) and 17(b) of the 1940 Act (File No. 812-13441)("1940 Act Application") which was noticed on

February 27,2009 (Investment Company Act Release No. 28638; 812-13441) ("Notice"),and have received an

- 1­

84314447 18

referred to herein as a "Market,,)2, ALPS Distributors, Inc. ("Distributor") and persons or entities

engaging in transactions in Initial Shares, including Authorized Participants (as defined below),

hereby request, as appropriate, from the staff ("Staff') of the Division of Trading and Markets of

the Commission, or from the Commission itself, exemptions from, or interpretive or no-action

advice regarding Section ll(d)(I) of the 1934 Act, Rules lOb-lO, lOb-I?, lldl-2, 15cl-5 and

15cl-6 thereunder and Rules 101 and 102 of Regulation M under the 1934 Act thereunder.

Applicants are familiar with requests made by, or on behalf of, various other ETFs and

the response letters of the Commission's Division of Trading and Markets, formerly the Division

of Market Regulation ("Division") granting the requested relief to (i) the open-end management

investment companies and unit investment trusts (registered as such with the Commission) that

have been listed and traded on a Market as "exchange traded funds" ("ETFs,,)3, (ii) certain

order on March 20, 2009 from the Commission granting such relief (Investment Company Act Release No.

28653; 812-13441) ("Order") (Notice and Order collectively referred to herein as "Trust Order").

2 In the future, the Trust may determine to list Shares on a Market other than NYSE Arca. If the Trust lists Shares on

a Market other than the NYSE Arca, Shares will be listed in accordance with exchange listing standards that are,

or will become, effective pursuant to Section 19(b) of the 1934 Act. If the Shares also trade on a Market pursuant

to unlisted trading privileges, such trading will be conducted pursuant to self regulatory organization rules, that

have become effective pursuant to 1934 Act Section 19(b).

3See, for example, the relief requested by WisdomTree Trust and its funds (" Wisdom Tree ETFs") and granted in the

Letter from James A Brigagliano, Acting Associate Director, Division of Market Regulation ("Division of Market

Regulation"), to Richard F. Morris, Esq. dated May 9, 2008 with respect to certain WisdomTree Funds, letter

from James A Brigagliano, Acting Associate Director, Division of Market Regulation, to Richard F. Morris, Esq.

dated October 12, 2006 with respect to certain additional WisdomTree Funds and in the letter from James A

Brigagliano, Acting Associate Director, Division of Market Regulation, to Kathleen Moriarty, Carter, Ledyard &

Milburn LLP dated June 15, 2006 with respect to certain existing as well as future WisdomTree Funds

(collectively, "WisdomTree Letters "); see also, iShares MSCI EAFE Growth Index Fund and iShares MSCI

EAFE Value Index, letter from James A Brigagliano, Assistant Director, Division of Market Regulation, to Jack

P. Drogin of Morgan Lewis & Bockius, LLP, dated August 4,2005; iShares FTSE/Xinhua China 25 Index Fund,

letter from James Brigagliano, Assistant Director, Division of Market Regulation to Jack P. Drogin, Morgan,

Lewis & Bockius LLP, dated October 14, 2004; Fresco Index Shares Fund, letter from James A. Brigagliano,

Assistant Director, Division of Market Regulation, to Stuart Strauss, Mayer, Brown Rowe & Maw, dated October

21, 2002; iShares Trust, letters from James A. Brigagliano, Assistant Director, Division of Market Regulation to

W. John McGuire, Morgan, Lewis & Bockius LLP, dated July 25,2002, to Mary Joan Hoene, Carter, Ledyard &

Milburn, dated December 1, 2000, and September 5, 2000, and to Kathleen H. Moriarty, Carter, Ledyard &

Milburn, dated May 16,2000 (collectively, "iShares Letters") ; see also, Vanguard Index Funds et a1., letter from

James A. Brigagliano, Associate Director of the Division of Market Regulation to Kathleen Moriarty, Carter,

Ledyard & Milburn, dated May 21, 2001; Vanguard World Index Funds, letter from James A. Brigagliano,

Assistant Director, Division of Market Regulation to Barry A. Mendelson, The Vanguard Group, dated October

20, 2004; and Vanguard International Equity Index Funds letter from James A. Brigagliano, Assistant Director,

Division of Market Regulation to Kathleen Moriarty, Carter, Ledyard & Milburn, dated March 9, 2005

(collectively, "Vanguard Letters"); see also the reliefrequested by ProShares Trust and granted in the letter from

James A. Brigagliano, Associate Director, Division of Market Regulation, to Kathleen Moriarty, Carter, Ledyard

& Milburn LLP, dated January 24, 2007 with respect to certain existing as well as future ProShares Funds,

amending the earlier letter from Brian B. Bussey, Assistant Chief Counsel, Division of Market Regulation, to

Kathleen Moriarty, Carter Ledyard & Milburn LLP dated June 20, 2006 (collectively, "ProShares Letters"); see

also letter from James A. Brigagliano, Assistant Director, Division of Market Regulation, to Stuart Strauss,

-2­

exchange traded financial products that are not registered investment companies ("ETVs,,)4, as

well as (iii) the Division's response letters issued in connection with certain ETF "Class Relief,5

Clifford Chance, US LLP, dated October 25,2005 re PowerShares Lux NanoTech Portfolio as well as letter from

James A. Brigagliano, Assistant Director, Division of Market Regulation, to Stuart M. Strauss, Clifford Chance,

dated March 2, 2005 with respect to PowerShares Exchange-Traded Fund Trust and its PowerShares WilderHill

Clean Energy Portfolio (collectively, "PowerShares Letters"); ; see also streetTRACKS Series Trust, letter from

James A. Brigagliano, Assistant Director, Division of Market Regulation, to Stuart Strauss, Mayer, Brown &

Platt, dated September 26, 2000; and see also Select Sector SPDR Trust, letters from Larry E. Bergman, Senior

Associate Director, Division of Market Regulation to Stuart M. Strauss, Gordon Altman Butowsky, dated

December 14, 1998 and December 22, 1998 (the open-end management investment companies that are the subject

of these letters are collectively referred to as the "Open-End ETFs").

See also, BLDRS Trust, letter from James Brigagliano, Assistant Director, Division of Market Regulation to

Edward S. Knight, Executive President and general counsel, NASDAQ, dated November 13, 2002, (regarding an

extension to NASDAQ of the application of "generic relief previously granted to the AMEX with respect to

certain exchange traded funds occasioned by the listing of BLDRS for trading on the NASDAQ ( "BLDRS

Letter"); Nasdaq 100 Trust (with respect to trading of QQQ), Letter from James A. Brigagliano, Assistant

Director, Division of Market Regulation to James Duffy, Senior Vice President and General Counsel, AMEX,

dated March 3,1999 ("Nasdaq-lOO Letter"); DIAMONDS Trust, letter from Larry E. Bergman, Senior Associate

Director, Division of Market Regulation to James F. Duffy, Executive Vice President and Counsel, AMEX, dated

January 9, 1998 ("DIAMONDS Letter") MidCap SPDR Trust, letter from Nancy Sanow, Assistant Director,

Division of Market Regulation to James Duffy, Senior Vice President and General Counsel, AMEX, dated April

21, 1995 ("MidCap SPDR Letter");SPDR Trust, Series 1, letter from Nancy Sanow, Assistant Director, Division

of Market Regulation to James Duffy, Senior Vice President and General Counsel, AMEX, dated January 22,

1993("SPDR Letter"); and The SuperTrust Trust; Letter from Nancy 1. Sanow, Assistant Director, Division of

Market Regulation, to James E. Duffy, Esq. of the AMEX, dated June 24, 1992, (the unit investment trusts that are

the subject of these letters are collectively referred to as the "UIT ETFs "). (Open-End ETFs and UIT ETFs are

collectively referred to herein as the "Prior ETFs ").

4See, for example, letter from James A. Brigagliano, Assistant Director, Division of Market Regulation, to Michael

Schmidtberger, Esq. , Sidley Austin Brown & Wood LLP dated January 19, 2006 with respect to DB Commodity

Index Tracking Fund and DB Commodity Services LLC; letter from Brian A. Bussey, Assistant Chief Counsel,

Division of Market Regulation, to Kathleen H. Moriarty, Carter, Ledyard & Milburn, dated December 12, 2005,

with respect to StreetTRACKS Gold Trust and letter from James A. Brigagliano, Assistant Director, Division of

Market Regulation to Kathleen H. Moriarty of Carter, Ledyard & Milburn LLP, dated November 17,2004, with

respect to the streetTRACKS Gold Trust; letter from Brian A. Bussey, Assistant Chief Counsel, Division of

Market Regulation, to David Veres, Clifford Chance, dated December 12,2004, with respect to iShares COMEX

Gold Trust and letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to David

Veres, Clifford Chance US LLP, dated January 27,2005, with respect to the iShares COMEX Gold Trust; letter

from James A. Brigagliano, Assistant Director, Division of Market Regulation to George T. Simon, Foley &

Lardner, LLP, dated December 5, 2005, with respect to the Euro Currency Trust (the financial products that are

the subject of these letters are collectively referred to as the "Prior ETVs "); see also letter from James A.

Brigagliano, Assistant Director, Division of Market Regulation, to Claire P. McGrath of the AMEX, dated

November 3, 1999, regarding the trading ofHOLDRs.

5See letter from James A. Brigagliano, Esq., Assistant Director, Division of Market Regulation, to Claire P.

McGrath, Esq., Vice President and Special Counsel, The American Stock Exchange, dated August 17, 2001 (re:

Exemptive Relief for Exchange Traded Index Funds) ("2001 Class Letter"); see also, letter from James A.

Brigagliano, Esq., Assistant Director, Division of Market Regulation, to Ira Hammerman, Senior Vice President

and General Counsel, Securities Industry Association, dated January 3, 2005 (re: No-action Relief From Rule

200(g) of Regulation SHO); letter from Catherine McGuire, Esq., Chief Counsel, Division of Market Regulation,

to the Securities Industry Association Derivative Products Committee, dated November 21,2005 (re: Expanded

-3­

and "Class Relief' for certain commodity based ETVs 6. Applicants represent that each of the

Trust's Initial Funds will be structured and managed in the same manner as the Prior ETFs and in

particular as described in the WisdomTree Letters, but for the fact that each Initial Fund will be

structured as a "fund of funds"; that is, the portfolio holdings of each Initial Fund primarily will

be comprised of shares of Prior ETFs and ETVs, rather than shares of issuers of individual equity

securities, as discussed below in Part I.B. herein.

Applicants have carefully reviewed the ETF Class Relief Letters, and have determined

that the ETF Class Relief does not appear to extend to the Initial Funds because they do not meet

the terms of Condition 2 of the Equity ETF Class Relief Letter as discussed below in Part IV

herein; that is, none of the Initial Funds will hold twenty (20) or more "Component Securities"

and one or more Initial Funds may from time to time hold a Prior ETF and/or Prior ETV in

excess of 25% of the total value of such Initial Fund. 7 Applicants note that each of the Prior

ETFs and ETVs held by each Initial Fund either (i) meet all of the criteria established in the

Equity ETF Class Relief Letter and the ETV Class Relief Letter, respectively, or (ii) have

received individual relief pursuant to one or more response letters from the Division, such as the

WisdomTree Letters and the ProShares Letters cited in footnote 3 above. Therefore, Applicants,

on behalf of themselves and any Exchange and persons or entities engaging in transactions in

Shares of the Initial Funds, hereby request, as appropriate, exemptions from, or interpretive or

no-action advice regarding, Section ll(d)(l) of the 1934 Act, Rules 10b-lO, 10b-17, lldl-2,

l5cl-5 and l5c1-6 thereunder and Rules 101 and 102 of Regulation M thereunder. Applicants

believe that this request is appropriate for the reasons stated in this letter and because the

Division has stated in the Equity ETF Class Relief Letter that "requests for relief for products not

meeting the above criteria will continue to be considered upon request on a case by case basis"s.

The relief requested herein is substantially similar to that granted by the Commission to Prior

ETFs in the Commission's response letters, especially that granted in the WisdomTree Letters

and the ProShares Letters and is virtually identical to the relief granted in the Equity ETF Class

Letter and the SIA Letter.

Class Relief for ETFs with respect to Section ll(d)(l) of the 1934 Act and Rules IOb-IO, lldl-2, lScl-S, and

15c1-6 under the 1943 Act) ("SIA Letter"); letter from James A. Brigagliano, Acting Associate Director, Division

of Market Regulation, to Stuart M. Strauss, Esq., Clifford Chance US LLP (October 24, 2006) (re: ETFs

comprised of Equity Securities and incorporating relief from certain prior letters) ("Equity ETF Class Letter'');

letter from James A. Brigagliano, Associate Director, Division of Market Regulation, to Benjamin Haskin, Esq.,

Willkie FaIT & Gallagher LLP (April 9,2007) ("Fixed Income ETF Class Letter") and letter from Josephine Tao,

Associate Director, Division of Trading and Markets, to Domenick Pugliese, Esq., Paul, Hastings, Janofsky and

Walker LLP with respect to ETFs that are comprised of both equity as well as fIxed-income securities

("Combination ETF Class Letter") (collectively, "ETF Class ReliefLetters "), which provided relief to those ETFs

meeting the conditions set forth therein (collectively, "ETF Class Relief ").

6

See, letter from Racquel L. Russell, Branch Chief, OffIce of Trading Practices and Processes, Division of Market

Regulation, to George T. Simon, Esq., Foley & Lardner LLP dated June 21, 2006 ("ETV Class ReliefLetter"}.

7 See,

Equity ETF Class Relief Letter, at 2 of 7.

8 Gp. cit.

at 7 of7.

- 4­

This letter is divided into six parts. Part I is a description of the Trust and its Initial

Funds that are listed for trading on an Exchange, Part II is a description of the Trust's disclosure

documents with respect to its Initial Shares, Part III contains a discussion of dissemination of

information regarding Shares, Part N contains a discussion of the ETF Class Relief, Part V

contains Applicants' requests for relief and Part VI is the conclusion.

PART I

A.

THE TRUST AND ITS FUNDS

I.

General

The Trust was organized as a Delaware statutory trust on July 1, 2008, is registered under

the 1940 Act with the Commission as an open-end management investment company and is

authorized to issue an unlimited number of Funds. As described in this letter, Applicants intend

that each Initial Fund offer a single class of shares known as "Shares"9 to be listed and traded in

the secondary market on a Market. 10 The Trust has organized five Initial Funds identified and

briefly described in Subsection III below which are the subject of this request for relief. Each

Initial Fund will use a particular equity index also identified in Subsection III below ("Initial

Index") that was established by Financial Development Holdco LLC ("lndexIQ" or "Index

Provider"), and is calculated, maintained and disseminated by the Calculation Agent (defined

below) in the manner and according to the Rule Book (as defined and described below). The

Trust plans to issue other Funds at a later date and, if warranted, will submit a separate request

for relief at such time(s).

The Trust intends to offer and sells its Initial Shares pursuant to a "Registration

Statement" filed with the Commission (Registration Nos. 33-152915 and 811-22227 on Form N­

1A under the 1940 Act and the Securities Act of 1933, as amended (the "1933 Act")), which was

declared effective on March 20,2009. Each Initial Fund is an index fund that seeks to track, as

closely as possible, before fees and expenses, the performance of its stated Initial Index by

holding a portfolio of investments selected to correspond generally to the price and yield

performance of such index ("Portfolio Holdings"). The Portfolio Holdings of each Initial Fund

will be comprised principally of the individual components of its stated initial Index

(collectively, "Index Constituents"). Each Initial Fund intends to qualify as a "regulated

investment company" for purposes of the Internal Revenue Code.

IndexlQ as the Index Provider to each Initial Fund,11 has designed a proprietary, rules­

based process ("Process") to create each Initial Index, as briefly described below. Each Initial

10

II

The Trust has selected NYSE Arca as the Market on which it intends to list Shares of the Initial Funds.

The principals oflndexlQ are also principals oflndexlQ Advisors LLC, which acts as the investment advisor to

the Trust ("Advisor") as further described below. Therefore, IndexlQ is an "affiliated person" of the Advisor,

Trust and its Funds within the meaning of Section 2(a)(3) of the 1940 Act.

-5­

Index will be "transparent" because the rule-book derived from such Process ("Rule-Book") and

the composition of each such index will be freely available to the public. 12 Each Initial Fund will

follow a stated Initial Index primarily comprised of equity securities as briefly described below.

As disclosed in its Prospectus, each Initial Fund will use either a replication strategy or a

"representative sampling" to track its respective Initial Index.

II.

Each Initial Index is a "fund of funds" index

(1)

General

Each Initial Index is a "fund of funds" index (each such "fund of funds" index, an "FOF

Index"), meaning that its Index Constituents are primarily shares issued by Prior ETFs and

ETVs currently listed and traded on a Market, rather than shares of individual corporate issuers

As each Initial Fund is based upon an FOF Index, the Portfolio Holdings of each Initial Fund

principally will be comprised of shares of the Prior ETFs and ETVs that are the Index

Constituents of its stated Index, as more fully described below. In order to be included as an

Index Constituent in an FOF Index, each Prior ETF or ETV must be (i) either an ETF registered

under the 1940 Act or an ETV issuing equity securities, (ii) organized in the U.S., (iii) comprised

of at least $50 million in assets under management initially and as of the date of the annual index

reconstitution13 and (iv) listed on a Market. Index Constituents may include inverse ETFs (i.e.,

ETFs that produce investment results that are opposite of a particular benchmark index) and ultra

inverse ETFs (i.e., ETFs that produce investment results that are opposite of a particular

benchmark index by a factor greater than one). Applicants note that because each Initial Fund

will invest in each Prior Inverse ETF, as well as any other Prior ETF, in reliance on the

provisions of Section 12(d)(1)(F) of the 1940 Act, no more than 3% of the total outstanding

shares of such Prior ETF may be held by anyone Fund, or by all of the Initial Funds if more than

one Initial Fund includes the same Prior ETF in its Portfolio Holdings. 14

(2)

Brief Overview of Process Used to Construct the Initial Indexes.

The Index Provider used its Process to construct each Initial Index (each of which is an

FOF Index). First, the Index Provider chose a group of Prior ETFs and ETVs meeting all of the

requirements stated immediately above to create the universe from which the individual Index

Constituents will be selected ("Selection Universe"). Next, the Index Provider applied the

Process to the Selection Universe, using the Rule Book, to select the actual Index Constituents

for each FOF Index. In brief, the Process for each FOF Index used by the Initial Funds is a

quantitative process designed to select individual Index Constituents that, when combined

together, will produce an FOF Index designed to replicate the risk-return characteristics

comparable to those of hedge funds generally, not individual hedge funds. As described more

12 See, Part I.A.II.3. below.

13

See, Part I.B.II. below.

14 See also, Part V.A. and footnote 27 below.

-6­

fully in the Trust's Registration Statement and its 1940 Act Application,15 certain of the FOF

Indexes used by Initial Funds seek to replicate the risk-adjusted return characteristics of the

collective hedge funds within a particular hedge fund strategy or combination of hedge fund

strategies ("Hedge Fund Replication Process") as represented by publicly available hedge fund

performance data provided by unaffiliated third parties. Other FOF Indexes used by Initial

Funds incorporate the Hedge Fund Replication Process into their index construction, and

additionally include an optimized weighting or other process ("Optimized Process") in order to

seek to achieve particular investment objectives. Such investment objectives may include, but

are not limited to, better replication results, or superior returns, low volatility, or low correlation

to the broad equity markets.

(3)

Portfolio Holdings ofthe Initial Funds

At least 80% of each Initial Fund's Portfolio Holdings is, and will be, shares of some or all of the

Prior ETFs and ETVs that are the Index Constituents of its stated Initial Index. Some or all of

the remaining 20% is, or will be, typically invested in equity securities that are not Index

Constituents which the Advisor or Sub-Advisor believes will help the Initial Fund track its FOF

Index (''Non-Index Constituents"), as well as cash, cash equivalents and various types of

financial instruments including, but not limited to, futures contracts, swap agreements, forward

contracts, reverse repurchase agreements and options on securities, indices and futures contracts

(collectively, "Financial Instruments"). In no case will an Initial Fund hold an equity security

issued by a single issuer in excess of20% of such Initial Fund's Portfolio Holdings. Each Initial

Fund generally will invest in each of the Index Constituents of its FOF Index in proportion to its

weighting in such FOF Index. However, under various circumstances, it may not be possible or

practicable to purchase all of the Index Constituents in those weightings; in such circumstances,

an Initial Fund may invest in a sample of the Index Constituents of its FOF Index. There may

also be instances in which the Advisor may choose to overweight another Index Constituent of

the FOF Index, purchase Non-Index Constituents which the Advisor believes are appropriate to

substitute for certain Index Constituents of the FOF Index or utilize various combinations of

other available investment techniques, in seeking to track such FOF Index. In all cases, the

Portfolio Holdings of each Initial Fund will have been selected pursuant to the rules-based

Process described below in an attempt to track its Initial Index, (i.e.), no Initial Fund tries to beat

its respective FOF Index. The relevant Rule Book, along with a list of Index Constituents in

which each Initial Fund invests, will be made available at the Trust's website: www.indexiq.com

("Website").

15 See,

1940 Act Application at 20-22 and Appendix B thereto.

-7­

(4)

Portfolio Holdings ofthe Underlying ETFs and ETVs.

Each individual Prior ETF that is an Index Constituent of an Initial Index ("Underlying

ETF") is a registered investment company advised by entities unaffiliated with the Advisor. 16

Each Underlying ETF follows its own specified underlying index ("Underlying Index") that is

primarily comprised of shares of issuers of individual equity securities. Therefore, the portfolio

assets of each Underlying ETF will principally be comprised of the individual securities

components of its Underlying Index (collectively, "Underlying Securities"). The Underlying

Securities of each Underlying ETF will be one or more of the following instruments: U.S.

equities, non-U.S. equities, U.S. and non-U.S. fixed income securities, as well as Depositary

Receipts, REITS and derivatives that provide similar exposure to its Underlying Index. In

addition, the remainder of Underlying ETF's portfolio assets may be comprised of Financial

Instruments described above.

Each individual Prior ETV that is an Index Constituent of an Initial Index ("Underlying

ETV") is sponsored by entities unrelated to the Advisor. Each Underlying ETV follows its own

specified underlying index or method of selecting assets. The assets held by each Underlying

ETV will be some or all of the Financial Instruments described above, as well as commodities

and currencies. On each day that the NYSE is open for business (each such day a "Business

Day"), before the commencement of trading in Shares on the NYSE Arca, each Initial Fund will

disclose the Website the identities and quantities of the Underlying ETFs and ETVs and other

assets held by such Initial Fund that will form the basis for the calculation ofNAV at the end of

such day.

III.

Initial Funds and Initial Indexes

The five Initial Funds and their respective Initial Indexes are as follows:

Name of Fund

Name of Initial Index

IQ Hedge Multi-Strategy Tracker ETF

IQ Hedge Macro Tracker ETF

IQ Hedge Long/Short Tracker ETF

IQ Hedge Event-Driven Tracker ETF

IQ Hedge Market Neutral Tracker ETF

IQ Hedge Multi-Strategy Index

IQ Hedge Global Macro Index

IQ Hedge Long/Short Index

IQ Hedge Event-Driven Index

IQ Hedge Market Neutral Index

The IQ Hedge Multi-Strategy Tracker ETF seeks investment results that correspond

(before fees and expenses) generally to the price and yield performance of the IQ Hedge Multi­

Strategy Index, which seeks to replicate the risk-adjusted returns of an unaffiliated third party's

index showing returns of hedge funds that employ various hedge fund investment styles, which

may include but are not limited to global macro, long/short, event-driven, market neutral,

in reliance upon the provisions of Section

12(d)(1)(F) of the 1940 Act. See, Part LA.II.I. above and Part VA and footnote 27 below.

16 Each FOF Fund will be considered an "unaffiliated fund of funds"

-8­

84314447_18

emerging markets, fixed-income arbitrage and other strategies commonly used by hedge fund

managers.

The IQ Hedge Macro Tracker ETF seeks investment results that correspond (before fees

and expenses) generally to the price and yield performance of the IQ Hedge Global Macro Index,

which seeks to replicate the risk-adjusted returns of an unaffiliated third party's index showing

returns of hedge funds pursuing a global macro strategy.

The IQ Hedge Long/Short Tracker ETF seeks investment results that correspond (before

fees and expenses) generally to the price and yield performance of the IQ Hedge Long/Short

Index, which seeks to replicate the risk-adjusted returns of an unaffiliated third party's index

showing returns of hedge funds pursuing a long/short strategy.

The IQ Hedge Event-Driven Tracker ETF seeks investment results that correspond

(before fees and expenses) generally to the price and yield performance of the IQ Hedge Event­

Driven Index, which seeks to replicate the risk-adjusted returns of an unaffiliated third party's

index showing returns of hedge funds pursuing an event-driven strategy.

The IQ Hedge Market Neutral Tracker ETF seeks investment results that correspond

(before fees and expenses) generally to the price and yield performance of the IQ Hedge Market

Neutral Index, which seeks to replicate the risk-adjusted returns of an unaffiliated third party's

index showing returns of hedge funds pursuing a market neutral strategy.

B.

OTHER PARTIES.

I.

Advisor and Sub-Advisor(s)

IndexIQ Advisors, as Advisor, is, and will be, the investment adviser to each ofthe Initial

Funds. The Advisor is a limited liability company, with its principal office currently located at

800 Westchester Avenue, Suite N-611 , Rye Brook, NY 10573 and is registered as an

"investment adviser" under Section 203 of the Advisers Act. The Advisor is affiliated within the

meaning of Section 2(a)(3) ofthe 1940 Act with the Index Provider (see below).

Mellon Capital Management Corporation, an indirect wholly-owned subsidiary of the

Bank of New York Mellon (TNT) and a registered investment adviser with its principal offices

located at 50 Fremont Street, Suite 3900, San Francisco, CA 94105, serves as the "Sub-Advisor"

for each Initial Fund. The Sub-Advisor chooses each Initial Fund's portfolio investments and

places orders to buy and sell each Initial Fund's Portfolio Holdings. The Sub-Advisor is not

affiliated (within the meaning of Section 2(a)(3) of the 1940 Act) with the Advisor, the

Distributor, NYSE Area, any other Market, the Index Provider or the Calculation Agent.

Applicants note that this management arrangement is very similar to that described in the

WisdomTree Letters.

- 9­

II.

Distributor and Authorized Participants

ALPS Distributors, Inc., a broker-dealer registered under the Exchange Act and a

member of the Financial Industry Regulatory Authority ("FINRA"), will act as the Distributor

and principal underwriter of the Creation Units of Shares ("Distributor"). The Distributor will

distribute Shares on an agency basis. The Distributor is not affiliated (within the meaning of

Section 2(a)(3) of the 1940 Act) with the Advisor, Sub-Advisor, NYSE Arca, any other Market,

the Index Provider, or the Calculation Agent.

Entities that have entered into an agreement with the Distributor to become "Authorized

Participants" may place orders with the Distributor to directly purchase or redeem Creation

Units, as described below. An Authorized Participant must be an entity that is (i) a broker-dealer

or other participant in the clearing process through the Continuous Net Settlement System of the

NSCC, a clearing agency that is registered with the SEC; or a DTC Participant, and (ii) which

has executed an agreement with the Distributor with respect to creations and redemptions of

Creation Unit Aggregations" with the Distributor. Authorized Participants may be, but are not

required to be, members of the Primary Listing Market. Authorized Participants are generally

broker-dealers and are not compensated by the Trust or any Initial Fund in connection with the

issuance or redemption of Shares. Authorized Participants are not affiliated (within the meaning

of Section 2(a)(3) of the 1940 Act) with the Advisor, Sub-Advisor, NYSE Arca, any other

Market, the Index Provider, nor the Calculation Agent.

III.

Administrator/Custodian/Transfer

Accounting Agent

Agent/

Securities

Lending

Agent/Fund

The Trust may appoint the Advisor or other service providers to act as administrator

("Administrator"), custodian ("Custodian") transfer agent ("Transfer Agent), Fund Accounting

Agent ("Fund Accounting Agent") and securities lending agent ("Securities Lending Agent") for

the Trust. The Bank of New York Mellon ("BNY Mellon") located at One Wall Street, New

York, NY 10286 will act as Transfer Agent, Custodian, Administrator and Fund Accounting

Agent for the Trust and the Initial Funds, for which it will receive fees. BNY Mellon is

authorized to appoint certain foreign custodians or foreign custody managers for Initial Fund

investments outside the United States ("Sub-Custodians"). BNY Mellon is not affiliated (within

the meaning of Section 2(a)(3) of the 1940 Act) with NYSE Arca, any other Market, the

Advisor, the Distributor or the Index Provider. Initial Funds may lend their Portfolio Holdings

and will use a "Securities Lending Agent" for such purposes; the Securities Lending Agent will

share in a portion of the revenue derived from lending each Initial Fund's Portfolio Holdings.

The identity of the Advisor, Administrator, Custodian, Transfer Agent and Fund Accounting

Agent is, and will be, disclosed in the Prospectus. If any such persons are "affiliated" persons

within the meaning of Section 2(a)(3) of the 1940 Act with the Trust, the Advisor or the

Distributor, such affiliation will also be disclosed and the performance of their duties and

obligations will be conducted within the provisions of the 1940 Act and the rules thereunder.

- 10­

IV.

Index Provider and Index Calculation Agent

Financial Development HoldCo LLC (d/b/a IndexIQ) ("FDH") is the owner and creator

of the Indexes ("Index Provider"). As its principals are also principals of the Advisor, the Index

Provider is an "affiliated person" (within the meaning of Section 2(a)(3) of the 1940 Act) of the

Advisor, the Trust and the Initial Funds. The Index Provider has adopted policies and

procedures, similar to those described in the WisdomTree Letters, designed to prevent the

dissemination and improper use of non-public information about changes to the constituents of

the Index and the Process. These policies and procedures are intended to limit or prohibit

communication between the "Index Administrator" (the employee of FDH with ultimate

responsibility for the Indexes and Process), the "Index Group" (those employees of FDH

appointed to assist the Index Administrator in the performance of his/her duties) and the

employees of the Advisor with respect to issues related to the maintenance, calculation and

reconstitution of the Indexes. Among other things, the Index Administrator and Index Group are

solely responsible for the creation and development of the Process and determining the nature of

modifications to the Process and do not, and will not, have any responsibility for management of

the Initial Funds. Also, the Index Provider has publicly disclosed the Process governing the

construction and maintenance of the Indexes, and although it has reserved the right to modify the

Process from time to time, it is required to publish notification of all such changes well in

advance of their implementation, thus eliminating any advantage that the Advisor or any Initial

Fund could enjoy over other market participants, including the investing public. In addition, the

Index Administrator and Index Group are prohibited from providing information with respect to

prior knowledge of companies that may be added to or deleted from an Index or from any Initial

Fund to the Advisor, or any person affiliated with it or any Initial Fund.

FDH has entered into a "Calculation Agent Agreement" with Standard & Poor's to act as

"Calculation Agent". The Calculation Agent is not, and will not be, an affiliated person of the

Initial Funds, the Advisor, any Subadvisor, any promoter or the Distributor. Pursuant to the

terms of the Calculation Agent Agreement, the Index Provider initially applied the Process to the

Selection Universe and determined the number, type and weight of Index Constituents that will

comprise each Index and will perform all calculations necessary to determine the proper make­

up of each such Index. Thereafter, (i) the Calculation Agent will be solely responsible for the

calculation and maintenance of each Index, as well as the dissemination of the values of each

Index and (ii) the FDH, Index Provider will be responsible solely for performing the

reconstitution updates and rebalance updates for each Index, as specified in the relevant Rule

Book.

The Calculation Agent will disseminate Index information through one or more

unaffiliated third party data providers; Index values on a total return basis will be disseminated

on an end-of-day basis through such third party data provider(s) and "price index values" of each

Index will be calculated by the Calculation Agent and disseminated every 15 seconds to be

printed to the Consolidated Tape. The Index Group will monitor the results produced by the

Calculation Agent on a periodic basis to determine whether the Calculation Agent is performing

such maintenance, calculation and dissemination functions in accordance with the Process.

- 11 ­

Applicants note that the structural arrangements, policies and procedures described in this

section are very similar to those described in the WisdomTree Letters.

C.

MANAGEMENT OF THE INITIAL FUNDS - INDEXING APPROACH

The Trust's Board of Trustees (the "Board") has responsibility for the overall

management of the Initial Funds. The Advisor, subject to the supervision of the Board, is

responsible for the overall investment management of each Initial Fund. The Sub-Advisor will

be responsible for the management of the investment and reinvestment of the Initial Fund's

assets, subject to the supervision of the Advisor. As described in the statutory prospectus

contained in the Registration Statement ("Prospectus"), the Initial Funds are not actively

managed; rather, each uses an indexing investment approach, designed to closely track the

investment performance of its stated Index. Applicants observe that this management structure

and indexing approach is very similar to that described in the WisdomTree Letters.

D.

SHARES

As described in subparts I.E. through I.H. below, each Initial Fund will issue and redeem

Shares only in aggregations of 50,000 ("Creation Units"). Shares will not be individually

redeemable; only Shares combined into Creation Units will be redeemable 17. Purchasers of

Creation Units will be able to disaggregate Creation Units into the individual Shares comprising

such Creation Unit. The initial value of an individual ETF Share will vary depending on the

Initial Fund, but the initial value of any Creation Unit can be expected to be in excess of $1

million dollars.

It is not expected that the Initial Funds' Distributor or any other entity will maintain a

secondary market in individual Shares. The Exchange will designate one or more member firms

to act as a market maker and maintain a market for the Shares that trade on that Exchange (the

"Market Maker"). The Shares will trade on the Exchange in a manner similar to the shares of

Prior ETFs, such as those issued by WisdomTree, ProShares, SPDRs, iShares, Select Sector

SPDRs and PowerShares currently listed and traded on a Market.

Shares will be registered in book-entry form only; the Initial Funds will not issue

individual share certificates for Shares. The Depository Trust Company ("DTC") will serve as

securities depository for Shares and DTC or its nominee will be the record or registered owner of

all outstanding Shares. Beneficial ownership of Shares will be shown on the records of DTC or a

broker-dealer that is a participant in DTC (a "DTC Participant"). Beneficial owners of Shares

("Beneficial Owners") will receive, at the relevant Initial Fund's expense, all of the statements,

17For any particular Initial Fund, the number of Shares in a Creation Unit will not change, except in event of a share

split, reverse split or similar revaluation.

- 12 ­

notices, and reports required under the 1940 Act and other applicable laws ("Required

Materials").

E.

PURCHASING SHARES

1.

General

The Trust will be structured in a manner similar to WisdomTree and other Prior ETFs

and therefore it will offer, issue and sell Shares of each Initial Fund in Creation Units through the

Distributor on a continuous basis at the net asset value (sometimes referred to herein as "NAV")

per share next determined after receipt of an order in proper form. The NAV of each Initial Fund

is expected to be determined as of the close of the regular trading session on the NYSE

(ordinarily 4:00 p.m. Eastern Time ("ET")), on each Business Day. The Trust will sell and

redeem Creation Units of each Initial Fund on every Business Day and will not suspend the right

of redemption or postpone the date of payment or satisfaction upon redemption for more than

seven days, other than (a) any period during which the NYSE is closed other than customary

weekend and holiday closings, (b) any period during which trading on the NYSE is restricted, (c)

any period during which an emergency exists as a result of which disposal by the Trust of

securities owned by it is not reasonably practicable or it is not reasonably practicable for the

Trust to determine the value of its net assets, and (d) for such other periods as the Commission

by order permit for the protection of holders of Shares.

II.

"In-Kind DepositJPayment" and Balancing Amount

Shares of each Initial Fund will be issued only in Creation Units to Authorized

Participants, and only in exchange for (i) primarily a specified "In-Kind" deposit, by the

purchaser, of a basket of specified Prior ETFs and ETVs, plus any other specified equity

security, if applicable ("Creation Basket"), most or all of which are contained in the FOF Index

for such Initial Fund, plus (ii) the specified cash Balancing Amount (described below). The

identities and amounts of the components of the Creation Basket will be made available daily to

Authorized Participants. Likewise, redemptions of Shares of each Initial Fund in Creation Units

generally will be made by the Trust (i) primarily in an "In-Kind" payment to Authorized

Participants as briefly described below, plus (ii) the specified cash Balancing Amount. By

requiring that purchase and redemption transactions involving Shares be made primarily "In­

Kind" rather than in cash, the Initial Funds intend to minimize portfolio turnover, brokerage

expenses, and other transaction costs.

Each day the Advisor or the Subadvisor will specify an amount of cash that must

accompany the Creation Basket or the Redemption Basket ("Balancing Amount"). The

Balancing Amount serves the function of compensating for differences, if any, between the NAV

(per Creation Unit) of an Initial Fund and the total aggregate market value (per Creation Unit)

of the Creation Basket or the Redemption Basket, as the case may be. As Financial Instruments

cannot be delivered "In-Kind", the Balancing Amount accompanying a Creation Basket for each

Initial Fund will also include the cost of any Financial Instrument that will become a Portfolio

Holding of such Fund, and the Balancing Amount accompanying a Redemption Basket for each

- 13 ­

Initial Fund will also include the cost of any Financial Instrument that is a Portfolio Holding of

such Fund.

III.

Secondary Market Trading of Individual Shares

Individual Shares of each Initial Fund will be listed on a Market and traded in the

secondary market in the same manner as other equity securities, including those issued by Prior

ETFs. The price of Shares trading in the secondary market will be based on a current bid/offer

market. No secondary sales will be made to brokers or dealers at a concession by the Distributor

or by any Initial Fund. Transactions involving the sale of Shares in the secondary market -­

which will be between purchasers and sellers and will not involve an Initial Fund -- will be

subject to customary brokerage commissions and charges. This is the same method employed in

connection with the shares of the Prior ETFs, and Applicants expect that Shares of the Initial

Funds will trade in a similar manner; that is, the price at which Shares trade will be disciplined

by arbitrage opportunities created by the ability to purchase or redeem Creation Units at NAV,

which should ensure that Shares do not trade at a material premium or discount in relation to

theirNAV.

F.

PROCEDURES APPLICABLE TO THE PURCHASE OF INITIAL FUNDS

I.

Placement of Purchase Orders

All orders to purchase Creation Units of Shares directly from an Initial Fund must be

placed with the Distributor by or through an "Authorized Participant," which is a DTC

Participant that has executed a "Participant Agreement" with the Distributor. Once a purchase

order has been placed and accepted, the Distributor will inform the Advisor, the Sub-Advisor and

the Initial Fund's custodian ("Custodian"). The Authorized Participant will deliver to the

Custodian, on behalf of itself or the Beneficial Owner, the relevant Creation Basket (or the cash

value of all or a part of such Creation Basket, in the case of a permitted or required cash purchase

or "cash in lieu" amount), with any appropriate adjustments as determined by the Initial Fund

plus the specified Balancing Amount. Creation Baskets and Balancing Amounts must be

delivered to the accounts maintained at the Custodian.

All orders to purchase Creation Units must be received by the Distributor no later than

the closing time of the NYSE ("Closing Time") on the date the order is placed (the "Transmittal

Date") in order for the purchaser to receive the NAV determined on the Transmittal Date. The

Distributor will maintain a record of Creation Unit purchases and will send out confirmations of

such purchases. The Distributor will transmit all accepted purchase orders to the relevant Initial

Fund. After an Initial Fund has received delivery of the Creation Basket and any accompanying

cash payment, including the Balancing Amount, DTC will instruct the Initial Fund to initiate

"delivery" of the appropriate number of Shares to the book-entry account specified by the

- 14­

purchaser. 18 The Distributor will furnish the Prospectus for the relevant Shares and a

confirmation to those placing purchase orders for Creation Units.

II.

Payment for Creation Units

Persons purchasing Creation Units from an Initial Fund generally must make an "In­

Kind" deposit of the Creation Basket together with an amount of cash specified by the Advisor

(the "Creation Balancing Amount"), plus the applicable Transaction Fee (defined below). The

Creation Basket, the Creation Balancing Amount, and Transaction Fee collectively are referred

to as the "Creation Deposit". As mentioned above, the Creation Balancing Amount is a cash

paYment designed to ensure that the NAV of a Creation Deposit is identical to the NAV of the

Creation Unit it is used to purchase and is the amount equal to the difference between the NAV

of a Creation Unit and the market value of the Creation Basket l9 • The Initial Funds reserve the

right to permit or require the ETF Share purchaser to substitute an amount of cash or a different

security to replace any portion of a prescribed Creation Basket,20 as described in the 1940 Act

Application.

The Custodian will make available through the facilities of NSCC on each business day,

prior to the opening of trading on the Exchange, a list of the name and the required number of

each component of the Creation Basket to be included in the Creation Deposit for each Initial

Fund. 21 The Custodian also will make available on a daily basis information about the previous

day's Creation Balancing Amount.

18Creation Units may be issued to an Authorized Participant even though the corresponding Creation Basket has not

been received in whole or in part, where reliance is made on the undertaking of the Authorized Participant to

deliver the missing Creation Basket as soon as possible, where such undertaking is secured by the Authorized

Participant's delivery and maintenance of collateral.

19If the market value of the Creation Basket is greater than the NAV of a Creation Unit, then the Creation Balancing

Amount will be a negative number, in which case the Creation Balancing Amount will be paid by the Fund to the

purchaser, rather than vice-versa.

20In the future, a Fund may require a Share purchaser to purchase a Creation Unit entirely for cash under certain

limited circumstances. For example, on days when a substantial rebalancing of a Fund's Portfolio Holdings is

required, a Fund may prefer to receive cash instead of "in-Kind" securities so that it has liquid resources on hand

to make the necessary purchases.

21The identity and number of components in a Creation Basket required for a Creation Deposit will change from

time to time in response to changes in the composition of a Index, or portfolio adjustments by the Advisor. In

accordance with the Advisor's Policies and Procedures, all personnel of the Advisor with knowledge about the

composition of a Creation Deposit will be prohibited from disclosing such information to any other person, except

as authorized in the course of their employment, until such information is made public.

- 15 ­

G.

PROCEDURES APPLICABLE TO THE REDEMPTION OF INITIAL FUNDS

I.

Placement of Redemption Orders

Just as Shares can be purchased from an Initial Fund only in Creation Units, such shares

similarly may be redeemed only if tendered in Creation Units. As required by law, redemption

requests in good order will receive the NAV next determined after the request is made. Except

in unusual circumstances, Shares will be redeemed primarily by an "In-Kind" payment, together

with a cash payment ofthe Redemption Balancing Amount, as described briefly below.

II.

Redemption Proceeds

Shares in Creation Units will be redeemable on any day on which the NYSE is open

primarily in exchange for an "In-Kind" basket of an Initial Fund's Portfolio Holdings

("Redemption Basket"). The Advisor will make available on each business day, prior to the

opening of trading on the Exchange, a list of the name and amount of each component of the

Redemption Basket that will be given to Authorized Participants tendering Shares for

redemption. The contents of the Redemption Basket provided to such redeemers mayor may not

be the same as the contents of the Creation Basket required of creators purchasing Creation Units

on the same day.22 Depending on whether the NAV of a Creation Unit is higher or lower than

the market value of the Redemption Basket, the redeemer of a Creation Unit will either receive

from, or pay to, the Initial Fund the Balancing Amount equal to the difference ("Redemption

Balancing Amount"). (In the typical situation where the Redemption Basket is the same as the

Creation Basket, this cash amount will be equal to the Creation Balancing Amount described

above in Part I.G.).

An Initial Fund typically will make redemptions primarily "In-Kind", but in all cases,

whether payment is made entirely "In-Kind", entirely in cash, or in a combination of each, the

value of its redemption payments must equal the NAV of the Shares tendered for redemption.

Applicants currently contemplate that Creation Units of each Initial Fund will be redeemed

principally "In- Kind", except in certain circumstances. An Initial Fund may make redemptions

partly in cash in lieu of transferring "In-Kind" one or more of the components of the Redemption

Basket to the redeeming investor if such Initial Fund determines, in its discretion, that such

alternative is warranted due to the unusual circumstances. This could happen, for example, if the

redeeming investor is unable, by law or policy, to own a particular security that is a component

of a Redemption Basket.

22

Under some circumstances, the Creation Basket and Redemption Basket could differ; see the 1940 Act

Application.

- 16 ­

H.

TRANSACTION FEE

Each Initial Fund will charge a small "Transaction Fee" on investors purchasing or

redeeming Creation Units. The maximum Transaction Fee will be fully disclosed in the

Prospectus for each Initial Fund.

PART II

A.

DISCLOSURE DOCUMENTS

The primary disclosure document with respect to the Shares is, and will be, the

Prospectus, briefly described below23 . As with all investment company securities, including

shares of Prior ETFs, the purchase of Shares in Creation Unit size aggregations from an Initial

Fund will be accompanied or preceded by the Prospectus for such Initial Fund. A Prospectus

also makes clear that Shares may be bought from an Initial Fund only in Creation Unit sized

aggregations and redeemed with an Initial Fund only if tendered in Creation Unit sized

aggregations. It notes that an investor may incur brokerage costs in purchasing enough Shares to

constitute a Creation Unit. The Prospectus also discloses certain legal risks that are unique to

persons purchasing Creation Units from an Initial Fund, as well as all cautionary language and

illustrative examples with respect to "distribution," "underwriting," "unsold allotments" that is

required of all Prior ETF issuers.

The Prospectus also provides a plain English overview of the Initial Fund, including its

investment objective and investment strategies, the identity of the Initial Fund's Advisor and

Sub-Advisor, and the material risks of investing in the Initial Fund, and the composition and

frequency of distributions. It also provides a brief, plain English description of the salient

aspects of Shares. It also clearly discloses, among other things, that Shares are not redeemable

individually, and that an investor selling Shares on the secondary market may incur brokerage

commissions when selling such shares and may receive less than the NAV of such shares. In

addition, the Prospectus provides the Website address where investors can obtain information

about the composition and compilation methodology of an Initial Fund's Index. The Website

will make the Initial Fund's Prospectus and Statement of Additional Information ("SAl")

available, as well as indicating that the Prospectus and the SAl may be obtained in hard copy,

without charge, from the investor's broker or from the Distributor. The Advisor will coordinate

the production and distribution of Prospectuses to broker-dealers. It will be the responsibility of

the broker-dealers to ensure that a Prospectus is provided to each secondary market purchaser of

Shares.

The SAl includes more detailed information about Shares, and will contain a detailed

explanation of the procedures for purchasing and redeeming Creation Units.

23In the future, Applicants may also elect to use and deliver a "Summary Prospectus" as permitted in the final rule

adopted by the Commission in Release Nos. 33-8998; IC-28584; File No. S7-28-07(Jan. 13, 2009).; see also

footnote 9 of the Trust Application.

- 17 ­

84314447_18

B.

WEBSITE

As discussed above, the Portfolio Holdings of each Initial Fund will be disclosed on the

public website of the Primary Listing Market and/or the Trust. 24 The Trust, the Calculation

Agent or the Primary Listing Market will also calculate and publish the Estimated NAV

(discussed below) for each Initial Fund. The Calculation Agent, or another organization

authorized by the Index Provider or the Calculation Agent, will calculate and publish the current

updated value of the relevant Index every 15 seconds throughout the trading day.

Each Business Day, the Website will publish free of charge (or provide a link to another

website that will publish free of charge) the Index Constituents of each Index and their respective

weightings in each Index as of the close of the prior Business Day. Also on each Business Day,

the Website will publish free of charge (or provide a link to another website that will publish free

of charge) the Portfolio Holdings held by each Fund and their respective weightings, and each

Fund's per share NAV, last-traded price and midpoint of the bid/ask spread as of the NAV

calculation time ("Bid/Ask Price"), all as of the prior Business Day.

PART III

A.

DISSEMINATION OF INFORMATION ABOUT CREATION AND

REDEMPTION BASKETS

As discussed above, the names and required number of shares of each component of the

Creation Basket and the Redemption Basket to be tendered in connection with the issuance or

redemption, respectively, of Shares in Creation Units for each Initial Fund, will be made

available by the Custodian through the facilities of NSCC on a daily basis prior to the opening of

trading on NYSE Area.

B.

DISSEMINATION OF INFORMATION ON TRADING IN THE DEPOSIT AND

REDEMPTION SECURITIES

The prices of each component of an Initial Fund's Deposit Basket and Redemption

Basket will be available from, as applicable, the relevant listing Market, other Markets,

automated quotation systems, sources such as independent pricing services, newspapers and

other publications prior to the opening of trading on NYSE Area.

24

T he Trust will comply with its obligations set forth in Form N-lA, to disclose in its policies and procedures with

respect to the disclosure of its portfolio-securities and to state its Prospectus that a description of each Fund's

policies and procedures is available in the SAl See Release No. lC-26418.

- 18 ­

C.

DISSEMINATION OF INFORMATION ABOUT SHARES

In order to provide current Share pricing information for use by investors, professionals

and persons wishing to create or redeem Shares, information will be made available by the

Custodian through the facilities of NSCC including, among other things, the previous day's

Creation Cash Component. In addition to the information made available by the Custodian, it is

expected that for each Initial Fund, (i) the Exchange will disseminate continuously throughout

the trading day, through the facilities of the consolidated tape, the market price of a Share, and

(ii) the Exchange data vendor, independent pricing service or other market information provider

(for example, Bloomberg), every 15 seconds throughout the trading day, separately from the

consolidated tape, will disseminate a calculation of the estimated NAV of a Share (which

estimate is anticipated to be very close to, but not a substitute for, the "real-time" NAV during

such trading day). Comparing these two figures may allow an investor to determine whether,

and to what extent, Shares are selling at a premium or a discount to NAV.

The Website, which is publicly accessible at no charge, will contain the following

information on a per ETF Share basis, for each Initial Fund: (i) the prior business day's NAV and

the bid/asked price, and a calculation of the premium or discount of the bid/asked price at the

time of calculation of the NAV against such NAV; and (2) data in a chart format for a period

covering each four previous calendar quarters (or life of an Initial Fund, if shorter) displaying the

frequency distribution of discounts and premiums of the daily bid/asked price against the NAV.

PART IV

Comparison of the Initial Funds to the Other ETFs Which Have Sought Similar

Commission Action and Received Similar Relief

Applicants believe that the relief requested herein is substantially similar to the relief

granted by the Commission to Prior ETFs in response to their individual requests, including the

ProShares Letters, and is virtually identical to that granted in the WisdomTree Letters and the

ETF Class Relief Letters.

Applicability of the ETF Class Relief to the Initial Funds

Collectively, the ETF Class Relief Letters provide exemptive and/or no-action or

interpretive relief with respect to Section 11(d)(I) of the 1934 Act and Rules 1Ob-l 0, 1Ob-l?,

1Idl-2, 14e-5, 15cl-5, 15cl-6 under such Act as well as Rules 101 and 102 of Regulation M, to

any ETF that meets the criteria set forth in the Equity ETF Class Relief Letter and the SIA

Letter. The Equity ETF Class Relief Letter sets forth five criteria that an ETF must meet in order

to rely upon the ETF Class Relief. These are:

"1. The ETF Shares are issued by an open-end investment company or

unit investment trust registered with the Commission under the Investment

Company Act;

- 19 ­

2. The ETF consists of a basket of twenty or more Component Securities:

with no one Component Security constituting more than 25% of the total

value of the ETF;

3. At least 70% of the ETF must be comprised of Component Securities

that meet the minimum public float and minimum average daily trading

volume thresholds under the 'actively-traded securities' definition found

in Regulation M for excepted securities during each of the previous two

months of trading prior to the formation of the relevant ETF; provided,

however, that if the ETF has 200 or more Component Securities then 50%

of the Component Securities must meet the actively-traded securities

thresholds;

4. ETF shares are to be issued and redeemed in Creation Unit

aggregations of 50,000 shares or such other amount where the value of a

Creation Unit is at least $1 million at the time of issuance; and

5. The ETF must be managed to track a particular index all of the

components of which have public available last sale trade information.

The intra-day proxy value of the ETF per share and the value of the

"benchmark" index must be publicly disseminated by a major market data

vendor throughout the trading day. ,,25

The SIA Letter sets forth the following three conditions that ETFs must satisfy in order to

rely on the relief from Section 11(d)(1 and Rules 10b-1O, 11dl-2, 15cl-5 and 15c1-6 granted

therein:

1.

"The ETF shares are issued by an open-end investment company

or unit investment trust registered with the Commission under the

Investment Company Act;

2.

The ETF shares are listed and trade on a market that has obtained

approval from the Commission pursuant to Section 19(b) of the Exchange

Act of a rule change regarding the listing and trading of the ETF shares on

the market (or that is relying on Rule 19b-4(e) to list and trade the ETF

shares); and

The ETF (a) consists of a basket of twenty or more Component

Securities, with no one Component Security constituting more than 25%

of the total value of the ETF, and is managed to track a particular index all

of the components of which are publicly available; or (b) solely for

purposes of the exemptive relief for Broker-Dealer APs from Section

3.

25 See, Equity ETF Class Relief Letter at 2.

- 20­

11(d)(1) of the Exchange Act, is an ETF with respect to which the staff of

the Division of Market Regulation ("Staff') has granted Non-AP Broker­

Dealers (as defined below) relief from the requirements of Section

l1(d)(l) in a letter dated prior to the date of this letter, provided that the

ETF has not changed in such a way as to materially affect any of the facts

or representations in such prior letter." (footnotes omitted)

Each Initial Fund will meet all of the criteria of the Equity ETF Class Relief Letter set

forth above with the exceRtion of Condition 2; that is, none of the Initial Funds will hold "a

basket of twenty or more" 6 Index Constituents and one or more Initial Funds may hold, from

time to time, a Prior ETV and/or Prior ETF in excess of 25% of the total value of the Initial

Fund. Similarly, each Initial Fund will meet the conditions of the SIA Letter except for

Condition 3. Applicants note, however, that each of the Prior ETFs and ETVs held by an Initial

Fund itself will have either met all conditions set forth in the Equity ETF Class Relief Letter and

the SIA Letter, or the ETV Class Relief Letter, respectively or will have received individual

relief from the Commission. Therefore, Applicants hereby request, in the alternative, that the

Commission grant exemptive, interpretive or no-action relief from Section 11 (d)(l) of the 1934

Act, from Rules IOb-10, 10b-17, lldl-2, 15cl-5 and 15cl-6 thereunder, and Rules 101 and 102

of Regulation M in connection with secondary market transactions in Shares of each Initial

Fund, and the creation or redemption of Shares of such Initial Funds, as discussed below. As

noted above, this relief is substantially similar to individual relief granted to the Other ETFs as

well that granted in the Equity Class Relief.

PART V

A.

RULE 101 OFREGULATIONM

Applicants respectfully request that the Commission grant an exemption from Rule 101,

as discussed below, to permit persons participating in a distribution of Initial Shares of an Initial

Fund to bid for or purchase, .redeem or engage in other secondary market transactions in such

Shares.

Generally, Rule 101 of Regulation M is an anti-manipulation regulation that, subject to

certain exemptions, prohibits any "distribution participant" and "its affiliated purchasers" from

bidding for, purchasing from, or attempting to induce any person to bid for or purchase, any

security which is the subject of a distribution until after the applicable restricted period, except as

specifically permitted in Regulation M. The provisions of Rule 101 apply to underwriters and

prospective underwriters, brokers, dealers, and other persons who have agreed to participate or

are participating in such distribution.

26

Ibid.

- 21 ­

Applicants understand that while broker-dealers that (i) tender the Creation Basket for an

Initial Fund to the Trust through the Distributor in return for Creation Unites) or (ii) redeem

Creation Units for receipt of the Redemption Basket (which is usually the same as the Creation

Basket) generally will not be part of a syndicate or selling group, and while no broker-dealer will

receive fees, commissions or other remuneration from the Trust or the Advisor for the sale of

Creation Units, under certain circumstances such broker-dealers could be deemed to be

"underwriters" or "distribution participants" as such terms are defined in Rule 1OO(b).

Paragraph (c)(4) of Rule 101 exempts from its application, inter alia, redeemable

securities issued by an open-end management investment company (as such terms are used in the

1940 Act). The Trust is registered as an open-end management investment company under the

1940 Act. However, individual Shares of Initial Funds are not redeemable except in Creation

Units. Due to the redeemability of such Shares in Creation Units, there should be little disparity

between the Shares' market price and their NAV per Share. Accordingly, the rationale for

exempting redeemable securities of open-end management investment companies from the

application of Rule 101 is equally applicable to the Shares of Initial Funds. Although

redemption is subject to the condition of tendering the appropriate number of Shares of Creation

Units, the Trust otherwise will continue to function as an open-end fund continuously offering its

Shares. It is in recognition of the special nature of such offerings that open-end management

investment company and unit investment trust securities are exempted under paragraph (c)(4).

Without such an exemption, they could not operate as intended. In view of the foregoing,

Applicants request that the Commission confirm that as a result of registration of the Trust as an

open-end management investment company and the redeemable nature of its Shares in Creation

Units, transactions in the Shares of Initial Funds would be exempted from Rule 101 on the basis

of the exception contained in (c)(4) of such Rule.

The purpose of Rule 101 is to prevent persons from conditioning the market to facilitate a

distribution. Creation Units of Shares of Initial Funds may be created and redeemed, primarily

"In-Kind" (or in cash in certain cases) at NAV, on any business day; holders of such Shares also

have the benefit of intra-day secondary market liquidity by virtue of their Exchange listing.

Thus, the secondary market price of an Initial Fund's Shares should not vary substantially from

the NAV of such Shares. Because of the redeemability of Shares in Creation Units, coupled with

the open-end nature of the Trust, any significant disparity between the market price of the Initial

Shares and their NAV should be eliminated by this arbitrage activity. Given that the NAV of an

Initial Fund's Shares is largely based on the market value of such Initial Fund's Portfolio

Holdings, transactions involving Shares (creations from and redemptions with the Trust, as well

as purchases and sales in the secondary market) will not affect NAV. Similarly, such

transactions should not have a significant effect on the market price of an Initial Fund's Shares.

Applicants also respectfully request relief from the provisions of Rule 101 to the extent

necessary to permit persons or entities that may be deemed to be participating in the distribution

of Shares of any Initial Fund or shares of any components of an Initial Fund's Creation Basket (i)

to purchase a Creation Basket for the purpose of tendering it to such Initial Fund as part of a

Creation Deposit, for the purchase of Creation Units of Shares of such Initial Fund and (ii) to

- 22­

tender Shares of such Initial Fund for redemption in Creation Units and to receive a Redemption

Basket as part of redemption proceeds.

Applicants request that the Commission clarify that the tender of the Shares of any Initial

Fund to such Initial Fund for redemption and the receipt of some or all of the components of a

Redemption Basket upon redemption does not constitute a bid for or purchase of any of such

securities, or an "attempt to induce any person to bid for or purchase a covered security, during

the applicable restricted period" for the purposes of Rule 101. Redemption entails no separate

bid for any of the components of a Redemption Basket. As described above, following notice of

redemption, an Initial Fund will deliver the specified components of a Redemption Basket after

the redemption request is received in proper form, except in those cases where redemption

proceeds are paid in cash. Absent unusual circumstances, the Trust will not purchase such

Redemption Basket in the secondary market to fulfill a redemption request. Therefore,

redemptions of Initial Fund Shares cannot be expected to affect the market price of the

Redemption Basket. As indicated above, the Distributor will not engage in any secondary

market transactions in Initial Fund Shares, either for its own account or for investors.

In addition, Applicants believe that the purchase of a Creation Basket occurring when a

creator is engaged in a distribution with respect to the components of such Creation Basket,

made for the purpose of acquiring a Creation Unit of Shares, should be exempted from Rule 101.

The purpose of Rule 101 is to prevent persons from conditioning the market to facilitate a

distribution. Applicants state that there is no ability to manipulate the price of one or more Index

Constituents by executing Creation Unit transactions, for several reasons. As mentioned above,

no Initial Fund will hold in excess of 3% of the outstanding shares of any Underlying ETF that is

an Index Constituent of such Initial Fund's FOF Index, and may hold considerably less than such

amount. 27 In addition, the liquidity requirements that are part of the Process' selection

parameters, ensure that only large ETFs will become Index Constituents of such Initial Fund's

FOF Index. It is difficult to imagine that a creator could effectively manipulate the price of

shares of any Underlying ETF by engaging in Creation Unit transactions involving a position far

smaller than 3% of such ETF's total outstanding shares. Applicants also note that the Underlying

Prior ETFs that are Index Constituents of each initial Index are themselves index funds that are

either subject to the ETF Class Relief or have received individual relief from the application of

Rule 101, and in all cases are subject to the arbitrage mechanism inherent in the ETF structure.

Given that the Prior ETFs have successfully argued that the risk of price manipulation in their

single tier Index ETFs is unlikely, Applicants believe the same result is even more unlikely in an

Initial Fund comprised of such single tier ETFs. Therefore, Applicants state that there is no

ability to manipulate the price of one or more Index Constituents by entering into Creation Unit

27 In order for any FOF Fund to comply with the requirements of Section 12(1)(d)(1)(F) of the 1940 Act, it, together

with all of its affiliated persons, including all other Funds, may not hold in excess of "3% of the total outstanding

stock" of such ETF. Applicants note, therefore, that although a single FOF Fund may hold up to 3%, it is likely to

hold less than this maximum because 3% is an aggregate cap applicable to all Funds that hold shares of such ETF.

Were more than one Initial Fund to hold the shares of a particular Prior ETF, each such Fund would necessarily

hold less than 3% of the outstanding shares of such Prior ETF.

- 23 ­

transactions. Even assuming, for the purposes of discussion, that a creator managed to engage in

price manipulation via Creation Units transactions, for the reasons discussed above, Applicants

note that aberrations in the price should be readily detected by the marketplace and corrected by

arbitrage activity when detected, thus eliminating the need for the limitations contained in Rule

101.

For all these reasons therefore, Applicants believe that the application of Rule 101 in this

context would not further the anti-manipulative purposes underlying the Rule. In view of the

inability to manipulate the price of one or more Index Constituents by creating Creation Units of

Initial Fund Shares, combined with a predictable lack of any meaningful potential for the

issuance and the secondary market trading of such Shares to affect significantly Share pricing,

Applicants believe that the application of Rule 101 to a broker-dealer or other person who may

be participating in a distribution of Initial Fund Shares or an Index Constituent of an Fund

Creation Basket is unnecessary and inappropriate, and could unnecessarily hinder broker-dealers

or other persons in their creation and redemption activities, in their day-to-day ordinary business

of buying and selling securities and such Shares and thus undermine the potential beneficial

market effect of Share trading.

B.

RULE 102 OF REGULATION M

Applicants also request that the Commission confirm that, as a result of registration of the

Trust as an open-end management investment company and the redeemable nature of the Initial

Fund Shares in Creation Units, for the reasons previously stated under the request for relief under

Rule 101(c)(4), transactions in such Shares would be exempted from Rule 102 on the basis of the

exception contained in paragraph (d)(4) of such Rule. Applicants believe that the application of

Rule 102 in this context would not further the anti-manipulative purposes underlying the Rule.

The purpose of Rule 102 is to prevent persons from manipulating the price of a security

during a distribution and to protect the integrity of the offering process by prohibiting activities

that could artificially influence the market for that particular security. Applicants respectfully

request that the Commission grant an exemption under paragraph (e) of Rule 102 to allow each

of the Initial Funds to redeem Shares in Creation Units during the continuous offering of their

Shares. Applicants respectfully submit that the redemptions described in this letter do not

constitute a manipulative or deceptive practice within the purpose of Rule 102 and are eligible

for an exemption from the provisions of Rule 102 to allow each of the Initial Funds to redeem

their Shares in Creation Units during the continuous offering of such Shares.

For the reasons described above in connection with the requested Rule 101 relief,

redemption transactions and secondary market transactions in the Shares of Initial Funds can not

be used to manipulate the price of one or more components of a Redemption Basket during a

distribution of such components. The Trust will redeem the Creation Units of Initial Fund

Shares at the NAV of such Shares. Although Shares of Initial Funds are traded on the secondary

market, such Shares may only be redeemed in Creation Units. Thus, Applicants believe that the

redemption by of the Shares of each of the FOF Initial Funds at NAV in consideration

principally for components of a Redemption Basket does not involve the abuses that Rule 102

was intended to prevent.

- 24­

C.

RULE lOb-lO

Rule 1Ob-1 0 requires a broker or dealer effecting a transaction in a security for a

customer to give or send written notification to such customer disclosing the information

specified in paragraph (a) of Rule 10b-10, including the identity, principal amount, price yield

and number of units or units (or principal amount) of the security purchased or sold. Applicants

request that the Commission grant an exemption from Rule lOb-lO, as discussed below, with

respect to the creation (i.e., issuance) or redemption of Shares of Initial Funds (all of which are in

Creation Units). Applicants are not requesting exemptive or interpretive relief from Rule lOb-10

in connection with purchases and sales of Shares of Initial Funds in the secondary market.

Applicants propose that broker-dealers either creating or redeeming Shares of Initial

Funds in Creation Units for their customers be permitted to provide such customers with a

statement of the number of such Creation Units created or redeemed without providing a

statement of the identity, number and price of individual components of the Creation Basket

tendered for purposes of creation of Creation Units, or the identity, number and price of the

individual components of the Redemption Basket to be delivered to the redeeming holder. As

mentioned above, the composition of the Creation Basket or Redemption Basket required for

tender or delivery, respectively, will be disseminated by the Initial Fund's Custodian on each

business day and will be applicable to requests for creations or redemption, as the case may be,

on that day. This information will be publicly available at the primary listing Exchange and will

be made available to requesting broker-dealers or other persons through the facilities of NSCC.

Moreover, institutions and market professionals will be readily able to calculate independently

such information based on publicly available information. Applicants anticipate that any

institution or broker-dealer engaging in creation or redemption transactions would have done so

only with knowledge of the composition of the applicable Creation Basket or Redemption

Basket, so that specific information in the Rule 1Ob-1 0 notification would be redundant.

Applicants agree that any exemptive or interpretive relief under Rule 1Ob-1 0 with respect

to creations and redemptions of Initial Funds be subject to the following conditions:

(1)

Confirmation statements of creation and redemption transactions in Shares will

contain all of the information specified in paragraph (a) of Rule 1Ob-l 0 other than

identity, price, and number of shares of each individual securities constituent of the

Creation Basket or the Redemption Basket tendered or received by the customer in

the transaction;

(2)

Any confirmation statement of a creation or redemption transaction in Shares that

omits the identity, price, or number of shares of each individual securities

constituent of the Creation Basket or the Redemption Basket will contain a

statement that such omitted information will be provided to the customer upon

request; and

(3)

All such requests will be fulfilled in a timely manner in accordance with paragraph

(c) of Rule lOb-10.

- 25 ­

D.

RULE lOb-17

Rule 10b-17 requires an issuer of a class of publicly traded securities to give notice of

certain specified actions (e.g., dividends, stock splits, rights offerings) relating to such class of

securities in accordance with Rule 1Ob-17(b). The Trust respectfully requests the Commission,

pursuant to paragraph (b)(2), unconditionally exempt the Trust from the application of Rule 10b­

17. Application of the Rule to the Trust would be impractical and unnecessarily burdensome, in

view of the fact that holders of Shares are not holders of the Prior ETFs, ETVs and other

Portfolio Holdings of an Initial Fund. Given the nature of the Initial Funds as FOF funds,

Applicants believe that compliance with Rule 10b-17 would be impractical and would not solve

any of the concerns that the rule was designed to address.

As an investment company, the Trust is required by the Internal Revenue Code to

distribute at least 98% of its ordinary income and capital gains during the calendar year. If the

Trust declares too small a dividend, it will be charged an excise tax. If it declares too large a

dividend, the excess could be considered a return of capital to investors. To avoid an over- or

under-distribution of ordinary income, mutual funds, including the Trust, must estimate: (i) the

amount of ordinary income to be earned during the period from the date the dividend is declared

to December 31; and (ii) the number of shares that will be outstanding as of the record date.

Requiring the Trust to declare its dividend ten days in advance of the record date would increase

the period for estimating ordinary income and the number of outstanding shares, and thus

increase the risk of an over- or under-distribution. Requiring the Trust to declare its dividend ten

days in advance of the record date also would increase the chance that the Trust would over- or

under-distribute capital gains. Unlike ordinary income, the Trust does not have the problem of

estimating the aggregate amount of capital gains it will earn between declaration date and year­

end, but as noted above, requiring the Trust to declare its dividend ten days in advance of the

record date would increase the chance that the Trust would misestimate the number of

outstanding shares. This, in tum, would increase the chance that the Trust would mis-estimate

the per share amount of capital gains it must distribute. In view of the foregoing, the Trust

requests that the Commission, pursuant to paragraph (b)(2), exempt the Trust, its Initial Funds

and the Initial Shares from the application of Rule lOb-17.

In the alternative, the Trust seeks clarification that the exemption contained in paragraph

(c) of Rule 10b-17 is applicable to the Initial Shares of each Initial Fund of the Trust. Paragraph

(c) of Rule 10b-17 states that the Rule shall not apply to redeemable securities issued by open­

end investment companies and unit investment trusts registered under the 1940 Act. But for the

fact that Shares of each Initial Fund may only be redeemed in Creation Unit sized aggregations,

such Shares are redeemable securities issued by the Trust. It is in recognition of the foregoing

that the Commission has issued the Trust Order to Applicants, as well as orders to Other ETFs,

permitting them to issue shares with limited redeemability while at the same time treating them

as other open-end investment companies. Therefore, the exemption under paragraph (c) of Rule

1Ob-17, which covers open-end investment companies with fully redeemable shares, should be

applicable to the Shares of each Initial Fund of the Trust.

- 26­

E.

SECTION ll(d)(l); RULES lldl-1 AND lldl-2

Section 11 (d)(1) of the 1934 Act generally prohibits a person who is both a broker and a

dealer from effecting any transaction in which the broker-dealer extends credit to a customer on

any security which was part of a new issue in the distribution of which he participated as a

member of a selling syndicate or group within thirty days prior to such transaction. Rule 11 d1-1

provides an exemption from Section 11 (d)(I) for securities issued by a registered open-end

investment company or unit investment trust with respect to transactions by a broker-dealer who

extends credit on such security, provided the person to whom such credit is extended has owned

the securities for more than thirty days.28

In the SIA Letter, the Staff has previously issued class relief under Section 11 (d)(l) and

Rule I1dl-2 with respect to ETFs which meet certain conditions. Applicants request that similar

relief be extended with respect to the Initial Funds subject to the identical conditions enumerated

in the SIA Letter. Under the conditions of the SIA Letter, the only compensation a broker-dealer

will receive for representing a customer in purchasing Shares of the Initial Funds is the

commission charged to that customer, which in all likelihood is the same compensation the

broker-dealer would receive in connection with any stock purchase by a customer. Therefore,

there is no special financial incentive to a broker-dealer, except the broker-dealer's regular

commission, to engage in secondary market transactions in Shares of the Initial Funds, whether

as principal or agent. In view of the foregoing, Applicants do not believe that application of the

thirty-day restriction in Rule I1dl-2 to broker-dealers furthers the purpose of Section 11(d)(I) or

Rule lldl-2.

F.

RULE 15c1-5 AND 15cl-6

Rule 15cl-5 requires a broker or dealer controlled by, controlling, or under common

control with, the issuer of a security who induces the purchase or sale by a customer of a

security, to disclose the existence of such control before entering into a contract with or for such

customer for the purchase or sale of such security. Rule 15c1-6 requires a broker or dealer to

send a customer written notification of its participation in the primary or secondary distribution

in which it effects any transaction in or for such customer's account or induces the purchase or

sale of such security by such customer.

For the reasons discussed above, Applicants believe that disclosure by a broker-dealer of

a control relationship with the issuer of a Index Constituent of the relevant Initial Index, or of a

participation in the distribution of one of the security components of an Initial Fund's Portfolio

Holdings would impose an unnecessary and unjustifiable burden on broker-dealers engaging in

Share transactions for their customers. As discussed above, there is no realistic potential for

manipulating the market price of any component of an Initial Fund's Portfolio Holdings by

28 Applicants note that broker-dealers that engage in both creation of Creation Units of Shares of Initial Funds and

secondary market transactions in such Shares and that meet the requirements of Rule lldl-l may be covered by the

exemptions provided in such rule.

- 27­

transactions in its Shares. Application of the Rules could adversely affect the attractiveness of

Initial Fund Shares to broker-dealers and thereby affect market liquidity and the utility of such

Shares as a form of basket trading. Applicants, therefore, requests the Commission to grant no­

action relief from application of the Rules 15cl-5 and 15cl-6 with respect to creations and

redemptions of Initial Fund Shares and secondary market transactions therein.

PART VI

Based on the foregoing, Applicants respectfully request that the Commission and the

Division grant the relief requested herein. The forms of relief requested are virtually identical to

those actions which the Commission and the Division of Trading and Markets have taken in

similar circumstances.

Thank you for your consideration of this request. The Trust intends to launch the trading

of the Shares of the Initial Funds on March 25, 2009 as soon as practicable after the appropriate

regulatory relief has been obtained. In light of this schedule and given the ample precedent for

the requested relief, Applicants are hopeful that the requests contained herein will be handled

expeditiously. Should you have any questions or require additional information, please do not

hesitate to call the undersigned at (212) 940-6304.

~it0\

Kathleen H. Moriarty

KHM:mb

cc:

James L. Eastman, Esq.

Brian A. Bussey, Esq.

Bradley Gude, Esq.

Darren Vieira, Esq.

Division of Trading and Markets

Michael W. Mundt, Esq.

Division of Investment Management

- 28­