

[Federal Register: March 24, 2006 (Volume 71, Number 57)]
[Notices]               
[Page 14977-14982]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr06-134]                         


[[Page 14977]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53520; File No. SR-PCX-2005-117]

 
Self-Regulatory Organizations; Pacific Exchange, Inc. (n/k/a NYSE 
Arca, Inc.); Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change and Amendment No. 1 Thereto Relating to the 
Trading of Shares of the iShares[reg] Silver Trust Pursuant to Unlisted 
Trading Privileges

March 20, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 11, 2005, the Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.) 
(``Exchange''),\3\ through its wholly owned subsidiary PCX Equities, 
Inc. (n/k/a NYSE Arca Equities, Inc.), has filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Exchange proposes to amend the rules governing 
Archipelago Exchange, LLC (n/k/a NYSE Arca, LLC), the equities trading 
facility of NYSE Arca Equities, Inc. On March 3, 2006, the Exchange 
filed Amendment No. 1 to the proposed rule change.\4\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons and is approving the proposal on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On March 6, 2006, the Pacific Exchange, Inc. (``PCX''), 
filed with the Commission a proposed rule change, which was 
effective upon filing, to change the name of the Exchange, as well 
as several other related entities, to reflect Archipelago's recent 
acquisition of PCX and the merger of the NYSE with Archipelago. See 
File No. SR-PCX-2006-24. All references herein have been changed to 
reflect these transactions. Telephone conference between David 
Strandberg, Director, NYSE Arca Equities Inc., and Florence E. 
Harmon, Senior Special Counsel, Division of Market Regulation 
(``Division''), Commission, on March 10, 2006.
    \4\ In Amendment No. 1, the Exchange clarified and supplemented 
certain aspects of its proposal. Amendment No. 1 replaces and 
supplements the information provided in various sections of the 
Exchange's Form 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly-owned subsidiary, NYSE Arca 
Equities, Inc., proposes to amend its rules governing the Archipelago 
Exchange (n/k/a NYSE Arca MarketPlace), the equities trading facility 
of NYSE Arca Equities, Inc. The Exchange proposes to trade, pursuant to 
unlisted trading privileges (``UTP''), shares (``Shares'') of the 
iShares[reg] Silver Trust (the ``Trust'').\5\
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    \5\ iShares[reg] is a registered trademark of Barclays Global 
Investors, N.A.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

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

1. Purpose
    The Exchange proposes to trade the Shares pursuant to UTP under 
NYSE Arca Equities, Inc. Rule 8.201. Under NYSE Arca Equities, Inc. 
Rule 8.201, which the Exchange adopted in January 2005,\6\ the Exchange 
may propose to list and/or trade pursuant to UTP ``Commodity-Based 
Trust Shares.'' \7\ The Exchange currently trades shares of the iShares 
COMEX Gold Trust \8\ and the streetTRACKS Gold Trust \9\ pursuant to 
UTP under NYSE Arca Equities, Inc. Rule 8.201. The American Stock 
Exchange LLC (``Amex'') has filed a rule proposal to list and trade the 
Shares,\10\ which the Commission approved on March 20, 2006.\11\
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    \6\ See Securities Exchange Act Release No. 51067 (January 21, 
2005), 70 FR 3952 (January 27, 2005) (approving the listing and 
trading of Commodity-Based Trust Shares and trading of shares of the 
iShares COMEX Gold Trust pursuant to UTP).
    \7\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
trust. Unlike trust issued receipts (``TIRs''), Commodity-Based 
Trust Shares hold one or more physical commodities, rather than one 
or more discrete securities.
    \8\ See supra, note 7.
    \9\ See Securities Exchange Act Release No. 34-51245 (February 
23, 2005), 70 FR 10731 (March 4, 2005) (approving the trading of 
shares of the streetTRACKS Gold Trust pursuant to UTP).
    \10\ See Securities Exchange Act Release No. 53130 (January 17, 
2006), 71 FR 3570 (January 23, 2006) (SR-AMEX-2005-072) (``Amex 
Notice'').
    \11\ See Securities Exchange Act Release No. 53521 (March 20, 
2006) (``Amex Order'').
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    The Shares represent beneficial ownership interests in the net 
assets of the Trust consisting primarily of silver bullion 
(``silver''). The investment objective of the Trust is for the Shares 
to reflect the performance of the price of silver, less the Trust's 
expenses.

(a) The Shares

    A description of the silver and the Shares, the operation of the 
Trust, and other information about the Shares is set forth in the Amex 
Notice and Amex Order. To summarize, issuances of Shares will be made 
only in baskets of 50,000 Shares or multiples thereof (``Baskets'' or 
``Basket Aggregations''). The Trust will issue and redeem the Shares on 
a continuous basis, by or through participants that have entered into 
participant agreements (each, an ``Authorized Participant'')\12\ with 
Barclays Global Investors International, Inc. (the ``Sponsor'') and The 
Bank of New York (the ``Trustee'' or ``BNY'').
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    \12\ An ``Authorized Participant'' is a person, who at the time 
of submitting to the trustee an order to create or redeem one or 
more Baskets, (i) is a registered broker-dealer, (ii) is a 
Depository Trust Company Participant or an Indirect Participant and 
(iii) has in effect a valid Authorized Participant Agreement.
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    Baskets will be issued as an in-kind exchange for a corresponding 
amount of silver. The basket amount of silver, measured in ounces (the 
``Basket Silver Amount'') will be determined on each business day by 
the Trustee.\13\ The Basket Silver Amount necessary for the creation of 
a Basket will slightly diminish each day depending on the Trust's daily 
expense accrual.\14\ Authorized Participants that wish to purchase a 
Basket must transfer the Basket Silver Amount to the Trust in exchange 
for a Basket of Shares. Baskets are then separable upon issuance into 
the Shares that will be traded on NYSE Arca MarketPlace on a UTP 
basis.\15\
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    \13\ On each business day, the Trustee will make available 
immediately prior to the opening of trading on the Amex, the 
Indicative Basket Silver Amount for the creation of a Basket. The 
Sponsor will also make the next day's Indicative Basket Silver 
Amount available on the Trust's Web site at http://www.iShares.com 

shortly after 4 p.m. ET each business day. The Amex stated that the 
Basket Silver Amount, Indicative Basket Silver Amount and net asset 
value (``NAV'') will be publicly available simultaneously to all 
market participants (to avoid any informational advantage) on either 
the Trust's Web site or the Amex Web site. These items will also be 
communicated to Authorized Participants via facsimile or electronic 
mail message.
    \14\ According to the Amex Notice, the initial Basket Silver 
Amount is 500,000 ounces of silver (with each Share initially 
representing 10 ounces of silver). The number of ounces of silver 
required to create a basket or to be delivered upon a redemption of 
a basket will gradually decrease over time because the silver shares 
comprising a basket will represent a decreasing amount of silver due 
to the sale of the Silver Trust's silver to pay Trust expenses.
    \15\ Shares are separate and distinct from the underlying silver 
comprising the portfolio of the Trust. The Exchange expects that the 
number of outstanding Shares will increase and decrease as a result 
of in-kind deposits and withdrawals of the underlying silver.
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    The Shares will not be individually redeemable but will only be 
redeemable

[[Page 14978]]

in Baskets. To redeem, an Authorized Participant will be required to 
accumulate enough Shares to constitute a Basket (i.e., 50,000 Shares). 
Authorized Participants that wish to redeem a Basket will receive the 
Basket Silver Amount in exchange for each Basket surrendered. The 
operation of the Trust and creation and redemption process is described 
in more detail in the Amex Notice and Order.
    When calculating the net asset value (``NAV'') per Share, the 
Trustee will value the silver held by the Trust on the basis of the 
day's announced London silver fix price. The calculation methodology 
for the NAV is described in more detail in the Amex Notice.
    After the NAV is determined, at or about 4 p.m. Eastern Time 
(``ET'') each business day, the Trustee will then determine the Basket 
Silver Amount for orders placed by Authorized Participants received 
before 4 p.m. ET that day. The Trustee will also at the same time 
determine an ``Indicative Basket Silver Amount'' that Authorized 
Participants can use as an indicative amount of silver to be deposited 
for issuance of the Shares on the next business day. Thus, although 
Authorized Participants place orders to purchase Shares throughout the 
trading day, the actual Basket Silver Amount is determined at 4 p.m. ET 
or shortly thereafter.
    After 4 p.m. ET each business day, the Trustee and the Sponsor will 
disseminate the NAV for the Shares, the Basket Silver Amount (for 
orders properly placed by 4 p.m. ET during the day), and the next day's 
Indicative Basket Silver Amount. The Basket Silver Amount, the 
Indicative Basket Silver Amount, and the NAV are communicated by the 
Trustee to all Authorized Participants via facsimile or electronic mail 
message and on the Trust's Web site at http://www.iShares.com (to which 

the Exchange will provide a link).
    The Sponsor fee, in the absence of any extraordinary expenses and 
liabilities, is established at 0.50% of the net assets of the Trust. As 
a result, assuming there is no extraordinary movement in the intra-day 
market price of silver, the amount of silver by which the Basket Silver 
Amount will decrease each day will be predictable (i.e., 1/365th of the 
net asset value of the Trust multiplied by 0.50%). Given the 
anticipated predictability of the daily decline in the Basket Silver 
Amount, as stated, the Trustee will disclose and disseminate the 
Indicative Basket Silver Amount for the next business day shortly after 
4 p.m. ET. Authorized Participants may use the Indicative Basket Silver 
Amount as guidance regarding the amount of silver expected to be 
deposited with the custodian, JP Morgan Chase Bank, N.A., London 
Branch, in connection with the issuance of Shares on the next business 
day.
    As a result, the amount of silver required for the Basket Silver 
Amount is not disseminated during the trading day to correspond to 
changes in the value of silver as measured by spot silver prices. 
Before 4 p.m. ET, Authorized Participants may use the Indicative Basket 
Silver Amount published by the Sponsor and the Trustee the day before 
as guidance in respect of the amount of silver that they may expect to 
be required to deposit. But if the Indicative Basket Silver Amount 
published by the Sponsor and the Trustee turns out to be incorrect (for 
example, because the Trust incurred an extraordinary expense such as 
legal fees in excess of the amount assumed by the Sponsor), the amount 
actually determined by the Trustee will prevail, resulting in a greater 
decrease in the Basket Silver Amount.

(b) Dissemination of Information About Silver Prices, the Shares, and 
the Indicative Trust Value

1. Availability of Information Regarding Silver Prices
    Although the spot price of silver will not be disseminated over the 
facilities of Consolidated Tape Association (``CTA''), the last sale 
price for the Shares, as is the case for all equity securities traded 
on the Exchange, will be disseminated over the CTA's Network B. In 
addition, there is a considerable amount of silver price and market 
information available on public Web sites and through professional and 
subscription services.
    Investors may obtain on a 24-hour basis silver pricing information 
based on the spot price of an ounce of silver from various financial 
information service providers, such as Reuters and Bloomberg. In 
addition, the daily London silver fix is also disseminated by various 
market data vendors and is available from the Web site of the London 
Bullion Market Association (``LBMA''). Reuters and Bloomberg provide at 
no charge on their Web sites delayed information regarding the spot 
price of silver and last sale prices of silver futures contracts and 
related options, as well as information about news and developments in 
the silver market. Reuters and Bloomberg also offer a professional 
service to subscribers for a fee that provides information on silver 
prices directly from market participants.\16\ Complete real-time data 
for silver futures contracts and options prices traded on the COMEX, a 
division of the New York Mercantile Exchange, Inc. (``NYMEX''), is 
available by subscription from Reuters and Bloomberg and also on a 
delayed basis free of charge on the NYMEX Web site at http://www.nymex.com.
 The Exchange also notes that there are a variety of 

other public Web sites providing information on silver, ranging from 
those specializing in precious metals to sites maintained by major 
newspapers, such as The Wall Street Journal. Current silver spot prices 
are also generally available with bid/ask spreads from silver bullion 
dealers.
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    \16\ According to the Amex Notice, EBS, a London-based provider 
of foreign exchange trading solutions, also provides an electronic 
trading platform to institutions such as bullion banks and dealers 
for the trading of spot silver, as well as a feed of live streaming 
prices to Reuters and Moneyline Telerate subscribers. Approximately 
4 million ounces in silver are traded each day over the EBS trading 
platform. See Amex Notice, footnote 34; see also http://www.ebs.com.

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    The Exchange will provide at no charge on its Web site at http://www.archipelago.com
,\17\ via a link to the Trust's Web site, updated 

bids and offers indicative of the spot price (i.e., real time 
information) of silver.\18\
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    \17\ NYSE Arca Inc.'s new Web site is http://www.nysearca.com. 

Telephone conference between David Strandberg, Director, NYSE Arca 
Equities Inc., and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on March 20, 2006.
    \18\ The Trust Web site's silver spot price will be provided by 
TheBullionDesk at http://www.thebulliondesk.com. The Exchange will 

provide a link to the Trust Web site. TheBullionDesk is not 
affiliated with the Trust, Sponsor, Custodian or the Exchange. The 
silver spot price is indicative only, constructed using a variety of 
sources to compile a spot price that is intended to represent a 
theoretical quote that might be obtained from a market maker from 
time to time. The Trust Web site will indicate that there are other 
sources for obtaining the silver spot price.
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2. Availability of Information Regarding Silver Shares
    The Web site for the Trust, which will be publicly accessible at no 
charge, will contain the following information: (a) The prior business 
day's NAV and the reported closing price; (b) the mid-point of the bid-
ask price in relation to the NAV as of the time the NAV is calculated 
(the ``Bid-Ask Price''); (c) calculation of the premium or discount of 
such price against such NAV; (d) data in chart form displaying the 
frequency distribution of discounts and premiums of the Bid-Ask Price 
against the NAV, within appropriate ranges for each of the four 
previous calendar quarters; (e) the Basket Silver Amount; (f) the 
Indicative Basket Silver Amount; (g) the

[[Page 14979]]

Prospectus; and (h) other applicable quantitative information.
    As described above, the NAV for the Trust will be calculated and 
disseminated daily. According to the Amex Notice, the Amex also intends 
to disseminate for the Trust on a daily basis by means of CTA/CQ High 
Speed Lines information with respect to the Indicative Trust Value 
(``ITV'') (as discussed below), recent NAV, and shares outstanding. As 
stated, the Trust Web site will also provide a real-time indicative 
silver spot price through TheBullionDesk at http://www.thebulliondesk.com
, which will be used to calculate the ITV, 

according to the Amex Notice. Notwithstanding that they will be 
provided free of charge, the indicative spot price from the BullionDesk 
on the Trust Web site and the ITV per Share disseminated via the CTA, 
will be provided essentially on a real-time basis.\19\
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    \19\ That these values are subject to an average delay of 5 to 
10 seconds.
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    The Exchange will make available on its Web site, http://www.archipelago.com
, daily trading volume, closing prices, NAV, and the 

Basket Silver Amount. The London silver fix price is readily available 
from the LBMA at http://www.lbma.org.uk, automated quotation systems, 

published or other public sources, or online information services such 
as Bloomberg or Reuters. In addition, the Exchange will provide a 
hyperlink on its Web site at http://www.archipelago.com to the Trust's Web site at http://www.iShares.com.

3. Dissemination of Indicative Trust Value
    As noted above, the Trustee calculates the NAV of the Trust once 
each trading day. In addition, the Trustee causes to be made available 
on a daily basis the required amount of silver to be deposited in 
connection with the issuance of Shares in Basket Aggregations. In 
addition, other investors can request such information directly from 
the Trustee.
    In order to provide updated information relating to the Trust for 
use by investors, professionals, and Authorized Persons wishing to 
create or redeem Shares, the Amex will disseminate through the 
facilities of CTA an updated ITV. The ITV will be disseminated on a per 
Share basis at least every 15 seconds from 9:30 a.m. to 4:15 p.m. ET. 
The ITV will be calculated based on the amount of silver required for 
creations and redemptions and a price of silver derived from updated 
bids and offers indicative of the spot price of silver. The ITV on a 
per Share basis should not be viewed as a real time update of the NAV, 
which is calculated only once a day.
    The Exchange believes that dissemination of the ITV based on the 
amount of silver required for a Basket Aggregation provides additional 
information that is not otherwise available to the public and is useful 
to professionals and investors in connection with Shares trading on the 
Exchange or the creation or redemption of Shares. In addition, as noted 
above, the Trust's Web site at http://www.iShares.com will also provide 

from TheBullionDesk updated bids and offers indicative of the spot 
price of silver in the OTC market for the purpose of disclosing to 
investors on a real-time basis the underlying or spot price of silver.

(c) UTP Criteria

    The Exchange will cease trading in the Shares if (a) the listing 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on NYSE Arca Equities, Inc. Rule 7.12 or a halt because 
the ITV or the value of the underlying silver is no longer available as 
described in the Amex Order; or (b) the listing market delists the 
Shares. Additionally, the Exchange may cease trading the Shares if such 
other event shall occur or condition exists which in the opinion of the 
Exchange makes further dealings on the Exchange inadvisable.

(d) Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Fund subject to the Exchange's existing rules 
governing the trading of equity securities. Trading in the Shares on 
the Exchange will occur in accordance with NYSE Arca Equities, Inc. 
Rule 7.34(a), except that the Shares will not be eligible to trade 
during the Opening Session (4:00 a.m. to 9:30 a.m. ET) or the Late 
Trading Session (4:15 p.m. to 8 p.m. ET). The minimum trading increment 
for Shares on the Exchange will be $0.01.
    Further, NYSE Arca Equities, Inc. Rule 8.201 sets forth certain 
restrictions on ETP Holders acting as registered Market Makers in the 
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities, Inc. 
Rule 8.201(h), an ETP Holder acting as a registered Market Maker in the 
Shares is required to provide the Exchange with information relating to 
its trading in the underlying silver, related futures or options on 
futures, or any other related derivatives. NYSE Arca Equities, Inc. 
Rule 8.201(i) prohibits an ETP Holder acting as a registered Market 
Maker in the Shares from using any material nonpublic information 
received from any person associated with an ETP Holder or employee of 
such person regarding trading by such person or employee in the 
underlying silver, related futures or options on futures or any other 
related derivative (including the Shares). In addition, NYSE Arca 
Equities, Inc. Rule 8.201(g) prohibits an ETP Holder acting as a 
registered Market Maker in the Shares from being affiliated with a 
market maker in the underlying silver, related futures or options on 
futures, or any other related derivative unless adequate information 
barriers are in place, as provided in NYSE Arca Equities, Inc. Rule 
7.26.
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder, as well as a subsidiary or 
affiliate of an ETP Holder that is in the securities business. A 
subsidiary or affiliate of an ETP Holder that does business only in 
commodities or futures contracts would not be subject to Exchange 
jurisdiction, but the Exchange could obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may include 
(1) the extent to which conditions in the underlying silver market have 
caused disruptions and/or lack of trading, or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. In addition, trading in the Shares will 
be subject to trading halts caused by extraordinary market volatility 
pursuant to the Exchange's ``circuit breaker'' rule.\20\ In addition, 
the Exchange will cease trading the Shares if (a) the listing market 
stops trading the Shares because of a regulatory halt similar to NYSE 
Arca Equities, Inc. Rule 7.12 or a halt because the ITV or the value of 
the underlying silver is no longer available as described in the Amex 
Order, or (b) the listing market delists the Shares.
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    \20\ See NYSE Arca Equities, Inc. Rule 7.12.
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    Shares will be deemed ``Eligible Listed Securities,'' as defined in 
NYSE

[[Page 14980]]

Arca Equities, Inc. Rule 7.55, for purposes of the Intermarket Trading 
System (``ITS'') Plan and therefore will be subject to the trade 
through provisions of NYSE Arca Equities, Inc. Rule 7.56, which require 
that ETP Holders avoid initiating trade-throughs for ITS securities.
    Unless exemptive or no-action relief is available, the Shares will 
be subject to the short sale rule, Rule 10a-1 and Regulation SHO under 
the Act.\21\ If exemptive or no-action relief is provided, the Exchange 
will issue a notice detailing the terms of the exemption or relief.
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    \21\ According to the Amex Notice, the Silver Trust has 
requested relief from the Commission in connection with the trading 
of the Shares from the operation of the short sale rule, Rule 10a-1, 
and Regulation SHO under the Act.
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(e) Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products and shares of the 
streetTRACKS Gold Trust \22\ to monitor trading in the Shares. The 
Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares.
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    \22\ See supra, note 10.
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    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. Also, as noted above, 
pursuant to NYSE Arca Equities, Inc. Rule 8.201(h), the Exchange is 
able to obtain information regarding trading in the Shares and the 
underlying silver, silver futures contracts, options on silver futures, 
or any other silver derivative, through ETP Holders acting as 
registered Market Makers, in connection with such ETP Holders' 
proprietary or customer trades which they effect on any relevant 
market. In addition, the Exchange may obtain trading information via 
the Intermarket Surveillance Group (``ISG'') from other exchanges who 
are members or affiliates of the ISG. Also, the Exchange has an 
Information Sharing Agreement with the NYMEX for the purpose of sharing 
information in connection with trading in or related to COMEX silver 
futures contracts.

(f) Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Baskets (including noting that 
Shares are not individually redeemable); (2) NYSE Arca Equities, Inc. 
Rule 9.2(a),\23\ which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (3) how information regarding the ITV is 
disseminated; (4) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (5) trading information. 
For example, the Information Bulletin will advise ETP Holders, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Trust. The Exchange notes that investors purchasing 
Shares directly from the Trust (by delivery of the Basket Silver 
Amount) will receive a prospectus. ETP Holders purchasing Shares from 
the Trust for resale to investors will deliver a prospectus to such 
investors.
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    \23\ The Exchange has proposed to amend NYSE Arca Equities, Inc. 
Rule 9.2(a) (``Diligence as to Accounts'') to provide that ETP 
Holders, before recommending a transaction, must have reasonable 
grounds to believe that the recommendation is suitable for the 
customer based on any facts disclosed by the customer as to his 
other security holdings and as to his financial situation and needs. 
Further, the proposed rule amendment provides that prior to the 
execution of a transaction recommended to a non-institutional 
customer, the ETP Holders should make reasonable efforts to obtain 
information concerning the customer's financial status, tax status, 
investment objectives and any other information that they believe 
would be useful to make a recommendation. See Amendment No. 1 to SR-
PCX-2005-115 (November 21, 2005).
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    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement and that the number of ounces of silver required to create a 
basket or to be delivered upon redemption of a basket will gradually 
decrease over time because the Silver Shares comprising a basket will 
represent a decreasing amount of silver due to the sale of the Silver 
Trust's silver to pay Trust expenses.\24\ The Information Bulletin will 
also reference the fact that there is no regulated source of last sale 
information regarding physical silver, that the Commission has no 
jurisdiction over the trading of silver as a physical commodity, and 
that the CFTC has regulatory jurisdiction over the trading of silver 
futures contracts and options on silver futures contracts.
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    \24\ Telephone Conference between David Strandberg, Director, 
NYSE Arca Equities Inc., and Florence E. Harmon, Senior Special 
Counsel, Division, Commission, on March 10, 2006.
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    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \25\ in general and furthers 
the objectives of Section 6(b)(5),\26\ in particular, in that it is 
designed to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transaction in securities, to remove impediments and perfect the 
mechanisms of a free and open market, and, in general, to protect 
investors and the public interest.
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    \25\ 15 U.S.C. 78s(b).
    \26\ 15 U.S.C. 78s(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/.
 rules/sro.shtml); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-PCX-2005-117 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-PCX-2005-117. This file 
number should be included on the

[[Page 14981]]

subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, please use only one method. The 
Commission will post all comments on the Commission's Internet Web site 
(http://www.sec.gov/rules/sro.shtml). Copies of the submission, all 

subsequent amendments, all written statements with respect to the 
proposed rule change that are filed with the Commission, and all 
written communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room. Copies of such filing also will be available for 
inspection and copying at the principal office of NYSE Arca, Inc. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PCX-2005-117 and should be 
submitted on or before April 14, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\27\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\28\ which 
requires that an exchange have rules designed, among other things, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and in general to protect investors and the public 
interest.
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    \27\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \28\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\29\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\30\ The Commission notes that it previously approved the 
listing and trading of the Shares on the Amex.\31\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\32\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. NYSE Arca Equities, Inc. rules deem the Shares to be 
equity securities, thus trading in the Shares will be subject to the 
Exchange's existing rules governing the trading of equity 
securities.\33\
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    \29\ 15 U.S.C. 78l(f).
    \30\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \31\ See Amex Order.
    \32\ 17 CFR 240.12f-5.
    \33\ See NYSE Arca Equities, Inc. Rule 7.34.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\34\ which sets forth 
Congress's finding that it is in the public interest and appropriate 
for the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for and last sale information regarding Silver 
Shares will be disseminated via the CTA/CQS. Furthermore, as noted by 
the Exchange, various means exist for investors to obtain reliable 
silver price information and thereby monitor the underlying spot market 
in silver relative to the NAV of their Shares. Additionally, the Amex 
will make available via the CTA an updated ITV at least every 15 
seconds during regular trading hours of 9:30 a.m. to 4:15 p.m. ET.
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    \34\ 15 U.S.C. 78k-1(a)(1)(C)(iii).

    In connection with the Exchange's UTP of the Shares, the Exchange 
will cease trading in the Shares if: (a) The listing market stops 
trading the Shares because of a regulatory halt similar to NYSE Arca 
Equities, Inc. Rule 7.12 or a halt because the ITV or the value of the 
underlying silver is no longer available; or (b) if the primary market 
delists the Shares. The Commission notes that, if Silver Shares were to 
be delisted by Amex, the Exchange would no longer have authority to 
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trade Silver Shares pursuant to this order.

    In support of the portion of the proposal, the Exchange has made 
the following representations:
    1. NYSE Arca, Inc. has appropriate rules to facilitate transactions 
in this type of security in all trading sessions.
    2. NYSE Arca, Inc. surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange.
    3. NYSE Arca, Inc. will distribute an Information Bulletin to its 
ETP Holders prior to the commencement of trading of the Shares on the 
Exchange that explains the terms, characteristics, and risks of trading 
such shares.
    4. NYSE Arca, Inc. will require that investors purchasing Shares 
directly from the Trust (by delivery of the Basket Silver Amount) will 
receive a prospectus and that ETP Holders purchasing Shares from the 
Trust for resale to investors will deliver a prospectus to such 
investors.
    5. The Exchange will cease trading in the Shares if: (a) the 
listing market stops trading the Shares because of a regulatory halt 
similar to NYSE Arca Equities, Inc. 7.12 or a halt because the ITV or 
the value of the underlying silver is no longer available as described 
in the Amex Order; or (b) if the primary market delists the Shares.
    This approval order is conditioned on NYSE Arca, Inc.'s adherence 
to these representations.
    The Commission finds good cause for approving this proposed rule 
change, as amended, before the thirtieth day after the publication of 
notice thereof in the Federal Register. As noted previously, the 
Commission previously found that the listing and trading of these 
Shares on the Amex is consistent with the Act.\35\ The Commission 
presently is not aware of any issue that would cause it to revisit that 
earlier finding or preclude the trading of these funds on the Exchange 
pursuant to UTP. Therefore, accelerating approval of this proposed rule 
change should benefit investors by creating, without undue delay, 
additional competition in the market for these Shares.
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    \35\ See Amex Order.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-PCX-2005-117), as amended, is hereby 
approved on an accelerated basis.\36\
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    \36\ 15 U.S.C. 78s(b)(2).


[[Page 14982]]


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\37\
Nancy M. Morris,
Secretary.
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    \37\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-4270 Filed 3-23-06; 8:45 am]

BILLING CODE 8010-01-P
