SEC Division of Trading and Markets no-action letter: Claymore Exchange-Traded Fund Trust

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
DIVISION OF
TRADING AND MARKETS
May 24, 2011
Jeremy Senderowicz
Dechert LLP

1095 Avenue ofthe Americas

New York, NY 10036
Re: Claymore Exchange-Traded Fund Trust

File No. TP 11-12

Dear Mr. Senderowicz:
In your letter dated May'24, 2011, as supplemented by conversations with the staff ofthe Division ofTrading and Markets ("Division"), Claymore Exchange-Traded Fund Trust (the "Trust") requests exemptive, interpretive, or no action relief with respect to Rule 1Ob-17 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). We have enclosed a photocopy ofyour letter. Each defined term in this letter has the same meaning as defined in your letter, unless we note otherwise. The Trust was organized on May 24,2006 as a Delaware statutory trust. The Trust is registered with the Commission under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end management investment company. The Trust is currently comprised of twenty-five series (each, a "Fund"), including the Claymore U.S. Capital Markets Bond ETF ("Converting ETF #1") and the Claymore U.S. Capital Markets Micro-Term Fixed Income ETF ("Converting ETF #2" and together with Converting ETF #1, the "Converting ETFs"). You represent that the Converting ETFs currently meet the requirements of the class reliefletters for index ETFs. 1 However, as a result ofthe conversion ofthese funds from an index-based to an actively-managed strategy, the Converting ETFs will no longer be able to rely upon these letters for relief from Rule 1Ob-17. Response:
Rule 1Ob-17, 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 ofsecurities in accordance with Rule 1Ob-17(b). On the basis of your representations and the facts presented, and without necessarily concurring in your analysis, particularly that the concerns that the Commission raised in adopting Rule 10b￾17 will generally not be implicated if exemptive relief is granted to the Trust because market participants will receive timely notification of the existence and timing of a pending distribution See, ~, Letter from James A. Brigagliano, Associate Director, Division of Market Regulation, to Benjamin J. Haskin, Esq., Willkie Farr & Gallagher, LLP (Apr. 9,2007).

Jeremy Senderowicz
Dechert LLP
May 24, 2011 and Shares ofthe Converting ETFs are listed on an Exchange, the Commission hereby grants an exemption from the requirements ofRule 10b-17 to the Trust with respect to transactions in the Shares.2 This exemptive reliefis subject to the following conditions:

• The Trust will comply with Rule 1Ob-17 except for Rule 1Ob-17(b)(1 )(v)(a) and (b); and
• Rule 10b-17(b)(1)(v)(a) and (b) will be complied with as soon as practicable before
  trading begins on the ex-dividend date, but in no event later than the end ofregular business hours for the Exchange the day before the ex-dividend date. This exemptive relief is subject to modification or revocation if at any time the Commission or Staff determines that such action is necessary or appropriate in furtherance ofthe purposes ofthe Exchange Act. In addition, persons relying on this exemptive relief are directed to the anti-fraud and anti-manipulation provisions ofthe Exchange Act, particularly Sections 9(a), lO(b), and Rule IOb-5 thereunder. Responsibility for compliance with this and other provisions of the federal or state securities laws must rest with persons relying on this exemptive relief. The Division expresses no view with respect to other questions that the proposed transactions may raise, including, but not limited to, the adequacy ofdisclosure 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,

~eAssistant Director
Attachment
We also note that timely compliance with Rule lOb-17(b)(1)(v)(a) and (b) would be impractical in light ofthe nature ofthe Converting ETFs. This is because it is not possible for the Trust to accurately project ten days in advance the information required by these provisions. 2

1095 Avenue of the Americas
New York, NY 10036-6797 Dechert +1 212 698 3500 Main +1 212 698 3599 Fax LLP www.dechert.com JEREMY SENDEROWICZ jeremy.senderowicz@dechert',99.JJl +12126415669 Direct'S>". +2126983599 Fax ':':",. May 24, 2011 JosephineJ. Tao, Esq. Assistant Director Office of Trading Practices and Processing Division ofTrading and Markets Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Claymore Exchange-Traded Fund Trust: Request for Exemptive, Interpretive or No-Action Relief from Rule 1Ob-17, promulgated under the Securities Exchange Act of 1934, for Actively-Managed, Exchange-Traded Fixed Income Funds Dear Ms. Tao:
Claymore Exchange-Traded Fund Trust (the "Trust") was organized on May 24, 2006 as a Delaware statutory trust and is registered with the Securities and Exchange Commission (the "Commission" or the "SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust is currently comprised oftwenty-nine series (each, a "Fund" or "ETF"), including the Claymore U.S. Capital Markets Bond ETF ("Converting ETF #1") and the Claymore U.S. Capital Markets Micro-Term Fixed Income ETF ("Converting ETF #2" and together with Converting ETF #1, the "Converting ETFs"). Guggenheim Funds Advisors, LLC (formerly known as Claymore Advisors, LLC; the "Investment Adviser") oversees the business affairs ofthe Converting ETFs and provides or oversees the provision of all administrative and investment advisory services to the Converting ETFs. The Investment Adviser is responsible for selecting portfolio securities ("Portfolio Securities") for the Converting ETFs. Each Converting ETF commenced operations on February ,':'1, v· I5838397.5.BUSINESS US Austin Boston Charlotte Hartford New York Orange County Philadelphia Princeton San Francisco Silicon Valley Washington DC EUROPE Brussels Dublin London Luxembourg Moscow Munich Paris ASIA Beijing Hong Kong

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12,2008 and has operated since that date as an index-based ETF, but is converting to an actively￾managed ETF on or about June 1, 2011.1 The Trust, on behalf of itself and the Converting ETFs, hereby requests that the Securities and Exchange Commission grant exemptive, interpretive or no-action relief from Rule 10b-17 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Trust issues and redeems shares ofthe Converting ETFs ("Shares") in aggregations of 100,000 Shares ("Creation Unit Aggregations"). The Trust has filed a post-effective amendment to its registration statement on Form N-IA with respect to the Converting ETFs' conversion to actively-managed ETFs and the Shares are listed on an Exchange. The Trust is overseen by a board oftrustees (the "Board") that will maintain the composition requirements of
Section 10 ofthe Investment Company Act of 1940, as amended (the "1940 Act"). The
Converting ETFs have adopted fundamental policies consistent with the 1940 Act and are classified as "non-diversified" under the 1940 Act. The Converting ETFs intend to maintain the required level of diversification, and otherwise conduct their operations, so as to meet the regulated investment company diversification requirements of the Internal Revenue Code of 1986, as amended. In connection with their conversion to actively-managed ETFs, the Claymore U.S. Capital Markets Bond ETF and the Claymore U.S. Capital Markets Micro-Term Fixed Income ETF will be changing their names to the Guggenheim Enhanced Core Bond ETF and the Guggenheim Enhanced Ultra-Short Bond ETF, respectively. 15838397.5.BUSINESS

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The SEC staff ("Staff') has previously issued relief substantially similar to that requested herein to actively-managed exchange-traded funds ("ETFs"),z as well as index-based ETFs listed and traded on a national securities exchange, which meet certain conditions.3 During the period which the Converting ETFs have operated as index-based ETFs, the Converting ETFs have relied upon the aforementioned class relief provided to index-based ETFs listed and traded on a national 2 See Letter from Josephine Tao, Esq., Assistant Director, Division of Trading and Markets, to PIMCO ETF Trust Actively Managed Fixed Income Exchange Traded Fund, dated November 10, 2009 ("PIMCO Letter"); Letter from Josephine Tao, Esq., Assistant Director, Division ofTrading and Markets, to WisdomTree Trust, dated May 9, 2008 ("WisdomTree Letter I") and Letter from Josephine Tao, Esq., Assistant Director, Division of Trading and Markets, to WisdomTree Trust Real Return Actively Managed ETF, dated May 27, 2010 ("WisdomTreeLetter II", and together with WisdomTree Letter I, the "WisdomTree Letters"); Letter from James A. Brigagliano, Esq., Associate Director, Division ofTrading and Markets, to PowerShares Actively Managed Exchange Traded Fund Trust, dated April 4, 2008 ("PowerShares Letter"); Letter from Josephine Tao, Esq., Assistant Director, Division of Trading and Markets, to Grail Advisors ETF Trust, dated April 30, 2009 [revised - May 6, 2009] ("Grail Letter"); and Letter from Josephine Tao, Esq., Assistant Director, Division ofTrading and Markets, to AdvisorShares Trust Actively￾Managed ETF, WCMlBNY Mellon Focused Growth ADR, dated June 18,2010 ("AdvisorShares Letter"). In the WisdomTree Letter I, the Staff stated that it has repeatedly expressed its views on Exchange Act Section ll(d)(l) and Exchange Act Rules 10b-10, lldl-2, l5cl-5 and l5c1-6 with respect to ETFs that are not tied to an index. The Staff stated that it therefore would not respond to requests for relief under Section 11(d)(l) or Rules 1Ob-1O, lldl-2, l5cl-5, and l5cl-6 relating to ETFs that are not managed to track a particular index unless they present novel or unusual issues. Because the Trust does not believe that the creation, redemption, listing or trading of Shares should present any novel or unusual issues, the Trust does not request relief from Section l1(d)(l) or Rules 10b-10, lldl-2, l5cl-5 and l5c1-6 under the Exchange Act. See Letter from James A. Brigagliano, Esq., Associate Director, Division of Market Regulation, regarding Class Relieffor Fixed Income Exchange Traded Index Funds, dated April 9, 2007; Letter from James A. Brigagliano, Esq., Acting Associate Director, Division of Market Regulation, to PowerShares Exchange-Traded Fund Trust regarding Class Relief for Exchange Traded Index Funds, dated October 24,2006; Letter from James A. Brigagliano, Esq., Assistant Director, Division of Market Regulation, to Claire P. McGrath, Vice President and Special Counsel, The American Stock Exchange,
regarding relief for Exchange Traded Index Funds, dated August 17,2001; see also Letter from Josephine Tao, Esq., Assistant Director, Division of Market Regulation, regarding Combination Exchange-traded Funds, dated June 27,2007. 15838397.5.BUSINESS

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LLP securities exchange (each such exchange, an "Exchange"), which meet certain conditions. The PIMCO Letter, WisdomTree Letters, PowerShares Letter, Grail Letter and AdvisorShares Letter each provided relief specific to the ETFs described therein and, therefore, the Trust and the Converting ETFs are not entitled to rely on those letters for relief. Further, because the Converting ETFs are converting from index-based ETFs to actively-managed ETFs, they are not entitled to rely on the relief previously provided to index-based ETFs as a class. The Trust and the Converting ETFs note, however, that their proposal-the creation and issuance by an actively-managed investment company ofshares that individually trade on an E~change, but that can only be purchased from and redeemed with the issuing investment company in large aggregations-is no longer novel. The Commission has in the past sixteen years considered and approved many similar proposals. Some ofthe index-based products for which relief has been granted have been trading publicly for years, and the Trust is not aware of any abuses associated with them. Indeed, several ofthe index-based products have been so embraced by investors that they are routinely among the highest volume securities on the exchanges on which they trade.4 4 The SEC has previously granted exemptive or no-action relief under Rules 1Oa-1, 10b-6, 1Ob-7, lOb-lO, 14e-5 (formerly, lOb-B), 10b-17, lldl-2, 15cl-5, 15cl-6 and Regulation M under the Exchange Act similar to that requested here. See, e.g., Letter from Nancy J. Sanow, Assistant Director, Division of Market Regulation to James F. Duffy, Senior Vice President and General Counsel, AMEX, dated January 22, 1993 with respect to the trading of the SPDR Trust, Series 1; Letter from Nancy 1. Sanow, Assistant Director, Division of Market Regulation to James F. Duffy, Executive Vice President and General Counsel, AMEX, dated April 21, 1995 with respect to the 15838397.5.BUSINESS

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The Converting ETFs, like the ETFs described in the PIMCO Letter, WisdomTree Letters, PowerShares Letter, Grail Letter and AdvisorShares Letter, will differ from index-based ETFs to the extent that they are "actively managed." However, the Converting ETFs' portfolios will be fully transparent and thereby permit arbitrage activity to the same extent as index-based ETFs. In all other material respects, the Converting ETFs will operate in the same manner as index-based ETFs. Therefore, while the Converting ETFs will be actively managed, the Trust does not believe that they raise any significant new regulatory issues. trading of the MidCap SPDR Trust; Letters from Larry E. Bergman, Senior Associate Director, Division of Market Regulation and James A. Brigagliano, Assistant Director, Division of Market Regulation to Stuart M. Strauss, Gordon, Altman, Butowsky, Weitzen, Shalov & Wein, dated December 14, 1998 and December 22, 1998, respectively, each with respect to the trading ofthe Select Sector SPDR Trust; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to James F. Duffy, Executive Vice President and General Counsel, AMEX, dated March 3, 1999 with respect to the trading of the Nasdaq-lOO Trust, Series 1; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to Kathleen H. Moriarty, Carter, Ledyard & Milburn, dated May 16,2000 with respect to the trading of the iShares Trust; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to Stuart M. Strauss, Mayer, Brown & Platt, dated September 26,2000 with respect to the trading ofthe streetTRACKS® Series Trust; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to W. John McGuire, Morgan, Lewis & Bockius LLP, dated July 25, 2002 with respect to the trading ofvarious series funds ofthe iShares Trust; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to Stuart M. Strauss, Mayer, Brown, Rowe & Maw, dated October 21,2002 with respect to the trading of the FrescoSM Index Shares Funds; Letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to Jack P. Drogin, Morgan, Lewis & Bockius LLP, dated September 25, 2003 with respect to the trading ofthe iShares Lehman U.S. Treasury Inflation Protected Securities Fund and the iShares Lehman U.S. Aggregate Bond Fund (each a series ofthe iShares Trust). 15838397.5.BUSINESS

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The Converting ETFs' Amended Investment Objective and Strategies Converting ETF # l's investment objective will be total return, comprised ofincome and capital appreciation. Converting ETF #2's investment objective will be maximum current income, consistent with preservation of capital and daily liquidity. The Converting ETFs will primarily invest in u.S. dollar-denominated investment grade debt securities. The Converting ETFs may invest in high yield securities ("junk bonds"). Converting ETF #2 may also invest in municipal securities. Converting ETF #2 may invest a substantial portion of its assets in short-term instruments such as commercial paper and/or repurchase agreements. The Converting ETFs may invest in a wide range of fixed income instruments selected from, but not limited to, the following sectors: U.S. Treasury securities, corporate bonds, emerging market debt and non-dollar denominated sovereign and corporate .debt. Rule IOb-17 Rule 1Ob-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 lOb-17(b). Specifically, Rule 1Ob-17(b)(1 )(v)(a-b) require such advance notice to specify (a) for cash distributions, the amount of cash to be paid or distributed per share5 , and (b) for in-kind distributions, the amount ofthe security outstanding 5 The rule pennits a reasonable approximation ofthe per share distribution to be provided if exact amounts cannot be given because of existing conversion rights which may be exercised during the 15838397.5.BUSINESS

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LLP immediately prior to and immediately following the dividend or distribution and the rate of such dividend or distribution. Paragraph (c) ofthe Rule, however, 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. Except for the fact that redemption is subject to the minimum condition oftendering a Creation Unit Aggregation of Shares, the Trust is intended to function like any other open-end fund continuously offering its shares. It is in recognition ofthe foregoing, the Division ofInvestment Management issued an order permitting the Trust to issue shares with limited redeemability while still treating the Trust like any other open-end investment company. In addition, compliance with Rule 1Ob-17(b)(1)(v)(a-b) would be impractical in light of the nature ofthe Converting ETFs. This is because it is not possible for the Trust to accurately project ten days in advance what dividend, if any, would be paid on a particular record date. Because ofthis inability to project the amount ofany dividend ten days in advance of a record date, applying the timing requirements of lOb-17(b)(l)(v)(a-b) to the Trust would increase the chances that the Trust would mis-estimate the amount of any such dividend.6 notice period and may affect the per share cash distribution, as long as the actual per share distribution is subsequently provided on the record date. 6 As an investment company, the Trust is required by the mtemal Revenue Code to distribute at least 98% of its ordinary income and capital gains during the calendar year. Ifthe 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 15838397.5.BUSINESS

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The Trust represents that it will comply with the other requirements ofRule 1Ob-17. The Trust further represents that, as soon as practicable following the end oftrading on the Exchange on the day prior to the ex-date (but no later than the Exchange's close of business on such date) with respect to any distribution made by a Fund, the Trust will provide notice to the Exchange containing the information required in Rule lOb-17(b)(1)(v)(a-b). In the proposing release for Rule 1Ob-17 (the "Proposing Release"f, the Commission stated:
It has been the experience of the Commission and the securities industry that the failure of a publicly held company to provide a timely announcement ofthe record date with respect to these types of rights has had a misleading and deceptive effect on both the broker-dealer community and the investing public. As a direct result of such failure, purchasers and their brokers may have entered into and settled securities transactions without knowledge ofthe accrual ofsuch rights and were thus unable to take necessary steps to protect their interests. Further, sellers who have received the benefits of such rights as recordholders on the specified record date after having disposed oftheir ordinary income, registered investment companies, including the Trust, must estimate: (i) the amount ofordinary income to be earned during the period from the date the dividend is declared to December 31; and (ii) the number ofshares that will be outstanding as ofthe record date. Requiring the Trust to declare the amount of a 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 the amount of a dividend ten days in advance ofthe record date also would increase the chance that the Trust would over- or under-distribute capital gains. Further, 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 the amount of a dividend ten days in advance ofthe record date would increase the chance that the Trust would misestimate the number of outstanding shares. This, in turn, would increase the chance that the Trust would mis-estimate the per share amount of capital gains it must distribute. 7 Exchange Act Release No. 9076 (February 17, 1971). 15838397.5.BUSlNESS

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LLP securities, have also disposed ofthe cash or stock dividends or other rights received as such recordholders without knowledge ofpossible claims ofpurchasers ofthe underlying security to those rights....Inmany instances, innocent buyers and sellers have suffered losses. In addition, some issuers have made belated declarations of stock splits or dividends with the apparent knowledge that this action would have a manipulative effect on the market for their securities. We respectfully submit that none ofthese concerns raised by the Commission in the Proposing Release8 will be implicated ifthe requested relief is granted. As set forth above, the Trust will comply with the requirements of Rule IOb-17 except for the timing requirements for notification ofthe actual amounts ofthe distributions under Rule IOb-17(b)(1)(v)(a-b). Accordingly, market participants will receive timely notification ofthe existence and timing of a pending distribution, and will be able to plan their transactions in Fund shares accordingly. As a result, there should be no confusion or opportunity for manipulation regarding parties' rights to receive distributions, which concerns inspired the Commission to propose and adopt Rule IOb-17. Therefore, the requested relief concerning the timing requirements ofRule IOb-17(b)(1)(v)(a-b) is consistent with the purposes underlying the adoption ofRule IOb-17 as outlined in the Proposing Release and Adopting Release. The exemption under paragraph (c) ofRule IOb-17, which covers open-end investment companies with fully redeemable shares, thus should be applicable to the Trust with respect to the timing requirements of Rule IOb-17(b)(1)(v)(a-b). 8 The foregoing concerns were largely reiterated by the Commission in the release adopting Rule lOb-17. See Exchange Act Release No. 9192 (June 7,1971) (the "Adopting Release"). 15838397.5.BUSINESS

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Conclusion
Based on the foregoing, we respectfully request that the Commission and the Staff grant the relief requested herein. If the Commission or the Staff believes that a different format is appropriate (for example, a no-action position rather than an exemption), we would appreciate the opportunity to revise this request for relief accordingly. Should you have any questions please call me at 212.641.5669. / Sincerely, cc: David Bloom, Esq. Bradley Gude, Esq. Securities and Exchange Commission 15838397.5.BUSINESS