

[Federal Register: May 5, 2006 (Volume 71, Number 87)]
[Notices]               
[Page 26582-26589]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05my06-143]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53736; File No. SR-PCX-2006-22]

 
Self-Regulatory Organizations; Pacific Exchange, Inc. (n/k/a NYSE 
Arca, Inc.); Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change Relating to the Trading of the DB Commodity 
Index Tracking Fund Pursuant to Unlisted Trading Privileges

 April 27, 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 March 3, 2006, 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.) filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule

[[Page 26583]]

change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice and 
order to solicit comments on the proposal from interested persons and 
to approve the proposed rule change 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.
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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 new Commentary .02 to 
NYSE Arca Equities, Inc. Rule 8.200 in order to permit trading, either 
by listing or pursuant to unlisted trading privileges (``UTP''), shares 
of trust issued receipts (``TIRs'') where the trust holds shares or 
securities (``Investment Shares'') that are issued by a trust, 
partnership, commodity pool or other similar entity that holds 
investments comprising or otherwise based on any combination of futures 
contracts, options on futures contracts, forward contracts, 
commodities, swaps,\4\ or high credit quality short-term fixed income 
securities or other securities. The Exchange also proposes to trade, 
pursuant to UTP, shares (``Shares'') of the DB Commodity Index Tracking 
Fund (``Fund'') that invests in the securities of a commodity pool. The 
text of the proposed rule change is included below. Proposed new 
language is italicized.
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    \4\ Telephone Conference between David Strandberg, Director, 
NYSE Arca Equities Inc., and Florence E. Harmon, Senior Special 
Counsel, Division of Market Regulation, Commission, on April 26, 
2006 (adding ``swaps'' to description).
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* * * * *
Rules of PCX Equities, Inc.

Trust Issued Receipts

    Rule 8.200 (a) through (f). No Change.
Commentary .01. No Change.
Commentary .02
    (a) The provisions of this Commentary apply only to Trust Issued 
Receipts that invest in ``Investment Shares'' as defined below. Rules 
that reference Trust Issued Receipts shall also apply to Trust Issued 
Receipts investing in Investment Shares.
    (b) Definitions. The following terms as used in this Commentary 
shall, unless the context otherwise requires, have the meanings herein 
specified:
    (1) Investment Shares. The term ``Investment Shares'' means a 
security (a) that is issued by a trust, partnership, commodity pool or 
other similar entity that invests in any combination of futures 
contracts, options on futures contracts, forward contracts, 
commodities, swaps or high credit quality short-term fixed income 
securities or other securities; and (b) issued and redeemed daily at 
net asset value in amounts correlating to the number of receipts 
created and redeemed in a specified aggregate minimum number.
    (2) Futures Contract. The term ``futures contract'' is commonly 
known as a ``contract of sale of a commodity for future delivery'' set 
forth in Section 2(a) of the Commodity Exchange Act.
    (3) Forward Contract. A forward contract is a contract between two 
parties to purchase and sell a specific quantity of a commodity at a 
specified price with delivery and settlement at a future date. Forwards 
are traded over-the-counter (``OTC'') and not listed on a futures 
exchange.
    (c) Designation. The Corporation may list and trade Trust Issued 
Receipts investing in Investment Shares. Each issue of a Trust Issued 
Receipt based on a particular Investment Share shall be designated as a 
separate series and shall be identified by a unique symbol.
    (d) Initial and Continued Listing. Trust Issued Receipts based on 
Investment Shares will be listed and traded on the Corporation subject 
to application of the following criteria:
    (1) Initial Listing--The Corporation will establish a minimum 
number of receipts required to be outstanding at the time of 
commencement of trading on the Corporation.
    (2) Continued Listing--The Corporation will consider removing from 
listing Trust Issued Receipts based on an Investment Share under any of 
the following circumstances:
    (i) If following the initial twelve month period following the 
commencement of trading of the shares, (A) the Issuer has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of Trust Issued Receipts for 30 or more 
consecutive trading days; (B) if the Issuer has fewer than 50,000 
securities or shares issued and outstanding; or (C) if the market value 
of all securities or shares issued and outstanding is less than 
$1,000,000;
    (ii) If the value of an underlying index or portfolio is no longer 
calculated or available on at least a 15-second delayed basis or the 
Corporation stops providing a hyperlink on its website to any such 
asset or investment value;
    (iii) If the Indicative Value is no longer made available on at 
least a 15-second delayed basis; or
    (iv) If such other event shall occur or condition exists which in 
the opinion of the Corporation makes further dealings on the 
Corporation inadvisable.
    Upon termination of the Trust, the Corporation requires that Trust 
Issued Receipts issued in connection with such Trust be removed from 
Corporation listing. A Trust may terminate in accordance with the 
provisions of the Trust prospectus, which may provide for termination 
if the value of the Trust falls below a specified amount.
    (3) Term--The stated term of the Trust shall be as stated in the 
prospectus. However, such entity may be terminated under such earlier 
circumstances as may be specified in the Trust prospectus.
    (4) Trustee--The following requirements apply:
    (i) The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
    (ii) No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Corporation.
    (5) Voting--Voting rights shall be as set forth in the applicable 
Trust prospectus.
    (e) Market Maker Accounts. (1) An ETP Holder acting as a registered 
Market Maker in Trust Issued Receipts is obligated to comply with PCXE 
Rule 7.26 pertaining to limitations on dealings when such Market Maker, 
or affiliate of such Market Maker, engages in Other Business 
Activities. For purposes of Trust Issued Receipts only, Other Business 
Activities shall include trading in the underlying physical asset or 
commodity, related futures or options on futures, or any other related 
derivatives. However, an approved person of an ETP Holder acting as a 
registered Market Maker in Trust Issued Receipts that has established 
and obtained Corporation approval of procedures restricting the flow of 
material, non-public market information between itself and the ETP 
Holder pursuant to Rule 7.26, and any member, officer or employee 
associated therewith, may act in a market making capacity, other than 
as a Market Maker in the Trust Issued Receipts on another market 
center, in the underlying asset or commodity, related futures or 
options

[[Page 26584]]

on futures, or any other related derivatives.
    (2) The ETP Holder acting as a registered Market Maker in Trust 
Issued Receipts must file, with the Corporation, in a manner prescribed 
by the Corporation, and keep current a list identifying all accounts 
for trading the underlying physical asset or commodity, related futures 
or options on futures, or any other related derivatives, which the ETP 
Holder acting as registered Market Maker may have or over which it may 
exercise investment discretion. No ETP Holder acting as registered 
Market Maker in the Trust Issued Receipts shall trade in the underlying 
physical asset or commodity, related futures or options on futures, or 
any other related derivatives, in an account in which an ETP Holder 
acting as a registered Market Maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to the Corporation as required by 
this Rule.
    (3) In addition to the existing obligations under Corporation rules 
regarding the production of books and records (See, e.g. Rule 4.4), the 
ETP Holder acting as a registered Market Maker in Trust Issued Receipts 
shall make available to the Corporation such books, records or other 
information pertaining to transactions by such entity or registered or 
non-registered employee affiliated with such entity for its or their 
own accounts in the underlying physical asset or commodity, related 
futures or options on futures, or any other related derivatives, as may 
be requested by the Corporation.
    (4) In connection with trading the underlying physical asset or 
commodity, related futures or options on futures or any other related 
derivative (including Trust Issued Receipts), the ETP Holder acting as 
a registered Market Maker in Trust Issued Receipts shall not use 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 physical asset or commodity, futures or 
options on futures, or any other related derivatives.
    (f) Limitation of Corporation Liability. Neither the Corporation 
nor any agent of the Corporation shall have any liability for damages, 
claims, losses or expenses caused by any errors, omissions, or delays 
in calculating or disseminating any underlying asset or commodity 
value, the current value of the underlying asset or commodity if 
required to be deposited to the Trust in connection with issuance of 
Trust Issued Receipts; net asset value; or other information relating 
to the purchase, redemption or trading of Trust Issued Receipts, 
resulting from any negligent act or omission by the Corporation or any 
agent of the Corporation, or any act, condition or cause beyond the 
reasonable control of the Corporation or its agent, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission or delay in the reports of 
transactions in an underlying asset or commodity.
    (g) The Corporation will file separate proposals under Section 
19(b) of the Securities Exchange Act of 1934 before listing and trading 
Trust Issued Receipts based on separate Investment Shares.
* * * * *

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 add new Commentary .02 to NYSE Arca 
Equities, Inc. Rule 8.200 in order to permit trading, either by listing 
or pursuant to UTP, shares of TIRs that invest in Investment Shares. 
The Exchange also proposes to trade Shares of the Fund pursuant to UTP. 
The Commission previously approved the original listing and trading of 
the Shares by the American Stock Exchange LLC (``Amex'').\5\
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    \5\ See Securities Exchange Act Release No. 53105 (January 11, 
2006), 71 FR 3129 (January 19, 2006) (order granting accelerated 
approval to SR-Amex-2005-059) (``Amex Order'').
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    The Shares of the Fund represent beneficial ownership interests in 
the Fund's net assets, consisting solely of the common units of 
beneficial interests of the DB Commodity Index Tracking Master Fund 
(``Master Fund''). Each Share of the Fund will correlate with a Master 
Fund share issued by the Master Fund and held by the Fund. The 
investment objective of each of the Fund and the Master Fund is to 
reflect the performance of the Deutsche Bank Liquid Commodity Index) 
TM--Excess Return (``DBLCI'' or ``Index''), less the 
expenses of the operations of the Fund and the Master Fund. The Fund 
will pursue its investment objective by investing substantially all of 
its assets in the Master Fund. The Fund will hold no investment assets 
other than Master Fund Units.\6\ The Master Fund will pursue its 
investment objective by investing primarily in a portfolio of futures 
contracts on the commodities comprising the Index, which are crude oil, 
heating oil, aluminum, gold, corn and wheat (``Index commodities''). 
The Master Fund will also hold cash and U.S. Treasury securities for 
deposit with futures commission merchants for margin purposes and other 
high credit quality short-term fixed income securities.
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    \6\ See Pre-Effective Amendment No. 4 to the Fund's Form S-1, 
Registration No. 333-5325, dated October 26, 2005.
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(a) TIRs That Invest in Investment Shares and the Shares

    Commentary .02 to NYSE Arca Equities, Inc. Rule 8.200 is intended 
to accommodate possible future listing and trading of TIRs that invest 
in Investment Shares. Any new listing or trading of an issue of such 
TIRs will be subject to the approval of a proposed rule change by the 
Commission pursuant to Section 19(b)(2) of the Act and Rule 19b-4 
thereunder.\7\
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    \7\ 17 CFR 240-19b-4.
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    A description of the DBLCI, commodity futures contracts and related 
options, operation of the Fund, and the Shares is set forth in the Amex 
Order. To summarize, issuances of Shares will be made only in baskets 
of 200,000 Shares or multiples thereof (``Basket Aggregation'' or 
``Basket''). The Fund will issue and redeem the Shares on a continuous 
basis, by or through participants that have entered into participant 
agreements (each, an ``Authorized Participant'') \8\ with the Fund and 
its Managing Owner,\9\ at the net asset value (``NAV'') per Share 
determined shortly after 4 p.m. eastern

[[Page 26585]]

time (``ET'') or the last to close futures exchanges on which the Index 
commodities are traded, whichever is later, on the business day on 
which an order to purchase the Shares in one or more Baskets is 
received in proper form.
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    \8\ 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 Participant Agreement with the Fund 
issuer.
    \9\ The Managing Owner is DB Commodity Services LLC, a Delaware 
limited ability company that will be registered with the Commodity 
Futures Trading Commission as a Commodity pool operator and 
commodity trading advisor. The Managing Owner is an affiliate of 
Deutsche Bank AG, the sponsor of the Fund and Master Fund. The 
Managing Owner will serve as the commodity pool operator and 
commodity trading advisor of the Fund and the Master Fund and will 
manage and control all aspects of the business of the Funds.
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    Shortly after 4 p.m. ET each business day, The Bank of New York 
(``Administrator'') will determine the NAV for the Fund and Master 
Fund, utilizing the current day's settlement value of the particular 
commodity futures contracts in the Master Fund's portfolio and the 
value of the Master Fund's cash and high-credit quality, short-term 
fixed income securities. However, if a futures contract on a trading 
day cannot be liquidated due to the operation of daily limits or other 
rules of an exchange upon which such futures contract is traded, the 
settlement price on the most recent trading day on which the futures 
contract could have been liquidated will be used in determining the 
Fund's and the Master Fund's NAV. Accordingly, for both U.S. and non-
U.S. futures contracts, the Administrator will typically use that day's 
futures settlement price for determining NAV. The calculation 
methodology for the NAV is described in more detail in the Amex Order.
    Baskets will be issued in exchange for an amount of cash equal to 
the NAV per Share times 200,000 Shares (``Basket Amount'') on the 
purchase order date. The Basket Amount and NAV usually will be 
determined on each business day by the Administrator shortly after 4 
p.m. ET. Baskets are issued as of 12 noon ET, on the business day 
immediately following the purchase order date (T+1) at NAV per Share on 
the purchase order date if the required payment has been timely 
received. Authorized Participants that wish to purchase a Basket must 
transfer the Basket Amount to the Fund in exchange for a Basket. 
Baskets are then separable upon issuance into the Shares that will be 
traded on NYSE Arca MarketPlace on a UTP basis.\10\
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    \10\ Shares are separate and distinct from the shares of the 
Master Fund. The Master Fund's assets will consist of long positions 
in the futures contracts on the commodities comprising the DBLCI. 
The Exchange expects that the number of outstanding Shares will 
increase and decrease from time to time as a result of creations and 
redemptions of Baskets.
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    The Shares will not be individually redeemable but will only be 
redeemable in Baskets. To redeem, an Authorized Participant will be 
required to accumulate enough Shares to constitute a Basket (i.e., 
200,000 Shares). Authorized Participants that wish to redeem a Basket 
will receive the Basket Amount in exchange for each Basket surrendered. 
The operation of the Fund and creation and redemption process is 
described in more detail in the Amex Order.

(b) Dissemination of Information About the Shares and Underlying 
Futures Contracts

    The value of the Index will be calculated and published by its 
sponsor, Deutsche Bank AG London (``DB London''), at least every 15 
seconds from 9:30 a.m. to 4:15 p.m. ET through Bloomberg, Reuters, and 
other market data vendors. In addition, the Index value will be 
available on DB London's Web site at http://index.db.com and on the Fund's Web site at http://www.dbcfund.db.com on a 20 minute delayed 

basis.\11\ The closing Index level will similarly be provided by DB 
London and the Fund. In addition, any adjustments or changes to the 
Index will also be provided by DB London and the Fund on their 
respective Web sites.\12\
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    \11\ The Exchange will provide a hyperlink from its Web site at 
http://www.archipelago.com to the Fund's Web site http://www.dbcfund.db.com and the DB London Web site http://

http://www.index.db.com.

    \12\ According to the Amex Order, DB London, the sponsor of the 
Index, has in place procedures to prevent the improper sharing of 
information between different affiliates and departments. 
Specifically, an information barrier exists between the personnel 
within DB London that calculate and reconstitute the Index and other 
personnel of DB London, including but not limited to the Managing 
Owner, sales and trading, external or internal fund managers, and 
bank personnel who are involved in hedging the bank's exposure to 
instruments linked to the Index, in order to prevent the improper 
sharing of information relating to the recomposition of the Index. 
The Index is not calculated by a broker-dealer.
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    The closing prices and daily settlement prices for the futures 
contracts held by the Master Fund are publicly available on the Web 
sites of the futures exchanges trading the particular contracts. The 
particular futures exchange for each futures contract with Web site 
information is as follows: (i) Aluminum--London Metal Exchange 
(``LME'') at http://www.lme.com; (ii) corn and wheat--Board of Trade of the City of Chicago, Inc. (``CBOT'') at http://www.cbot.com; and (iii) 

crude oil, heating oil and gold--New York Mercantile Exchange 
(``NYMEX'') at http://www.nymex.com. The Exchange on its Web site at 

http://www.archipelago.com \13\ will include a hyperlink to DB London's 

Web site at https://index.db.com, which will contain hyperlinks to each 

of the futures exchanges Web sites for the purpose of disclosing 
futures contract pricing. In addition, various data vendors and news 
publications publish futures prices and data. The Exchange represents 
that futures quotes and last sale information for the commodities 
underlying the Index are widely disseminated through a variety of 
market data vendors worldwide, including Bloomberg and Reuters. In 
addition, the Exchange represents that complete real-time data for such 
futures is available by subscription from Reuters and Bloomberg. The 
CBOT, LME, and NYMEX also provide delayed futures information on 
current and past trading sessions and market news free of charge on 
their respective Web sites. The specific contract specifications for 
the futures contracts are also available from the futures exchanges on 
their Web sites as well as other financial informational sources.
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    \13\ 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.
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    The Web site for the Fund http://www.dbcfund.db.com (to which the 

Exchange will link), 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 \14\ in relation to the NAV as of the time the NAV is calculated 
(``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 (4) previous 
calendar quarters; (e) the prospectus; and (f) other applicable 
quantitative information. Quotations for and last sale information 
regarding the Shares will be disseminated via the CTA/CQS.\15\
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    \14\ The bid-ask price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV..
    \15\ Telephone Conference between David Strandberg, Director, 
NYSE Arca Equities Inc., and Florence E. Harmon, Senior Special 
Counsel, Division (``Division''), Commission, on March 21, 2006.
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    As described above, the NAV for the Fund will be calculated and 
disseminated daily. The Amex also intends to disseminate, from 9:30 
a.m. to 4:15 p.m. ET, for the Fund on a daily basis by means of CTA/CQ 
High Speed Lines information with respect to the Indicative Fund Value 
(``IFV''), recent NAV, and Shares outstanding. The Amex will also make 
available on its Web site daily trading volume, closing prices, and the 
NAV.
    As noted above, the Administrator calculates the NAV of the Fund 
once each trading day. In addition, the Administrator causes to be made 
available on a daily basis the amount of cash to be deposited in 
connection with

[[Page 26586]]

the issuance of the Shares in Basket Aggregations. In addition, other 
investors can request such information directly from the Administrator.
    In order to provide updated information relating to the Fund for 
use by investors, professionals, and persons, the Amex will disseminate 
through the facilities of CTA an updated IFV as noted above and in the 
Amex Order. The IFV 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 IFV will be 
calculated based on the cash required for creations and redemptions 
(i.e., NAV x 200,000) adjusted to reflect the price changes of the 
Index commodities through investments held by the Master Fund, i.e., 
futures contracts.
    The IFV will not reflect price changes to the price of an 
underlying commodity between the close of trading of the futures 
contract at the relevant futures exchange and the close of trading on 
the Exchange. The value of a Share may accordingly be influenced by 
non-concurrent trading hours between the Exchange and the various 
futures exchanges on which the futures contracts based on the Index 
commodities are traded.
    While the market for futures trading for each of the Index 
commodities is open, the IFV can be expected to closely approximate the 
value per Share of the Basket Amount. However, during Exchange trading 
hours when the futures contracts have ceased trading, spreads and 
resulting premiums or discounts may widen, and therefore, increase the 
difference between the price of the Shares and the NAV of the Shares. 
IFV 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 IFV based on the 
cash amount 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 the Shares trading on 
the Exchange or the creation or redemption of the Shares.

(c) Continued Listing and UTP Criteria

    While the Exchange immediately seeks to UTP the Shares, the 
Exchange is also adopting general initial and continued listing 
standards applicable to all TIRs that invest in Investment Shares in 
the event the Exchange were to list such TIRs. In such an event, the 
Exchange would still file a Form 19b-4 to list such TIRs. However, such 
continued listing standards include the following items. When the 
Exchange is the primary listing exchange for a trust that issues TIRs 
that invest in Investment Shares, the trust will be subject to the 
continued trading criteria under proposed Commentary .02(d) to NYSE 
Arca Equities, Inc. Rule 8.200. In particular, the proposed continued 
listing criteria provide that the Exchange may consider delisting or 
removal from listing of such TIRs under any of the following 
circumstances:
     Following the initial twelve month period from the date of 
commencement of trading of the TIRs: (a) If the fund has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of the TIRs for 30 or more consecutive 
trading days; (b) if the fund has fewer than 50,000 TIRs issued and 
outstanding; or (c) if the market value of all TIRs is less than 
$1,000,000.
     If the value of the underlying index or portfolio is no 
longer calculated or available on at least a 15-second basis through 
one or more major market data vendors during the time the TIRs trade on 
the Exchange.
     The IFV is no longer made available on at least a 15-
second basis.
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    In addition, the Exchange will remove TIRs from listing and trading 
upon termination of the fund.
    Since, in this case, the Exchange is trading the Shares pursuant to 
UTP, then 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 IFV or the underlying value of the Index is no longer 
available; or (b) the listing market delists the Shares. Additionally, 
the Exchange may cease trading the Shares pursuant to UTP 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 Shares 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 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, the Exchange has proposed new Commentary .02(e)(1)-(4) to 
NYSE Arca Equities, Inc. Rule 8.200, which sets forth certain 
restrictions on ETP Holders acting as registered Market Makers in TIRs 
that invest in Investment Shares to facilitate surveillance. Commentary 
.02(e)(1) to NYSE Arca Equities, Inc. Rule 8.200 will require that the 
ETP Holder acting as a registered Market Maker in the Shares provide 
the Exchange with information relating to its trading in the underlying 
physical asset or commodity, related futures or options on futures, or 
any other related derivatives. Commentary .02(e)(4) to NYSE Arca 
Equities, Inc. Rule 8.200 will prohibit the 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 physical asset or commodity, related futures or options 
on futures or any other related derivative (including the Shares). In 
addition, as stated above, Commentary .02(e)(1) to NYSE Arca Equities, 
Inc. Rule 8.200 will prohibit the ETP Holder acting as a registered 
Market Maker in the Shares from being affiliated with a market maker in 
the underlying physical asset or commodity, 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.
    Adoption of Commentary .02(e)(2)-(3) to NYSE Arca Equities, Inc. 
Rule 8.200 will also ensure that Market Makers handling the Shares 
provide the Exchange with all the necessary information relating to 
their trading in physical assets or commodities, related futures 
contracts and options thereon or any other derivative. As a general 
matter, the Exchange has regulatory jurisdiction over its ETP Holders 
and their associated persons, which includes 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

[[Page 26587]]

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: (a) The 
extent to which trading is not occurring in the underlying futures 
contracts; or (b) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. In addition, trading in Shares will be subject to trading 
halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' rule \16\ or by the halt or suspension 
of the trading of the underlying related futures contracts.
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    \16\ See NYSE Arca Equities, Inc. Rule 7.12.
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    If the Exchange is the listing market for TIRs that invest in 
Investment Shares, the Exchange will halt trading in the TIRs if: (a) 
The value of the underlying Index updated at least every 15 seconds 
from a source not affiliated with the sponsor, trust, or the Exchange 
is no longer available; (b) the IFV per Share updated at least every 15 
seconds is no longer available; or (c) the Exchange stops providing on 
the Exchange's Web site, via a hyperlink to the fund's Web site, such 
Index value and IFV per Share.
    As noted above, if the Exchange is trading the TIRs pursuant to 
UTP, such as the Shares, the Exchange will cease trading the TIRs if: 
(a) The listing market stops trading the TIRs because of a regulatory 
halt similar to NYSE Arca Equities, Inc. Rule 7.12 or a halt because 
the IFV or the underlying Index value is no longer available; or (b) 
the listing market delists the TIRs.
    TIRs that invest in Investment Shares will be deemed ``Eligible 
Listed Securities,'' as defined in NYSE 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.
    The Commission exempted the Shares from the short sale rule, Rule 
10a-1 and gave no-action relief from Rule 200(g) of Regulation SHO 
under the Act \17\ and granted certain other exemptive and no-action 
relief.\18\
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    \17\ 17 CFR 242.200(g).
    \18\ See letter dated January 19, 2006 from James A. 
Brigagliano, Division, Commission, to Michael Schmidtberger, Sidley 
Austin Brown & Wood LLP.
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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 \19\ to monitor trading in the Shares. The 
Exchange represents that these procedures are adequate to monitor 
Exchange trading of the Shares.
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    \19\  See Securities Exchange Act Release No. 51245 (February 
23, 2005), 70 FR 10731-01 (March 4, 2005) (approving the trading of 
shares of the streetTRACKS Gold Trust pursuant to UTP). See also 
Securities Exchange Act Release No. 53261 (February 2, 2006), 71 FR 
8328 (February 16, 2006) (proposing the trading of shares of the 
streetTRACKS Gold Trust pursuant to UTP during all ArcaEx trading 
sessions).
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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. The Exchange is able to 
obtain information regarding trading in the Shares and the underlying 
futures contracts through ETP Holders, 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, including the CBOT. 
In addition, the Exchange has Information Sharing Agreements in place 
with NYMEX and LME.

(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: (a) The procedures for 
purchases and redemptions of Shares in Baskets (and that Shares are not 
individually redeemable); (b) NYSE Arca Equities, Inc. Rule 9.2(a),\20\ 
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; 
(c) how information regarding the IFV is disseminated; (d) 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 (e) 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 Fund. The Exchange notes that investors purchasing 
Shares directly from the Fund (by delivery of the Basket Amount) will 
receive a prospectus. ETP Holders purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors.
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    \20\ 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 Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also reference the fact that 
there is no regulated source of last sale information regarding 
physical commodities, and that the Commission has no jurisdiction over 
the trading of physical commodities such as aluminum, gold, crude oil, 
heating oil, corn and wheat, or the futures contracts on which the 
value of the Shares is based.
    The Information Bulletin will also disclose that the NAV for Shares 
will be calculated shortly after 4 p.m. ET each trading day and that 
other information will be publicly available about the Shares and 
underlying Index.
    The Information Bulletin will also discuss any relief granted by 
the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The proposed rule change, as amended, is consistent with Section 
6(b) of the Act \21\ in general and furthers the objectives of Section 
6(b)(5) \22\ 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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    \21\ 15 U.S.C. 78s(b).
    \22\ 15 U.S.C. 78s(b)(5).
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    In addition, the Exchange believes that the proposal is consistent 
with Rule 12f-5 under the Act \23\ because it deems the Shares to be 
equity securities, thus rendering the Shares subject to the Exchange's 
existing rules governing the trading of equity securities.
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    \23\ 17 CFR 240.12f-5.

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[[Page 26588]]

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 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-2006-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-PCX-2006-22. This 
file number should be included on the 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 offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-PCX-2006-22 and should be submitted on or before May 26, 
2006.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\24\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\25\ 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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    \24\ 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).
    \25\ 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,\26\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\27\ The Commission notes that it previously approved the 
listing and trading of the Shares on the Amex.\28\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\29\ 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.\30\
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    \26\ 15 U.S.C. 78l(f).
    \27\ 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.
    \28\ See note 5, supra.
    \29\ 17 CFR 240.12f-5.
    \30\ 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,\31\ 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 Shares 
will be disseminated via the CTA/CQS. Furthermore, as noted by the 
Exchange, futures quotes and last sale information--both real-time and 
delayed--for the commodities underlying the Index are widely 
disseminated through a variety of market data vendors worldwide, 
including Bloomberg and Reuters. As described above, the NAV for the 
Fund will be calculated and disseminated daily. The Amex also intends 
to disseminate, from 9:30 a.m. to 4:15 p.m. ET, for the Fund on a daily 
basis by means of CTA/CQ High Speed Lines information with respect to 
the IFV, recent NAV, and Shares outstanding. The Amex will also make 
available on its Web site daily trading volume, closing prices, and the 
NAV. Additionally, in order to provide updated information relating to 
the Fund for use by investors, professionals, and persons, the Amex 
will disseminate through the facilities of CTA an updated IFV as noted 
above and in the Amex Order. The IFV will be disseminated on a per 
Share basis at least every 15 seconds from 9:30 a.m. to 4:15 p.m. ET.
---------------------------------------------------------------------------

    \31\ 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 value of the Index is no longer available; or (b) if the 
primary market delists the Shares. The Commission notes that, if Shares 
were to be delisted by Amex, the Exchange would no longer have 
authority to trade the 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

[[Page 26589]]

explains the terms, characteristics, and risks of trading such shares.
    4. NYSE Arca, Inc. will require that investors purchasing newly-
issued Shares 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 also cease trading in the Shares pursuant to 
UTP 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 Index is no longer 
available as described in the Amex Order; or (b) if the primary market 
delists the Shares.\32\
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    \32\ If the Exchange is the listing market for TIRs that invest 
in Investment Shares, the Exchange will halt trading in the TIRs if: 
(1) The value of the underlying Index updated at least every 15 
seconds from a source not affiliated with the sponsor, trust, or the 
Exchange is no longer available; (2) the IFV per Share updated at 
least every 15 seconds is no longer available; or (3) the Exchange 
stops providing on the Exchange's Web site, via a hyperlink to the 
fund's Web site, such Index value and IFV per Share.
---------------------------------------------------------------------------

    With respect to the trading of these Shares pursuant to UTP, 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 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.\33\ The Commission presently is not aware of 
any issue that would cause it to revisit that earlier finding or 
preclude the trading of these Shares on the Exchange pursuant to UTP. 
The Commission also notes that Commentary .02 to NYSE Arca Equities, 
Inc. Rule 8.200 is substantially similar to rules previously approved 
by the Commission for other SROs.\34\ 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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    \33\ See Amex Order.
    \34\ See Amex Rule 1200A et seq.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposed rule change (SR-PCX-2006-22), is approved on 
an accelerated basis.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\36 \
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-6781 Filed 5-4-06; 8:45 am]

BILLING CODE 8010-01-P
