

[Federal Register: June 28, 2006 (Volume 71, Number 124)]
[Notices]               
[Page 36856-36862]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jn06-135]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54025; File No. SR-NYSEArca-2006-12]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change and 
Amendment No. 1 Relating to iShares[supreg] GSCI Commodity-Indexed 
Trust

June 21, 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 April 26, 2006, NYSE Arca, Inc. (the ``Exchange''), through its 
wholly owned subsidiary NYSE Arca Equities, Inc. (``NYSE Arca 
Equities'' or the ``Corporation''), 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. On June 19, 2006, the Exchange submitted Amendment No. 1 
to the proposed rule change.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons and is approving the proposal, as amended, on 
an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made changes to the proposed rule text, as 
well as to corresponding sections of the Purpose section. Amendment 
No. 1 also made other clarifying changes to the Purpose section.
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1. 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, proposes to amend its rules governing NYSE Arca, LLC (also 
referred to as the ``NYSE Arca Marketplace''), the equities trading 
facility of NYSE Arca Equities. The Exchange proposes new NYSE Arca 
Equities Rule 8.203 in order to permit trading, either by listing or 
pursuant to unlisted trading privileges (``UTP''), shares issued by a 
trust that is a commodity pool that holds long positions in futures 
contracts on a specified commodity index, or interests in a commodity 
pool that, in turn, holds such long positions (``Commodity Index Trust 
Shares'') and trading, pursuant to UTP, shares (``Shares'') of the 
iShares[supreg] GSCI[supreg] Commodity-Indexed Trust (the 
``Trust'').\4\
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    \4\ iShares[supreg] is a registered trademark of Barclays Global 
Investors, N.A. GSCI is a registered trademark of Goldman, Sachs & 
Co.
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    The text of the proposed rule change appears below. All text is 
new.
* * * * *

Rules of NYSE Arca Equities, Inc.

Rule 8.203

Commodity Index Trust Shares

    (a) The Corporation will consider for trading, whether by listing 
or pursuant to unlisted trading privileges, Commodity Index Trust 
Shares that meet the criteria of this Rule.
    (b) Applicability. This Rule is applicable only to Commodity Index 
Trust Shares. Except to the extent inconsistent with this Rule, or 
unless the context otherwise requires, the provisions of the trust 
issued receipts rules, Bylaws, and all other rules and procedures of 
the Board of Directors shall be applicable to the trading on the 
Corporation of such securities. Commodity Index Trust Shares are 
included within the definition of ``security'' or ``securities'' as 
such terms are used in the Bylaws and Rules of the Corporation.
    (c) Commodity Index Trust Shares. The term ``Commodity Index Trust 
Shares'' as used in the Rules shall, unless the context otherwise 
requires, mean a security that (a) is issued by a trust (``Trust'') 
that (i) is a commodity pool as defined in the Commodity Exchange Act 
and regulations thereunder, and that is managed by a commodity pool 
operator registered with the Commodity Futures Trading Commission, and 
(ii) that holds long positions in futures contracts on a specified 
commodity index, or interests in a commodity pool which, in turn, holds 
such long positions; (b) when aggregated in some specified minimum 
number may be surrendered to the Trust by the beneficial owner to 
receive positions in futures contracts on a specified index and cash or 
short term securities. 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.
    (d) Designation. The Corporation may trade, either by listing or 
pursuant to unlisted trading privileges, Commodity Index Trust Shares 
based on one or more securities. The Commodity Index Trust Shares based 
on particular securities shall be designated as a separate series and 
shall be identified by a unique symbol.
    (e) Initial and Continued Listing. Commodity Index Trust 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 Commodity Index Trust Shares required to be outstanding at 
the time of commencement of trading on the Corporation.
    (2) Continued Listing--the Corporation will consider the suspension 
of trading in or removal from listing of a series of Commodity Index 
Trust Shares under any of the following circumstances:
    (i) following the initial twelve-month period beginning upon the 
commencement of trading of the Commodity Index Trust Shares, there are 
fewer than 50 record and/or beneficial holders of Commodity Index Trust 
Shares for 30 or more consecutive trading days;
    (ii) if the value of the applicable underlying index is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, the Trust or the trustee of the 
Trust; or
    (iii) if the net asset value for the trust is no longer 
disseminated to all market participants at the same time;
    (vi) if the Indicative Trust Value is no longer made available on 
at least a 15-second delayed basis; or
    (v) 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 a Trust, the Corporation requires that 
Commodity Index Trust Shares issued in connection with such entity 
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 
Trust prospectus. However, a Trust 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

[[Page 36857]]

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.
    (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 applicable underlying index value; 
the current value of the applicable positions or interests required to 
be deposited to the Trust in connection with issuance of Commodity 
Index Trust Shares; net asset value; or any other information relating 
to the purchase, redemption, or trading of the Commodity Index Trust 
Shares, 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, its agent, 
including, but not limited to, and 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 the applicable positions or interests.
    (g) Information Barrier. An ETP Holder acting as a registered 
Market Maker or Market Maker Authorized Trade in Commodity Index Trust 
Shares is obligated to comply with PCXE Rule 7.26 pertaining to 
limitations on dealings when such Market Maker or Market Maker 
Authorized Trader, or affiliate of such persons, engages in Other 
Business Activities. For purposes of Commodity Index Trust Shares only, 
Other business Activities shall include trading in the applicable 
physical commodities included in, or options, futures or options on 
futures on, an index underlying an issue of Commodity Index Trust 
Shares or any other derivatives based on such index or based on any 
commodity included in such index.
    (h) Market Maker Accounts. An ETP Holder acting as a registered 
Market maker in Commodity Index Trust Shares must file with the 
Exchange in a manner prescribed by the Exchange and keep current a list 
identifying all accounts for trading in the applicable physical 
commodities included in, or options, futures or options on futures on, 
an index underlying an issue of Commodity Index Trust Shares or any 
other derivatives based on such index or based on any commodity 
included in such index, which the Market Maker may have or over which 
it may exercise investment discretion. No Market Maker shall trade in 
the applicable physical commodities included in, or options, futures or 
options on futures on, an index underlying an issue of Commodity Index 
Trust Shares or any other derivatives based on such index or based on 
any commodity included in such index, in an account in which a 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 Exchange as required by this Rule.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records, the ETP Holder acting as 
a Market Maker in Commodity Index Trust Shares shall make available to 
the Exchange 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 for trading 
the applicable physical commodities included in, or options, futures or 
options on futures on, an index underlying an issue of Commodity Index 
Trust Shares or any other derivatives based on such index or based on 
any commodity included in such index, as may be requested by the 
Exchange.
    (i) In connection with trading the applicable physical commodities 
included in, or options, futures or options on futures on, an index 
underlying an issue of Commodity Index Trust Shares or any other 
derivatives based on such index (including Commodity Index Trust 
Shares), the ETP Holder acting as a Market Maker in Commodity Index 
Trust Shares 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 applicable 
physical commodities included in, or options, futures or options on 
futures on, an index underlying an issue of Commodity Index Trust 
Shares or any other derivatives based on such index or based on any 
commodity included in such index.
    Commentary:
    01. A Commodity Index Trust Share is a Trust Issued Receipt that 
holds long positions in futures contracts on a specified commodity 
index, or interests in a community pool which, in turns, holds such 
long positions, deposited with the Trust.
    02. The Corporation requires that ETP Holders provide all 
purchasers of newly issued Commodity Index Trust Shares a prospectus 
for the series of Commodity Index Trust Shares.
    03. Transactions in Commodity Index Trust Shares will occur during 
he trading hours specified in PCXE Rule 7.34.
    04. The Corporation will file separate proposals under Section 
19(b) of the Securities Exchange Act of 1934 before trading, either by 
listing or pursuant to unlisted trading privileges, commodity Index 
Trust 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, as 
amended, and discussed any comments it received on 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 NYSE Arca Equities Rule 8.203 in 
order to permit trading, either by listing or pursuant to UTP, of 
Commodity Index Trust Shares.\5\ The Exchange also proposes to trade 
the Shares of the Trust purusant to UTP. The New York Stock Exchange, 
Inc. (``NYSE'') filed a rule proposal to list and trade the Shares, 
which was approved by the Commission on June 16, 2006.\6\
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    \5\ Commodity Index Trust Shares are securities that (a) are 
issued by a trust which (i) is a commodity pool as defined in the 
Commodity Exchange Act and regulations thereunder, and (ii) which 
holds long positions in futures contracts on a specified commodity 
index, or interests in a commodity pool which, in turn, holds such 
long positions; (b) when aggregated in some specified minimum number 
may be surrendered to the trust by the beneficial owner to receive 
positions in futures contracts on a specified index and cash or 
short term securities.
    \6\ See Securities Exchange Act Release Nos. 53659 (April 17, 
2006), 71 FR 21074 (April 24, 2006) (notice of filing of SR-NYSE-
2006-17) (``NYSE Proposal'') and 54013 (June 16, 2006) (``NYSE 
Order'').
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    The Shares represent fractional undivided beneficial interests in 
the net assets of the Trust. Substantially all of the assets of the 
Trust consist of its holdings of the limited liability

[[Page 36858]]

company interests of a commodity pool (``Investing Pool Interests''), 
which are the only securities in which the Trust may invest. That 
commodity pool, iShare[supreg] GSCI Commodity-Indexed Investing Pool 
LLC (``Investing Pool''), holds long positions in futures contracts on 
the GSCI Excess Return Index (``GSCI-ER''), called ``CERFs,'' listed on 
the Chicago Mercantile Exchange (``CME'') and will post margin in the 
form of cash or short-term securities to collaterlize these futures 
positions. The GSCI-ER is calculated based on the same commodities 
included in the Goldman Sachs Commodity Index (``GSCI''), which is 
production-weighted index of the prices of a diversified group of 
futures contracts on physical commodities. The GSCI is administered, 
calculated and published by Goldman, Sachs & Co. (the ``Index 
Sponsor''), a subsidiary of The Goldman Sachs Group Inc.
    According to the Trust's Registration Statement,\7\ the Trust's 
objective is that the performance of the Shares will correspond 
generally to the performance of the GSCI Total Return Index (``Index'') 
before payment of the Trust's and the Investing Pool's expenses and 
liabilities. The Index is intended to reflect the performance of a 
diversified group of commodities. The Trust and and Investing Pool are 
each commodity pools, as defined in the Commodity Exchange Act and the 
applicable regulations of the Commodity Futures Trading Commission.
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    \7\ The Sponsor, on behalf of the Trust, filed the Form S-1 (the 
``Registration Statement'') on July 22, 2005, as amended. See 
Registration No. 333-126810.
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    (a) Commodity Index Trust Shares and the Shares.
    Proposed NYSE Arca Equities Rule 8.203 is inteded to accommodate 
possible future listing and trading of shares of trusts based on 
positions in futures contracts on a specified commodity index, in 
addition to the Index's Shares. Any new listing or trading of an issue 
of Commodity Index Trust Shares will be subject to approval of a 
proposed rule change by the Commission pursuant to section 19(b)(2) \8\ 
of the Act and Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(1).
    \9\ 17 CFR 240.19b7ndash;4.
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    Descriptions of the Shares, the Investing Pool, the futures 
contracts, the Index, the GSCI-ER, the GSCI, and the fees and expenses 
of the Trustee are set forth in the NYSE Proposal.\10\ To summarize, 
issuances of Shares will be made only in baskets of 50,000 Shares or 
multiples thereof (``Baskets''). 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'') with Barclays Global Investors International, Inc. (the 
``Sponsor'') and Barclays Global Investors, N.A. (the ``Trustee'').
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    \10\ See NYSE Proposal, supra note 6.
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    Baskets will be issued only in exchange for an amount of CERFs and 
cash (or, in the discretion of the Trustee, Short-Term Securities \11\ 
in lieu of cash) equal to the Basket Amount for the Business Day \12\ 
on which the creation order was received by the Trustee. The Basket 
Amount for a Business Day will have a per Share value equal to the Net 
Asset Value (``NAV'') as of such day. However, orders received by the 
Trustee after 2:40 p.m. Eastern Time (``ET''), will be treated as 
received on the next following Business Day. The Trustee will notify 
the Authorized Participants of the Basket Amount on each Business Day. 
Baskets are then separable upon issuance into the Shares that will be 
traded on NYSE Arca Marketplace on a UTP basis.\13\
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    \11\ ``Short-Term Securities'' means U.S. Treasury Securities or 
other short-term securities and similar securities, in each case 
that are eligible as margin deposits under the rules of the CME.
    \12\ The Trust Registration Statement defines ``Business Day'' 
as any day (1) on which none of the following occurs: (a) The NYSE 
is closed for regular trading, (b) the CME is closed for regular 
trading, or (c) the Federal Reserve transfer system is closed for 
cash wire transfers, or (2) the Trustee determines that it is able 
to conduct business.
    \13\ Shares are separate and distinct from the underlying 
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 in the underlying portfolio.
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    The Shares will not be individually redeemable but will be 
redeemable only 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 an amount of CERFs and cash (or, in the discretion of the 
Trustee, Short-Term Securities in lieu of cash) equal to the Basket 
Amount on the Business Day the redemption request is received by the 
Trustee, in exchange for each Basket surrendered. However, redemption 
requests received by the Trustee after 2:40 p.m. ET (or, on any day on 
which the CME is scheduled to close early, after the close of trading 
of CERFs on the CME on such day), will be treated as received on the 
next following Business Day. The operation of the Trust and creation 
and redemption process is described in more detail in the NYSE 
Proposal.\14\
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    \14\ See NYSE Proposal, supra note 6.
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    On each Business Day on which the NYSE is open for regular trading, 
as soon as practicable after the close of regular trading of the Shares 
on the NYSE (normally, 4:15 p.m. ET), the Trustee will determine the 
net asset value of the Trust and the NAV as of that time. The 
calculation methodology for the NAV is described in more detail in the 
NYSE Proposal.
    The NAV for the Shares on each Business Day on which the NYSE is 
open for regular trading will be distributed to all market participants 
at the same time.\15\ The NAV will be distributed through major market 
data vendors and will be published online at http://www.ishares.com, or 

any successor thereto. The Trust will update the NAV as soon as 
practicable after each subsequent NAV is calculated.
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    \15\ Telephone conversation between Lisa Dallmer, Vice 
President, NYSE Arca, Inc., and Florence Harmon, Senior Special 
Counsel, Division of Market Regulation (``Division''), Commission, 
and Angela Muehr, Attorney, Division, Commission, on June 21, 2006.
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    (b) Dissemination of Information Relating to the Shares and the 
Underlying Futures Contracts and Commodities.
    The Web site for the Trust (http://www.ishares.com), 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 midpoint of the bid-ask price \16\ 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 prospectus; (f) the holdings of the Trust, including CERFs, cash 
and Treasury securities; (g) the Basket Amount, and (h) other 
applicable quantitative information. The Exchange, on its Web site at 
http://www.archipelago.com, will include a hyperlink to the Trust's Web site at http://www.ishares.com.

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    \16\ The bid-ask price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV.
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    As described above the NAV for the Trust will be calculated and 
disseminated daily. According to the NYSE Proposal, the NYSE intends to 
disseminate from 9:30 a.m. to 4:15 p.m. ET daily 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. 
NYSE Arca Marketplace will make available on its Web site at http://www.NYSEArca.com



[[Page 36859]]

daily trading volume, closing prices, and the NAV.
    Various data vendors and news publications publish futures prices 
and data. Futures quotes and last sale information for the commodities 
underlying the Index are widely disseminated through a variety of major 
market data vendors worldwide, including Bloomberg and Reuters. In 
addition, complete real-time data for such futures is available by 
subscription from Reuters and Bloomberg. The futures exchanges on which 
the underlying commodities and CERFs trade also provide delayed futures 
information on current and past trading sessions and market news 
generally 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 from other 
financial informational sources.
    In order to provide updated information relating to the Trust for 
use by investors, professionals, and other persons, the NYSE will 
disseminate through the facilities of CTA an updated ITV on a per Share 
basis. The ITV will be disseminated at least every 15 seconds from 9:30 
a.m. to 4:15 p.m. ET. The ITV will be calculated based on the cash and 
collateral in a Basket Amount divided by 50,000, adjusted to reflect 
the market value of the Index commodities through investments held by 
the Investing Pool, i.e. CERFs. The ITV 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. Accordingly, the value of a Share may 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.
    When the market for futures trading for each of the Index 
commodities is open, the ITV 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, may increase 
the difference between the price of the Shares and the NAV of the 
Shares. 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 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 creation or redemption of the Shares.
    (c) Continued Listing and UTP Trading Criteria.
    While the Exchange immediately seeks to trade the Shares pursuant 
to UTP, the Exchange also proposes to adopt general initial and 
continued listing standards applicable to Commodity Index Trust Shares 
in the event the Exchange were to list such Commodity Index Trust 
Shares. In such an event, the Exchange would file with the Commission a 
Form 19b-4 to list such Commodity Index Trust Shares. When the Exchange 
is the listing exchange, the Trust shall be subject to the continued 
listing criteria under proposed NYSE ARCA Equities Rule 8.203(e).
    Under the applicable continued listing criteria, a series of 
Commodity Index Trust Shares may be delisted as follows: (1) Following 
the initial twelve-month period beginning upon the commencement of 
trading of the Shares, there are fewer than 50 record and/or beneficial 
holders of the Shares for 30 or more consecutive trading days; (2) the 
value of the applicable Index ceases to be calculated or available on 
at least a 15-second basis from a source unaffiliated with the Sponsor, 
the Trust or the Trustee; (3) the ITV cease to be available on at least 
a 15-second delayed basis; (4) the NAV of the trust is not disseminated 
to all market participants at the same time,\17\ or (5) such other 
event shall occur or condition exists that, in the opinion of the 
Exchange, makes further dealings on the Exchange inadvisable. In 
addition, the Exchange will remove Shares from listing and trading upon 
termination of the Trust.
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    \17\ If the NAV is not disseminated to all market participants 
at the same time, the Exchange will immediately contact the 
Commission staff to discuss measures that may be appropriate under 
the circumstances.
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    If the Exchange is trading Commodity Index Trust Shares pursuant to 
UTP, such as 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 a halt based on NYSE ARCA Equities Rule 7.12 
or a halt because the ITV or the value of the Index, the GSCI-ER, or 
the GSCI is no longer calculated or available or a halt because the NAV 
for the Trust is not disseminated to all market participants at the 
same time; \18\ or (b) the listing market delists the Shares. 
Additionally, the Exchange may cease trading the Shares is such other 
event shall occur or condition exists which in the opinion of the 
Exchange makes further dealings on the Exchange inadvisable.
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    \18\ According to Amendment No. 2 to the NYSE's rule filing for 
the Trust (SR-NYSE-2006-17), the Trustee for the Trust (Barclay 
Global Investors International, Inc.) will make the NAV for the 
Trust available to all market participants at the same time.
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    (d) Trading Rules.
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the 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 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) unless the ITV is disseminated during 
that time.\19\ The Exchange has appropriate rules to facilitate 
transactions in the Shares during this time. The minimum trading 
increment for Shares on the Exchange will be $0.01.
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    \19\ Until such time as the ITV is disseminated during the 
Opening Session and/or Late Trading Session, the Exchange expects to 
trade the Shares during the Core Session only, which is from 9:30 
a.m. to 4:15 p.m. ET. In the event of after-hours trading, the 
Exchange will update NYSE Arca Equities Rule 7.34(a) pursuant to 
Rule 19b-4. Telephone conversation between Lisa Dallmer, Vice 
President, NYSE Arca, Inc., and Florence Harmon, Senior Special 
Counsel, Division of Market Regulation (``Division''), Commission, 
and Angela Muehr, Attorney, Division, Commission, on June 21, 2006.
    Similarly, in the event of after-hours trading, if the Index 
value is updated during the early or late trading sessions by the 
Index Sponsor, it must be widely disseminated at least every 15 
seconds during after hours trading sessions. Telephone conversation 
between Lisa Dallmer, Vice President, NYSE Arca, Inc., and Florence 
Harmon, Senior Special Counsel, Division of Market Regulation 
(``Division''), Commission, and Angela Muehr, Attorney, Division, 
Commission, on June 21, 2006.
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    Further, the Exchange has proposed new NYSE ARCA Equities Rules 
8.203(g)-(i), which set forth certain restrictions on equity trading 
permit holders (``ETP Holders'') acting as registered Market Makers in 
Commodity Index Trust Shares to facilitate surveillance. Proposed NYSE 
ARCA Equities Rule 8.203(h) requires that an ETP Holder acting as a 
registered Market Maker in the Shares provide the Exchange with 
information relating to its trading in the applicable physical 
commodities included in, or options, futures, or options on futures on 
the Index or any other derivatives based on the Index or based on any 
commodity included in such Index. Proposed NYSE ARCA Equities Rule 
8.203(i) prohibits 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

[[Page 36860]]

person regarding trading by such person or employee in the applicable 
physical commodities included in, or options, futures or options on 
futures on, the Index or any other derivatives based on the Index or 
based on any commodity included in such Index (including the Shares). 
In addition, proposed NYSE ARCA Equities Rule 8.203(g) prohibits the 
ETP Holder acting as a registered Market Maker in the Shares from being 
affiliated with a market maker in the applicable physical commodities 
included in, or options, futures or options on futures in, the Index or 
any other derivatives based on the Index unless adequate information 
barriers are in place, as provided in NYSE ARCA Equities Rule 7.26.
    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 trading is not occurring in the 
physical commodities, 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\
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    \20\ See NYSE ARCA Equities Rule 7.12.
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    If the Exchange is the listing market for Commodity Index Trust 
Shares, the Exchange will halt trading in the Shares if: (1) The value 
of the applicable underlying index, which is updated at least every 15 
seconds from a source not affiliated with the sponsor, trust, or 
trustee, ceases to be available; (2) the ITV per Share, which is 
updated at least every 15 seconds, ceases to be available; (3) the NAV 
of the trust is not disseminated to all market participants at the same 
time; \21\ or (4) the Exchange stops providing on the Exchange's Web 
site, via a hyperlink to the Trust's Web site, such index value or 
ITV.\22\
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    \21\ If the NAV is not disseminated to all market participants 
at the same time, the Exchange will immediately contact the 
Commission staff to discuss measures that may be appropriate under 
the circumstances.
    \22\ Telephone conversation between Lisa Dallmer, Vice 
President, NYSE Arca, Inc., and Angela Muehr, Attorney, Division, 
Commission, on June 20, 2006.
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    If the Exchange is trading the Commodity Index Trust Shares 
pursuant to UTP, such as the Shares, the Exchange will cease trading 
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 Rule 
7.12 or a halt because the ITV or the value of each of the Index, the 
GSCI-ER and the GSCI is no longer calculated or available or a halt 
because the NAV for the Trust is not disseminated to all market 
participants at the same time \23\ or (b) the listing market delists 
the Shares.
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    \23\ According to Amendment No. 2 to the NYSE's rule filing for 
the Trust (SR-NYSE-2006-17), the Sponsor for the Trust (Barclays 
Global Investors International, Inc.) has informed the NYSE that the 
Trustee for the Trust will make the NAV for the Trust available to 
all market participants at the same time.
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    Commodity Index Trust Shares will be deemed ``Eligible Listed 
Securities,'' as defined in NYSE ARCA Equities 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 Rule 
7.56, which requires the ETP Holders avoid initiating trade-throughs 
for ITS securities.
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and any person or entity controlling an ETP Holder. The 
Exchange also has regulatory jurisdiction over a subsidiary or 
affiliate of an ETP Holder that is in the securities business. A 
subsidiary or affiliate of an EPT Holder that does business only in 
commodities or futures contracts would not be subject to Exchange 
jurisdiction, but the Exchange could obtain certain 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.
    (c) Surveillance.
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products and shares of the 
streetTRACKS Gold Trust \24\ 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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    \24\ See supra note 4.
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    The Exchange's current trading surveillance focuses on detecting 
securities trading outside its normal pattern. 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, the physical commodities 
included in, or options, futures or options on futures on, an index 
underlying an issue of Commodity Index Trust Shares or any other 
derivatives based on such index, through ETP Holders, in connection 
with such ETP Holders' proprietary or customer trades which they effect 
on any relevant market. With regard to the Index components, the 
Exchange can obtain market surveillance information, including customer 
identity information, with respect to transactions occurring on the New 
York Mercantile Exchange (``NYMEX''), the Kansas City Board of Trade. 
ICE Futures, and the London Metal Exchange (``LME''), pursuant to its 
comprehensive information sharing agreements with each of those 
exchanges. All of the other trading venues on which the current Index 
components are traded are members of the Intermarket Surveillance Group 
(``ISG''); therefore, the Exchange has access to all relevant trading 
information with respect to those contracts without any further action 
being required on the part of the Exchange.
    If at any time the Index Sponsor includes in the Index a contract 
traded on any other market, which results in more than 10% of the 
cumulative weight of the Index not being subject to comprehensive 
surveillance sharing arrangements \25\ (e.g., is not a member or 
affiliate of the ISG or to which the Exchange does not have a 
preexisting comprehensive information sharing agreement), then, prior 
to the inclusion of such contract in the Index, the Exchange will (i) 
enter into adequate information sharing arrangements with that other 
market and (ii) contact the commission to discuss measures that may be 
appropriate under the circumstances, including whether the Exchange 
should file a form 19b-4 to seek Commission approval prior to the 
inclusion of the new contract in the Index.
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    \25\ Telephone conversation between Lisa Dallmer, Vice 
President, NYSE Arca, Inc., and Angela Muehr, Attorney, Division, 
Commission, on June 20, 2006.
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    (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 (and that Shares are not 
individually redeemable); (2) NYSE Arca Equities Rule 9.2(a),\26\ which 
imposes a duty of

[[Page 36861]]

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 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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    \26\ The Exchange has proposed to amend NYSE Arca Equities 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 the fact that 
the Trust 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 or the futures 
contracts on which the value of the Shares is based.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act \27\ in general and furthers 
the objectives of section 6(b)(5),\28\ 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 
transactions in securities, to remove impediments and perfect the 
mechanisms of a free and open market, and to protect investors and the 
public interest.
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    \27\ 15 U.S.C. 78s(b).
    \28\ 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 \29\ 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.\30\
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    \29\ 17 CFR 240.12f-5.
    \30\ Telephone conversation between Lisa Dallmer, Vice 
President, NYSE Arca, Inc., and Florence Harmon, Senior Special 
Counsel, Division, Commission, and Angela Muehr, Attorney, Division, 
Commission, on June 21, 2006.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, 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-NYSEArca-2006-12 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-NYSEArca-2006-12. 
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 office 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-NYSEArca-2006-12 and should be submitted on or before 
July 19, 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.\31\ In particular, the Commission finds that the proposed 
rule change is consistent with section 56(b)(5) of the Act,\32\ 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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    \31\ 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).
    \32\ 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,\33\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\34\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\35\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\36\ which provides that an exchange shall not extent 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

[[Page 36862]]

UTP. NYSEArca 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.
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    \33\ 15 U.S.C. 78l(f).
    \34\ 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.
    \35\ See NYSE Order, supra note 6.
    \36\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with section 11A(a)(1)(C)(iii) of the Act,\37\ 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.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of the portion of the proposed rule change regarding UTP 
of the Shares, the Exchange has made the following representations:
    1. The Exchange has appropriate rules to facilitate transactions in 
this type of security in all trading sessions.
    2. The Exchange's surveillance procedures are adequate to properly 
monitor the trading of the Shares on the Exchange.
    3. The Exchange will distribute an Information Bulletin to its 
members prior to the commencement of trading of the Shares on the 
Exchange that explains the special characteristics and risks of trading 
the Shares.
    4. The Exchange will require a member with a customer who purchases 
newly issued Shares on the Exchange to provide that customer with a 
product prospectus and will note this prospectus delivery requirement 
in the Information Bulletin.
    5. The Exchange will cease trading in the Shares if (1) the listing 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on NYSE Arca Equities Rule 7.12 and/or a halt because the 
ITV or the value of each of the Index, the GSCI-ER and the GSCI,) or a 
halt because the NAV of the trust is not disseminated to all market 
participants at the same time; is no longer calculated or available or 
(2) 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.
    6. If, at any time, the Index Sponsor includes in the index a 
contract traded on any other market, which results in more than 10% of 
the cumulative weight of the Index not being subject to comprehensive 
surveillance sharing arrangements, then, prior to the inclusion of such 
contract in the Index, the Exchange will (i) enter into adequate 
information sharing arrangements with that other market and (ii) 
contact the commission to discuss measures that may be appropriate 
under the circumstances, including whether the Exchange should file a 
Form 19b-4 to seek Commission approval prior to the inclusion of the 
new contract in the Index.
    This approval order is conditioned on the Exchange'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 NYSE is 
consistent with the Act.\38\ 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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    \38\ See NYSE Order, supra note 6.
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change, as amended (SR-NYSEArca-2006-12), is 
hereby approved on an accelerated basis.\39\
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    \39\ 15 U.S.C. 78s(b)(2).
    \40\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\40\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-5757 Filed 6-27-06; 8:45 am]

BILLING CODE 8010-01-M
