SEC Division of Trading and Markets no-action letter: PIMCO ETF Trust

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
TR'ADING AND MARKETS August 20,2009
W. John McGuire, Esq.
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
Re: PIMCO ETF Trust
File No. TP 09-62
Dear Mr. McGuire:
In your letter dated August 20, 2009, as supplemented by conversations with the staffofthe Division of Trading and Markets ("Staff'), PIMCO ETF Trust (the "Trust") requests fTom the Staff certain relief with respect to Rules 101 and 102 of Regulation M. We have enclosed a photocopy of your letter. Each defined term in this letter has the same meaning as defined, directly or by reference, in your letter, unless we note otherwise. The Trust was organized on November 14,2008 as a Delaware statutory trust. The Trust is registered with the Securities and Exchange Commission ("Commission") under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Trust's Original Fund seeks to provide total return that closely corresponds, before fees and expenses, to therotal return of the Merrill Lynch 1-3 Year U.S. Treasury Index ("Underlying Index"). The Additional Fund and the Future Funds will be structured identically to the Original Fund that was issued by the Trust and afforded relief by the Commission in the PIMCO Response Letter. In addition, the Additional Fund and the Future Funds will be subject to the same conditions and representations as those made in connection with the Original Fund. The Trust now requests that the relief afforded to the Original Fund in the PIMCO Response Letter with regard to Rules rOLand 102 ofRegulation M be extended to cover similar trading and other specified transactions in the Additional Fund and the Future Funds. In view of the substantial similarities between the Additional Fund, Future Funds, and the Original Fund, the Staff will not recommend to the Commission enforcement action under Rules 101 and 102 0 f Regulation M against persons or entities engaging in secondary market transactions in the Additional Fund and Future Funds on an Exchange, or engaging in the creation and redemption of Creation Units of the Additional Fund and Future Funds in reliance on the relief granted to the Trust in the PIMCO Response Letter, subject to the s.ame limitations and conditions.

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• w. John McGuire, Esq.
  Morgan, Lewis & Bockius LLP
  August 20, 2009
  Page:2 of2
  The foregoing no-action positions taken under Rules 101 and 102 of Regulation M are based solely on your representations and the facts presented to Staff, and are strictly limited to the application of those rules to transactions involving the shares of the Additional Fund and Future Funds under the circumstances described above, in your letter dated August 20,2009, and in the PIMCO Request Letter. Such transactions should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations. Moreover, the foregoing no-action positions taken under Rules 101 and 102 ofRegulation M are subject to the condition that such transactions in shares ofthe Additional Fund, Future Funds, Fund Securities, 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 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 no￾action positions are directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a), lOeb), and Rule IOb-5 thereunder. Responsibility for compliance with these and other provisions of the federal or state securities laws must rest with persons relying on these 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 ofdisclosure concerning, and the applicability of other federal and state laws to, the proposed transactions. Very truly yours,
• Jose ine 1. Tao
  Assistant Director
  Attachn;l~nt

Morgan. Lewis & Bockius llP Morgan Lewis
1111 Pennsylvania Avenue, NW COUNSELORS AT LAW Washington, DC 20004 SECURITIES AND EXCHA1"'.. Tel. 202.739.3000 nut COMMISSION Fax: 202.739.3001 RECElVEO www.morganlewis.com AUG 21 2009 W. John McGuire

Partner

202.739.5654 wjmcguire@MorganLewis.com DIVISION Of TRADiNG &MARKETS
August 20, 2009
Josephine J. Tao, Esq.
Assistant Director
Office of Trading Practices and Processing
Division ofTrading and Markets
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: Request of PIMCO ETF Trust for Additional Interpretive Relief from Rules 101 and 102 of Regulation M promulgated under the Securities Exchange Act of 1934 with Respect to Additional Fund and Future Funds Dear Ms. Tao:
We are writing on behalf of PIMCO ETF Trust ("Trust"). The Trust is an open-end series management investment company organized on November 14,2008 as a Delaware statutory trust. Summary of Previously Granted Relief In June 2009, the Trust listed the individual shares of a portfolio of the Trust ("Original Fund") on the NYSE Arca, Inc. ("NYSE Area"). Prior to such time, the Trust requested relief on behalfofitself, the Original Fund, any national securities exchange or national securities association on or through which the exchange.,traded shares of the Trust ("Shares") would subsequently trade (each an "Exchange"), and persons or entities engaging in transactions in Shares, from the staff of the Division of Trading and Markets ("Staff') with respect to Rules 10 I and 102 of Regulation M in connection with secondary market transactions in Shares and the creation or redemption of Creation Units ("PlMCO Request Letter"). I The Staff granted such relief ("Existing Relief') in the letter addressed to John McGuire, dated June 1, 2009 ("PIMCO Response Letter"). A copy of the PIMCO Request Letter and the PIMCO Response Letter are attached hereto for your convenience. All terms in this letter are as defined in the PIMCO Request and PIMCO Response Letters, unless otherWise defined herein. See, the request letter from W. John McGuire dated June 1,2009 with respect to the Trust. Washington Philadelphia New York Los Angeles San Francisco Miami Pittsburgh Princeton Chicago Minneapolis DB 1/6355ooJ1.I Palo Alto Dallas Houston Harrisburg Irvine Basion London Paris Brussels Frankfurt Beijing Tokyo

Josephine 1. Tao, Esq. Morgan Lewis
August 20, 2009 c o· U N S E lOR SAT lAW
Summary of Request to Extend Existing Relief to Additional and Future Funds An order on the Trust's exemptive application (File No. 812-13555) seeking relief from various provisions of the Investment Company Act of 1940, as amended ("1940 Act") was issued by the Securities and Exchange Commission on June 1,2009,2 and applied to any future series ("Future Funds") of the Trust or of certain other affiliated open-end management companies that operates as an exchange-traded fund and that tracks a specified fixed income securities index. The Trust plans to list on an Exchange shares of an additional fund not named in the Trust's request for exemptive relief or in the PIMCO Request Letter ("Additional Fund"), which is identified in Schedule A hereto. 3 In the future, the Trust plans to list on an Exchange shares of the Additional Fund, as well as shares of Future Funds as permitted by the Trust's existing exemptive relief. 4 The Additional Fund and the Future Funds will be subject to the same conditions and representations as those made in connection with the Original Fund. 5 The Additional Fund and the Future Funds will be structured identically to the Original Fund. Therefore, the relief requested in this letter is identical to that requested in the PIMCO Request Letter and granted in the PIMCO Response Letter. The Commission approved class relief relating to Fixed Income ETFs, which provides relief from Rules 101 and 102 of Regulation M, based on the composition and diversification; concentration or the rating of the Fixed Income ETF's portfolio securities, among other conditions. 6 The Original Fund was not able to rely on the Class Relief Letter because, with. respect to the investment of the cash collateral received from the Original Fund's securities lending program, it could not satisfy all of the conditions in the Class Relief Letter. Notably, it was not practical for the repository of the Original Fund's cash collateral to include a minimum of 13 non-affiliated issuers or for the Fund to be wholly comprised of non-convertible Fixed Income Securities that are rated "investment grade" by at least one nationally recognized statistical rating organization. The Original Fund, however, addressed the concerns the Class Relief Letter sought to address by consisting entirely of (l) non-convertible Fixed Income Securities that are rated "investment grade" by at least one nationally recognized statistical rating organization, as that term is used in Rule 15c3-1 ("NRSRO"), in one of its generic rating categories that signifies investment grade; and (2) investment companies that invest solely in non-convertible Fixed Ipcome securities and thatare rated "investment grade" by at least one NRSRO, in one of its generic rating categories that signifies investment grade. In all other See, Investment Company Act ReI. Nos. 28723 (May II, 2009) (Notice) and 28752 (June 1,2009) (Order).
Schedule A identifies the Additional Fund for which post-effective amendment to the Trust on Form N-IA is
currently pending. Other Future Funds may be launched at a later date. .
See supra note 2.
To the extent that a future Fixed-Income Fund is not able to meet the same conditions and representations as those made in connection with the Original Fund, the Trust would make a request to the Staff for separate relief See Letter from James A. Brigagliano, Division of Market Regulation, to Benjamin J. Haskin, dated April 9, 2007, File No. TP-07-57, for Fixed Income Exc!tange Traded-Funds (the "Class Relief Letter"). I DB1/63550031.1 6

Josephine J. Tao, Esq. Morgan Lewis
August 20, 2009 COUNSEL.ORS AT LAW material respects, the Additional Fund and the Future Funds will operate in the same manner as other ETFs. In view of the foregoing, the Trust respectfully requests that the Existing Relief be extended to cover the Additional Fund and any Future Funds on the same terms and to the same extent as that for the Original Fund. Precedent for Request to Extend Existing Relief to Additional Fund and Future Funds As discussed previously with members of your staff, given that the Additional Fund and any Future Funds will be structured identically to the Original Fund and that the form of relief requested herein is identical to the Existing Relief, we are requesting that the Existing Relief be extended to cover the Additional Fund named in Schedule A and any Future Funds by means of submitting this brief request letter, rather than a lengthy request letter restating and amending the PIMCO Request Letter. The staff has permitted this method in at least three other related contexts.? Conclusion Based on the foregoing and on our conversations with the Staff, the Trust respectfully requests that the Commission and the Division ofTrading and Markets grant the relief requested herein. The forms of relief requested are identical to the relief which the Commission and the Division of Trading and Markets granted in the PIMCO Response Letter. Should you have any questions, please call me at (202) 739-5654 or Michael Berenson at (202) 739-5450. Sincerely, W.Q/!Ju~ w. Jo~~~~ire' . cc: Bradley Gude, Esq. JOShUll Ratner, Esq~ C~theriIie Courtney, Esq. Michael Berenson, Esq. Enclosures See the letter from W. John McGuire, Esq., dated April 24, 2008 to Josephine J. Tao, Esq., Associate Director, Division of Market Regulation, and the response from Josephine J. Tao, Esq., dated April 24, 2008; the letter . from Kathleen H. Moriarty, Esq., dated January 19,2007 to James A. Brigagliano, Esq., Associate Director, Division of Market Regulation, and the response from James A. Brigagliano, Esq., to Kathleen H. Moriarty, dated January24, 2007; and the letter from Edward S. Knight, Esq., dated November 12, 2002, to James A. Brigagliano. Esq. and the response from James A. Brigagliano, Esq., dated November 13,2002. DB 1/63550031.1

Josephine J. Tao, Esq. Morgan Lewis
August 20, 2009 COUNSELORS AT LAW
Schedule A
List of Additional Fund
PIMCO 1-5 Year U.S. TIPS Index Fund
I DB1/6355003 U

Morgan. Lewis & Bockius LLP Morgan Lewis
1111 Pennsylvania Avenue, NW
Washington, CQU!'iSf,.I.ORS .AT LAW DC 20004
Tel. 202.739.3000

Fax: 202.739.3001

WNW.morganlewis.com
W. John McGuire
Partner
202.739.5654 wjmcguire@MorganLewis.com
June 1,2009
Josephine J. Tao, Esq.
Assistant Director, Office ofTrading Practices Division of Trading and Markets Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Request for Exemptive Relief from Rules 101 and 102 of Regulation M Dear Ms. Tao: . The PIMCO ETF Trust ("Trust") is an open-end series management investment company organized on November 14,2008 as a Delaware statutory trust. The Trust is currently comprised of an initial series, the PIMCO 1-3 Year U.S. Treasury Index Fund ("Fund"). The Trust, on behalf of itself: the Fund, and any national securities exchange or national securities association on or through which Shares subsequently trade (each such market being an HExchange"), and persons or entities engaging in transactions in shares issued by the Fund ("Shares"), as the case may be, requests that the Securities and Exchange Commission ("Commission") grant exemptive, interpretive or no-action relief from Rules I0 I and I02 of Regulation M under the Securities Exchange Act of 1934, as amended (the "Exchange Act") in connection with secondary market transactions in Shares, and the creation and redemption of Creation Units, as discussed below. The Commission has in the past considered and approved many proposals related to the creation andissuance by an exchange-traded fund ("ETF") that invest<; in Fixed Income SecuritiesI of See Leners froni James A. Brigagliano, Division of Market Regulation to: Jack P. Dragin, d<ltcd September 26, 2003, File No. TIl-03-IIS, for the iSharcs Lehman U.S. Treasury Inflation Protected Securities Fund and iShares Lehman U.S. Aggregate Bond Fund; W. John McGuire, dated July 25, 2002, File No. TP02-81, for the iShares 1-3 Year Treasury Index Fund, iSharcs 7-1 0 Year Treasury Index Fund, iShares 20-~ Year Treasury Index Fund, iShares Treasury Index Fund, iSharcs Governme.nt/Credit Index Fund, iShares Lehman Corporate Bond· Fund and iShares Goldman Sachs InvesTop Corporate Bond Fund. See also Letter from James A. Brigllgliano, Division of Market Regulation, to Benjamin 1. I-laskin, dated April 9, 2007, File No. 1'1'-07-57, for Fixed Income Exchange Traded~Funds. . For these purposes, "Fixed Income Securities" arc debt securities thaI are nOles, bonds, debentures or other evidence of indebtedness that include, but arc not limited 10, U.S. Department of Treasury Securities ("Treasury Securities"), government-sponsored entity securities, municipal securities, trust preferred Washington Philadelphia New Yorl< Los Angeles San Francisco Miami Pittsburgh Princeton Chicago Minneapolis

Palo Alto Dallas Houston Harrisburg irvine Boston london Paris Brussels Frankfurt Beijing Tokyo

June 1,2009 COtJ:\iSf.lOltS "T l. ..... w shares or units that individually trade on an Exchange, and that can be purchased and redeemed in large aggregations from the issuing investment company. Some of these Fixed IncomeETFs have been trading publicly for many years, and the Trust is not aware of any abuses associated with them. The Commission has also approved class relief relating to Fixed Income ETFs, which provides relieffrom Rules 101 and 102 of Regulation M, based on the composition and diversification; concentration or the rating of the Fixed Income ETF's portfolio securities, among other conditions. 2 Whi Ie the Fund can satisfy all of the conditions in the Class Relief Letter listed below,J the Fund is not able to rely on the Class Relief Letter with respect to the cash collateral received from the Fund's securities lending program. Notably, as described in greater detail below, it may not be practical for the repository for the Fund's cash collateral to include a minimum of 13 non-affiliated issuers or for the Fund to be wholly comprised of non-convertible Fixed lrico~e Securities that are rated "investment grade" by alleast one nationally recognized statistical rating organization.. The Fund can, however, address the concerns the Class Relief Letter sought to address by consisting entirely of (I) non-convertible Fixed Income Securities that are rated "investment grade" by at least one nationally recognized statistical rating organization, as that term is used in Rule 15c3-1 ("NRSRO"), in one of its generic rating categories that signifies investment grade; and (2) investment companies that investsolely in non-convertible Fixed Income securities and that are rated "investment grade" by at least one NRSRO, in one of its generic rating categories that signifies investment grade. securities, and supranational and sovereign debt. Also for this purpose, convertible bonds are deemed .to be Fixed Income Securities until converted into its underlying common or preferred sLOck. Once converted, the equity security may no longer continue to be treated as a Fixed Income Security. Series of the Trust and other ETFs that invest in Fixed Income Securities are referred to as "Fixed Income ETFs." See also Letter from James A. Brigagliano, Division of Market Regulation, to Benjamin J. Haskin, dated April 9,2007, File No. TP-07-57, for Fixed Income Exchange Traded-Funds (ihe "Class Relief Leiter"). The relevant conditions in the Class Relief Leltcrare: (I) the shares of the Fixed Income ETF are issued by an open-end investment company or unit investment trust registered with the Commission under the 1940 Act; (2) shares of the Fixed Income ETF arc listed and trade ~n a national securities exchange or a facility of a national securities association 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 a national securities exchange or on a
facility of a national securities association (or that is relying on Rule 19b-4(e) to list and trade the shares of the Fixed Income ETF; (3) shares of the Fixed Income ETF must be issued and redeemed in Creation Unit Aggregations of 50,000 shares or such other amount where the value of a Creation Unit Aggregation is at least $1 million at the time of issuance; (4) the Fixed Income ETF seeks to: (i) provide investment results that correspond to the performance of a particular underlying index; (ii) exceed the perfolmance of a particular underlying index by a specificdmultiple; or (iii) to correspond to the inverse of the .pcrfomlance of a particular underlying iudex by a specified multiple; (5) the underlying index must consist only of Fixed Income Securities; (6) the intra-day proxy value of the Fixed Income ETF per share and the value of the underlying index must be publicly disseminated by a major market data vendor during dIe trading day.

June 1,2009 COUNSfloa<) Al' l.o\W

1. The Initial Fund and its Investment Objective
   The Fund expects to issue and redeem its Shares at their net asset values ("NAVs") in aggregations of 100,000 Shares ("Creation Unit"), where the value of a Creation Unit aggregation is at least $1 million at the time ofissuancc. The market prices of Shares may vary from their NAVs, but it is not anticipated that any deviation between market price and NAV will be material. Allianz Global Investor Distributors LLC, a registered broker-dealer tinder the Exchange Act and member of the Financial Industry Regulatory Authority ("Distributor"), acts on an agency basis and is the Fund's principal underwriter. The Distributor intends to distribute Creation Units for the Fund but will not maintain a secondary market in Shares of the Fund. The Trust has filed a registration statement on Form N-I A and will apply to have Fund Shares Listed on the NYSE Area, Inc. The Fund is overseen by a board oftrustces ("Board") which will maintain the composition requirements of the Investment Company Act of 1940, as amended (" 1940 Act"). The Fund will adopt fundamental policies consistent with the 1940 Act and be classified as "diversified" or "non-diversified" under that act. The Fund intends to maintain the required level of diversification and otherwise conduct its operations, so as to meet the regulated investment company ("RIC") diversification requirements of the Internal Revenue Code of 1986, as amended. The Fund's investment objective is to provide total return that closely corresponds, before fees and expenses, to the total return of the Merrill Lynch 1-3 Year U.S. Treasury Index SM ("Underlying (ndex,,).4 The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its total assets (exclusive of the collateral held from securities lending) in the cDmponent securities of the Underlying Index C'index Component· Securities"). The Fund expects the cash collateral received from the Fund's securities lending program to be minimal, as compared to the assets of the Fund. The Fund may invest the remainder of its assets in Fixed Income Instruments5 that are not Index Component Securities, but which the Fund believes will help the Fund track its Underlying The Underlying Index is an unmanaged index that tracks the perfonnance of U.S. dollar denominated sovereign debtpublicly issued by the U.S. Government having a maturityofat leasti year and Jess tpan 3 years. As of February 28, 2009, there were44iss\jes in the Underlying Index. ThcseGuritj~sin thelJriderlying Index have a minimum $1 billion of outstanding face value, have one to three yearsremainingto maturity, are fixed-rate and are non-convertible. Bills, inflationcindexed debt and strips are excluded from the Underlying Index; however, original issue zero coupon bonds are included in the Underlying Index and the amounts outstanding of qualifying coupon securities are not reduced by any portions that have been stripped. The Underlying Index is capitalization-weighted and
   the composition of Index Component Securities is updated monthly. It is not possible to invest directly in the Underlying Index. Intra-month cash flows are reinvested daily, at the beginning-of-month I-month UBID rate, until the end of the month at which point all cash is removed from the Underlying Index. The Underlying Index does nOl retlect deductions for fees, expenses Of. taxes. ;'Fixed Income Instruments," includes: securities issued or guaranteed by the U.S. Government, its agencies or govemment-sponsored enterprises ("U.S. Gove.-nmcnt Securities"); bank certificates ofdeposit, fixed time deposits and bankers' acceptances; and repurchase agreements on Fixed Income Instruments and reverse repurchase agreements on Fixed Income Instruments.

June 1,2009 COUNs£tORS ..'1" lA\'
Index, as well as in cash and investment grade, liquid short-term instruments, forwards or derivatives, such as options, futures contracts or swapagreements, and shares of affiliated money market and/or bond funds. The average portfolio duration of the Fund will closely correspond to the duration of its Underlying Index, which as of February 28,2009 was 1.8 years. The "total return" sought by the Fund consists of income earned on the Fund's investments, plus cap~tal appreciation, if any, which generally arises from decreases in interest rates. No Fund Security (defined below), excluding a Treasury Security, will represent more than 30% of the weight of the Fund and the five highest weighted component securities (excluding Treasury Securities) will not in the aggregate account for more than 65% of the weight of the Fund. u. Class Relief relating to Rules 101 and 102 of Regulation M As discussed in detail below, we do not believe the operations of the Fund will involve the potential abuses Rules 101 and 102 ofRegulation M were designed to prevent. However, the Trust is not able to rely on the Class Relief Letter with respect to Rules 101 and 102 because it is not able to comply with the conditions upon which the relief from Rules 101 and 102 is based. Specifically, the Class Relief Letter requires the following two conditions with respect to a fixed incomeETF:
(i) No Component Security (excluding a Treasury Security) represents more than 30% of the weight of the Fixed Income ETF, and the five highest weighted Component Securities in the Fixed Income ETF do not in the aggregate account for more than 65% of the weight of the Fixed Income ETF; and (ii) Except where the fund consists entirely of exempted securities, the Fixed Income ETf must include a minimum of 13 non-affiliated issuers. Alternatively, the Class Relief Letter states that conditions (i) and (ii) do not apply where the Fund is wholly comprised of non-convertible Fixed Income securities that are rated "investment grade" by at least one NRSRO, in one of its generic rating categories that signifies investment grade ("Investment Grade Exemption"). It \>111 not be practical, -Or irishareholders' bestinter~sts, for the Funclto comply with condition (ii), particularly with respect to the repositotytorcash collateral and fees received in connection with the Fund's se.curities lending program. Registered investment companies engage in . . securities lending operations to generate incremental income from the assets of an existing portfolio. The Fund can earn additional income from two sources: (a) the investment return from investing the cash collateral received and (b) the fee received when Fund Securities are loaned. Generally, the Fund will pay a negotiated portion.ofthe interest earned on the cash collateral to the borrower as a rebate. Cash collateral received is generally temporarily invested in liquid, short term instruments so the Fund will be able to return the cash collateral and pay the negotiated rebate to the borrower when the loaned securities are returned. Interest earned on the cash collateral and corresponding fees are comparatively insignificant compared to the interest earned on the securities held by the Fund.

l
June 1,2009 COUSSf.t.QkS AT ..'''':
The Trust believes it would be inefficient for the portfolio manager to allocate the cash collateral received from the securities lending program of the Fund so that the Fund portfolio included 13 non-affiliated issuers, ~s this would effectively reduce the Fund's yield, because yields offered are generally larger for larger invested amounts. However, the Fund will consist entirely of (I) non-convertible Fixed Income Securities that are rated "investment grade" by at least one NRSRO, in one of its generic rating categories that signifies investment grade; and (2) investment companies that invest solely in non-convertible Fixed Income securities that arc rated "investment grade" by at least one NRSRO, in one of its generic rating categories that signifies investment grade. . HI. Additional Background It is currently expected that the Fund will issue and redeem shares in aggregations of lOO,OOO shares known as "Creation Unit Aggregations" and that purchasers of Creation Unit Aggregations will be able to separate.the Creation Unit Aggregations into individual shares. The Fund has submitted an application to list its shares'on an Exchange. One or marc. Exchange member firms will act as designated specialists and maintain a market for the shares [hat trade on such Exchange. Shares ofthe Fund are anticipated to trade on the Exchange in a manner similar

• to the way other exchange-traded funds, such as SPDRs, DIAMONDS, iShares MSCI, Select
  Sector SPDRs, and Nasdaq-100 Shares, trade on the Exchange.
  Shares generally are registered in book-cntry form only; the Fund generally will not issue individual share certificates for shares. The Depository Trust Company ("OTC") or its nominee will be the record or registered owner of all outstanding shares. Beneficial o\vnership of shares normally will be shown on the records of OTC or a broker-dealer that is a participant in DTC ("DTC Participant"). Beneficial owners of shares ("Beneficial Owners") will receive all of the statements, notices, and reports required under the 1940 Act and other applicable Jaws. They will receive, for example, annual and semi-annual reports, \VTitten statements accompanying dividend payments, proxy statements, annual notifications detailing the tax status of distributions, IRS Form 1099 DIVs, etc. Because the Fund's' records reflect o\l1crship of shares by DTC only; the FundgeneraHywill furnish these statements, notices, and reports to the DlC Participants who, in tuin, wiUbe responsible for distributing them to the Beneficial Owners. . A. Purchasing Shares The Fund intends to issue shares in Creation Unit Aggregations of 100,000 shares and generally in exchange for an in-kind deposit of securities by the purchaser, together with a deposit of a specified cash payment described more fully below ("Cash Amounf'). 'rhe in-kind deposit will consist of a basket of securities ("Deposit Securities") selected by the Fund's investment adviser

June 1,2009 COVNSELOKS AT LAW to correspond to the performance of the Underlying Index.6 The Cash Amount and the Deposit Securities together comprise the creation deposit ("Creation Deposit").The identities and amounts ofthe Deposit Securities will be determined by the investment adviser and made publicly available. 7 By requiring that purchase (and redemption) transactions involving shares be in-kind, rather than in cash, the Fund can seek to minimize portfolio turnover, brokerage . 8 expenses, and other transaction costs. The Fund will offer and sell shares in Creation Unit Aggregations on a continuous basis at the NAV per share next determined after receipt of an order in proper form. The NAV will be determined as of the close of regular trading on the applicable Exchange on each day that the Exchange is open ("Business Day"), as described in the Fund's disclosure documents. 9 Individual Shares of the Fund will be listed on an Exchange and traded in the secondary market in the same manner as other securities. The price of shares trading on an Exchange will be based on a current bid/ofter market and may vary from the NAV. Transactions involving the sale of shares on an Exchange -- which will be between purchasers and sellers and will not involve the Fund -- will be subject to customary brokerage commissions or mark-ups and charges. ETF shares generally are listed and traded on an Exchange. This is the method by which the shares of closed-end investment companies arc priced and sold after initial issuance. We believe that the Shares will generally trade at, or very close to, its NAV. Like other ETFs, the price at which Shares of the Fund trade on an Exchange will be disciplined by arbitrage opportunities created by the ability to purchase or redeem Creation Unit Aggregations at NAV, which should ensure that Shares similarly donOl trade at a material premium or discount in relation to NA V. The combination of intra-day liquidity with the Creation Unit purchase and redemption leatures creates potential arbitrage opportunities that, in turn, should mitigate pricing inefficiencies. B. Redemption of Shares Just as Shares can be purchased only in Creation Unit-size aggregations, Shares typically may be redeemed only iftendered in Creation Unit-size aggregations (except in the event the Fund is liquidated). As required by law, redemption requests in good order will receive the NAV next determined after the request ismade. EXGeptin unusual circumstances, Shares generally are redeemed in-kind, together with a small cash payment, as described more fully below. The Fund may require only ihe submission of cash or Olher fixed income securities, such as Treasury Securities, in order to achieve the investment objective of the Fund in relation to the performance of its Underlying Index. . See Section fIl.e. Notwithstanding the benefits of in-kind transactions, the Fund may allow a purchaser to substitute cash for some or all of the Deposit Securities.
Infonnation that becomes known to the Fund or its agents afterthe NA V has been calculated on a particular day will not generally be used to retroaCtively adjust the pric.e of a security or the NA V determined earlier that day. Securities and other assets for which market quotes are not readily available arc valued at fair value as determined in good faith by the Board or persons acting at their direction.

June 1,2009 c 0 U S N 0 S r: I. k .... T 1 .... W Creation Unit Aggregations of the Fund are redeemable on any day on which the applicable Exchange is open in exchange for a basket of securities ("Redemption Securities") and/or a cash payment. The Redemption Securities received by a redeeming investor will be those securities announced by the Fund's investment adviser on the Business Day that the request for redemption is received in tinal form. Where redemptions are in-kind, depending on whether the NAV of a Creation Unit Aggregation is higher or lower than the market value of the Redemption Securities, the redeemer of a Creation Unit Aggregation will either receive from or pay to the Fund a cash amount specified by the investment adviser. The Fund may make redemptions partly or fully in cash ("All-Cash Payment") in lieu of transferring one or more Redemption Securities to a redeeming investor if the Fund determines, in its discretion, that such altemati ve is warranted. For example, this could happen if the redeeming investor is unable, by law or policy, to own a particular Redemption Security.
C. Availability of Information about the Fund
The Fund represents that the intra-day proxy value of the Fund per Share will be disseminated, every 15 seconds during its regular trading hours, through the facilities of the Consolidated Tape. The Fund also represents that the value of the Underlying Index will be disseminated by a major market data vendor once each trading day at the end of the day. The Fund also intends to disseminate an amount per individual Share representing the sum of the estimated Cash Amount and the current value of the Deposit Securities. In addition, each Business Day, prior to the opening of trading on NYSE Area, or other primary listing Exchange, a list of securities and the required number of Shares of each Deposit Security to be included in the Creation Deposit for the Fund or cash information for the Fund, including when the purchase of Creation Unit Aggregations from the Fund in an All-Cash Payment will be made available. In addition, the All-Cash Payment will be disclosed, ifapplicablc.
IV. Requests for Relief
A. Rule to I of Regulation M
Generally, Rule 101 of Regulation M is an anti-marti'pulation 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 v,'hich 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, prospective underwriters, brokers, dealers, and other persons who have agreed to participate or are participating in a distribution of securities. We understand that while broker-dealers that: (i) tender Deposit Securities through the distributor in return for Creation Unit Aggregation(s) or (ii) redeem Creation Unit Aggregations generally will not. be pa11 of a syndicate or selling group, and while no broker-dealer will receive

June I, 2009 COUNSEtOH.S .\T LAW
. fees, commissions or other remuneratidn from the Fund or the Distributor for the sale of Creation Unit Aggregations, under certain circumstances such broker-dealers could be deemed to be "underwriters" or "distribution participants" as those terms are defined in Rule 100(b). The Trust respectfully requests that the Commission or the Staff grant relief from Rule 101, as discussed below, to permit persons participating in a distribution ofShares of the Fund to bid for or purchase, redeem or engage in other secondary market transactions in such Fund Shares during their participation in such distribution. Paragraph (c)(4) of Rule 101 exempts from its application, intcr alia, redeemable securities issued by an open-end management investment company (as such terms are used in the 1940 Act). The Fund will be registered as an open-end management investment company under the 1940 Act. However, Shares will not be redeemable except in Creation Unit Aggregations. Due to the redeemability of the shares in Creation Unit Aggregations, there should be little disparity between the Shares' market price and their NAV. Accordingly, the rationale for exempting redeemable securities of open-end management invcstment companies from the application of Rule 101 is equally applicable to Shares. Although redemption is subject to the condition of tendering sufficient shares in Creation Unit Aggregations, the Fund otherwise will 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, the Trust requests that the Commission confirm that as a result of registration of the Fund as an open-end management investment company and the redeemable nature of the Shares in Creation Unit Aggregations, transactions in the Shares 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 Unit Aggregations of Shares may be created, and Shares in Creation Unit Aggregations may be redeemed in-kind at NAV, on any Business Day. Holders of Shares also have the benefit of intra-day secondary market liquidity by virtue of the Exchange listing. Thus, the secondary market price of Shares should not vary substantially from their NAV. Because Creation Unit Aggregations are redeemable, any significant disparity between the market price of Shares and NAV should be eliminated by arbitrage activity. Because the NAVofSharesis based on the market v?-lue oftlle Fund's portfolio, transactions involving Shares (creations and redemptions from Fund, purchases and sales in the secondary market) will not affect NAY· Sirnilarly, such transactions should not have a significant effect on the market
valuc of Shares. The Trust also respectfully requests relief from thc 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 or portfolio securities of the Fund ("Fund Securities"): (i) to purchase Fund Securities for the purpose of purchasing Creation Unit Aggregations of shares, and (ii) to tender Shares for redemption in Creation Unit Aggregations and to receive Fund Securities as part of the redemption proceeds.

June 1,2009 <:OUSSf1.0R~ AI" 1.A\l'
The Trust requests that the Commission clarify that the tcnder of Sharcs to the Fund for redemption and the receipt of Fund Securities 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 Fund Securities. Absent unusual circumstances, the Fund will not purchase Fund Securities in the secondary market to tulfill a redemption request. Therefore, redemptions of shares cannot be 'expected to affect the market price of the Fund Securities. The Fund believes that the purchase of Fund Securities, while engaged in a distribution with respect to such stock, for the purpose of acquiring a Creation Unit aggregation of Shares should be exempted from Rule 10L The purpose of Rule 101 is to prevent persons from conditioning the market to facilitate a distribution. Application of Rule 101 in this context would not further the anti-manipulation purposes underlying the Rule. In view of the lack of any special financial incentive to create Creation Unit Aggregations, combined with a predictable lack of any meaningful potential for the issuance and the secondary market trading of Shares to affect significantly Share pricing, application of Rule 10 I to a broker-dealer or other person who may be participating in a distribution of Shares is unnecessary and inappropriate, and could unnecessarily hinder broker-dealers or other persons in their creation and redemption activities and in their day-to-day ordinary business of buying and selling securities and Shares, and thus undermine the potential beneficial market effect of Share trading. B. Rule 102 of Regulation M The Trust also requests that the Commission confirm that, subject to the conditions set forth above, as a result of registration of the Fund as an open-end management investment company and the redeemable nature of Shares in Creation Unit Aggregations, for the reasons previously stated under the request with respect lor relief under Rule IOI(c)(4), transactions in Shares would be excepted under paragraph (d)(4) of Rule 102. Application of Rule 102 in this context would not turther the anti-manipulative purposes underlying the rule. . The purpose of Rule I. 02 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 acti vities that could artificially intluence the market for that particular security. For the reasons described in connection with the requested Rule 101 relief; redemption . transactions and secondary market transactions in the Shares are not expected to manipulate the market price of a Fund Security during a distribution of such security. The Fund will redeem the Creation Unit Aggregations of Shares at NAV. Although shares arc traded on the secondary market, shares may
only be redeemed in Creation Unit Aggregations. Thus, the Trust believes that the redemption of shares at NA V in consideration prinqipaIIy for Fund Securities docs not involve the abuses that Rule 102 was intended to prevent.

June 1,2009 COU~S£LORS AT LAW
VI. Conclusion
Based on the foregoing, we respectfully request that the Commission and the Staff grant the relief requested herein. Should you have any questions please call the undersigned at (202) 739 5654 or my colleagues Katy Courtney at (202) 739-5674 or Michael Berenson at (202) 739-5450 respectively. Sincerely, t{).CuJ~~~. W.J~~i;:~ cc: Bradley Gude, Esq. Joshua Ratner, Esq. Catherine Courtney, Esq. Michael Berenson, Esq.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
TRADING AND MARKETS
June 1,2009 w. John McGuire, Esq.

Morgan, Lewis & Bockius LLP

1111 PelU1sylvania Avenue, NW .

Washington, DC 20004

Re: PIMCO ETF TRUST

File No. TP 09-54

Dear Mr. McGuire:
In your letter dated June 1,2009, as supplemented by conversations with the staffof the Division ofTrading and Markets ("Division"), PIMCO RTF Trust (the "Trust") on behalf ofitself, the Fund (as defIned below), any national securities exchange or national securities association on or through which the exchange traded shares ofthe Trust ("Shares"), may subsequently trade, and persons or entities engaging in transactions in Shares; requests exemptions from, or interpretive or no-action advice regarding Rules 101 and 102 of . Regulation M under the Securities Exchange Act of 1934, as amended ("Exchange Act") in cOlU1ection with secondary market transactions in Shares and the creation or redemption of Creation Units, as discussed in your letter. We have enclosed a photocopy of your 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 November 14,2008, 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 currently is comprised of initialseries, the PIMCO 1-3 Year U.S. Treasury Index.Fund ("Fund"). Th,~Ftln~wlUeachseek to provide total return that closely corresponds, before feesan(f.ex.f!en$es;to thetbtalretUm ofthe Merrill Ly[lch 1-3 Year U.S. Treasury Index ("UnderIyingfudex.") by investing, normally, at least 80%ofits assets (exclusive ofthe minimal cash collateral held from securities lending) in the component securities ofthy Underlying Index. The Fund may invest the remainder ofits assets in Fixed Income Securities that are not Index Component Securities, but which the Fund believes will help the Fund track its Underlying Index, as well as in cash and investment grade, liquid short-term instruments, forwards or derivatives, such as options, futl,lres contracts or swap agreements, and shares ofaffIliated bond funds. The average portfolio duration ofthe Fund will closely correspond to the duration ofits Underlying Index, which as ofFebruary 28,2009 was 1.8 years. The "total return" sought by the Fund consists of income earned on the Fund's investments, plus capital appreciation, if any, which generally arises from decreases in interest rates.

w. John McGuire, Esq.
Morgan, Lewis & Bockius LLP
June 1, 2009
In your letter, you also represent the following:

• Shares ofthe Fund will be issued by an open:~end management investment company
  that is registered with the Commission;
• The Fund will issue and redeem, at net asset value ('~AV"), Creation Unit
  Aggregations of 100,000 Shares, and the secondary market price of the Shares should not vary substantially from the NAV ofsuch Shares;
• Shares ofthe Fund will be listed and traded on an Exchange;
• No Fund Security (excluding a Treasury Security) held by the Fund will represent
  more than 30% ofthe weight of the Fund, and the five highest weighted component securities held by the Fund's portfolio (excluding a Treasury Security) will not in the aggregate account for more than 65% ofthe weight of the Fund;
• The Fund will consist entirely of(1) non-convertible Fixed Income Seqrrities that are
  rated «investment grade" by at least one NRSRO, in one of its generic rating cat;egories that signifies investment gi-ade; and (2) investment companies that invest solely in non-convertibie Fixed Income Securities and that are rated «investment grade" by at least one NRSRO, in one ofits generic rating categories that signifies investment grade;
• The Fund will disseminate every 15 seconds throughout the trading day through the
  facilities of the Consolidated Tape Association the intra-day proxy value -of the Fund on a per Share basis; and
• The value of the Underlying Index will be disseminated by a major market data
  vendor once each trading day at the end ofthe day, ReSponse:.
  RegulationM
  Redeemable securities issued by an open-end management investment company are excepted from the provisions ofRule 101 and 102 ofRegulation M. The Commission granted the Trust an exemption frOm certain provisions of the 1940 Act in order to pennit the Trust to maintain its registration as an open-end management investment company and to issue shares that are redeemable only in CreationUnit size aggregations ofShares.

I w. John McGuire, Esq.

Morgan, Lewis & Bockius LLP

June 1,2009

Rule 101 ofRegulation M
Generally, Rule 101 ofRegulation M is an anti-manipulation regulation that, subject to certain exceptions, 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 ofadistribution until after the applicable restricted period except as specifically permitted in the Regulation. The provisions ofRule 101 ofRegulation M apply to underwriters, prospective underwriters, brokers, dealers, or other persons who have .agreed to participate or are participating in a distribution ofsecurities. On the basis of your representations and the facts presented, and without necessarily

concurring in your analysis, particularly that the Trust is a registered open-end management

investment company that will continuously redeem at NAV Creation Unit size aggregations

of the Shares ofthe Fund, and the secondary market price ofthe Shares ofthe Fund should

not vary substantially from the NAV ofsuch Shares, which is based on the value ofthe

portfolio securities and the other assets held by the Fund, the Division hereby confirms that

the Trust is excepted under paragraph (c)(4) ofRule 101 of Regulation M with respect to the

Fund thus permitting persons who may be deemed to be participating in a distribution of

Shares of the Fund to bid for or purchase such Shares during their participation in such

distribution. 1

The Division also confirms the interpretation ofRule 101 ofRegulation M that a redemption ofCreation Unit size aggregations of Shares of the Fund and the receipt of Fund Securities in exchange therefor by a participant in a distribution of Shares of the Fund would· not constitute an "attempt to induce any person to bid fOfor purchase a covered security, during the applicable restricted period" within the meaning ofRegulation M, and therefore would not violate Regulation M. Rule 102 ofRegulation M Ru1e 102 ofRegulation M prohibits issuers, selling security holders,Qr any affiliated purchaser ofsuch person from bidding for, purchaSing, or atiempting to induce any personto . bid for or purchase a covered security during the applicable restricted period in connection We note that Regulation M does not prohibit a distribution participant and its affiliated purchasers from bidding for and purGhasing portfolio securities in accordance with the exceptions contained in paragraphs (b)(6) and (c)(l) ofRule 101. Rule 101(b)(6)(i) excepts basket transactions in which bids or purchases are made iIi the ordinary course ofbusiness in connection with a basket of20·0[ more securities in whith a covered security does not comprise more that 5% of the value of the basket purchased. Rule IOl(b)(6)(ii) excepts adjustments to such . a basket made in the ordinary course of business as a result ofa change in the composition of a standardized index. Also, Rule 101(c)(1) excepts transactions in actively-traded securities, that is, securities that have an average daily trading volume value ofat least $1 million and are issued by an issuer whose cornmon equity securities have a public float value ofat least $150miUion; provided however, that such securities are not issued by the distribution participant or an affiliate ofthe distribution participant.

W. John McGuire, Esq.

Morgan, Lewis & Boclcius LLP

June 1,2009

with a distribution ofsecurities effected by or on behalfof an issuer or selling security holder. Rule 100 ofRegulation M defines "distribution" to mean any offering of securities that is distinguished from ordinary trading transactions by the magnitude ofthe 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 NAV Creation Units ofShares ofthe Fund, the Division hereby confmns that the Trust is excepted under paragraph (d)(4)ofRule 102 ofRegulation Mwith respect to the Fund, thus permitting the. Fund to redeem Shares ofthe·Fund during the continuous offering ofsuch Shares. The foregoing interpretive advice regarding Rules 101 and 102 ofRegulation M:is based solely-on your representations and the facts presented to the Division; and are strictly limited to the application ofthose rules to transactions involving the Shares ofthe Fund 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 respect to any ofthose facts or representations. Moreover, the foregoing interpretive advice regarding Rules .101 and 102 ofRegulation M is subject to the condition that such transactions in Shares ofthe Fund, Fund Security, 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 interpretations are subject to modification or revocation if at any time the Commission or Division determines that such action is necessary or appropriate in furtherance ofthe purposes ofthe Exchange Act. In addition, persons relying onthese exemptions, interpretations, and no-action positions are directed to the anti-fraud and anti-manipulation . provisions ofthe 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 mustrest with persons relying on these interpretations.

W. John McGuire, Esq.
Morgan, Lewis &Bockius LLP
June 1,2009
The Division expresses no view with respect to other questions that the proposed transactions mayraise, including, but not limited to, the ad~uacy ofdisclosure concerning, and the applicability ofother federal and state laws to, the proposed transactions. For the Commission, by the Division of

Trading and Markets,

pursuant to delegated authority,

#'r:J.~ il:Ta:Afi7
Assistant Director
Attachment