

[Federal Register: September 21, 2006 (Volume 71, Number 183)]
[Notices]               
[Page 55230-55237]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21se06-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54450; File No. SR-Amex-2006-44]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Accelerated Approval of a Proposed Rule Change and Amendments 
No. 1 and 2 Thereto Relating to the Listing and Trading of the DB 
Currency Index Value Fund

September 14, 2006.

I. Introduction

    On May 2, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade the DB Currency Index Value Fund 
under Commentary .07 to Amex Rule 1202. On July 31, 2006, Amex filed 
Amendment No. 1 to the proposed rule change. On August 18, 2006, Amex 
filed Amendment No. 2 to the proposed rule change. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on August 29, 2006 for a 15-day comment period, which ended on 
September 13, 2006.\3\ The Commission received no comments on the 
proposal. This order grants accelerated approval of the proposed rule 
change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 54351 (August 23, 
2006), 71 FR 51245, as corrected by 71 FR 53492 (September 11, 
2006).
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II. Description of the Proposal

    The Exchange seeks to list and trade shares (``Shares'') of the DB 
Currency Index Value Fund (``Trust'' or ``Fund'').\4\

[[Page 55231]]

Pursuant to Commentary .07 to Amex Rule 1202, the Exchange may approve 
the listing and trading of trust issued receipts (``TIRs'') that 
represent beneficial ownership of shares or securities (``Investment 
Shares'') of a trust, partnership, commodity pool or other similar 
entity that holds investments comprising, or otherwise based on, any 
combination of securities, futures contracts, swaps, forward contracts, 
options on futures contracts, commodities or portfolios of investments.
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    \4\ The Fund will be formed as a Delaware statutory trust 
pursuant to a Certificate of Trust and a Declaration of Trust and 
Trust Agreement among Wilmington Trust Company, as trustee, the DB 
Commodity Services LLC as managing owner, and the holders of the 
Shares. The Exchange states that the Fund will not be subject to 
registration and regulation under the Investment Company Act of 1940 
(``1940 Act'').
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    The Shares represent beneficial ownership interests in the Fund's 
net assets, consisting solely of the common units of beneficial 
interests of DB Currency Index Value Master Fund (the ``Master Fund''). 
The Master Fund is a statutory trust created under Delaware law whose 
investment portfolio will consist primarily of futures contracts on the 
currencies comprising the Deutsche Bank G10 Currency Future Harvest 
IndexTM--Excess Return (the ``DBCHI'' or Index'') and 
securities for margin purposes. Both the Fund and the Master Fund will 
be commodity pools operated by DB Commodity Services LLC (the 
``Managing Owner''). The Managing Owner is registered as a commodity 
pool operator (the ``CPO'') and commodity trading advisor (the ``CTA'') 
with the Commodity Futures Trading Commission (``CFTC'') and is a 
member of the National Futures Association (``NFA'').
    For the Master Fund, the Managing Owner will manage the futures 
contracts with the investment objective of tracking the performance of 
the Index over time, less the expenses of the operations of the Fund 
and the Master Fund.\5\ The Master Fund will hold a portfolio of both 
long and short futures contracts with a notional value to equity ratio 
of approximately two to one (2:1) \6\ on the currencies that comprise 
the Index (the ``Index Currencies'') and will include cash and U.S. 
Treasury securities for margin purposes and other high credit quality 
short-term fixed income securities. The Master Fund will not engage in 
borrowing. In seeking to cause the NAV (as defined herein) \7\ of the 
Fund to track the Index during periods in which the Index is flat or 
declining, as well as when the Index is rising, the Managing Owner 
believes that the Index and the Fund will provide the advantages of 
market diversification and the reduction of country-specific foreign 
exchange risk (i.e., volatility). The Exchange represented that Amex 
Rule 1202 accommodates the listing and trading of the Shares and that 
the Shares will conform to the initial and continued listing criteria 
under Commentary .07(d) to Amex Rule 1202.
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    \5\ The Exchange stated that the Wilmington Trust Company is the 
trustee of the Fund and the Master Fund and has delegated to the 
Managing Owner the power and authority to manage and operate the 
day-to-day affairs of both.
    \6\ Such ratio is generally intended to be comparable to the 
limits imposed on registered investment companies pursuant to the 
asset coverage requirements of Section 18(a) of the 1940 Act. Even 
though the Master Fund is not registered or regulated as an 
investment company under the 1940 Act, the Exchange represents that 
it is structured in a manner that is sensitive to the capital 
structure limitations imposed on registered investment companies by 
the 1940 Act.
    \7\ See infra note 15 (defining net asset value or ``NAV'').
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    In connection with the proposal, Amex also seeks to amend 
Commentary .02 to Amex Rule 1200 to conform to Amex's current trading 
hours to permit the Shares to trade until 4:15 p.m. Eastern Time 
(``ET'').

Index Description

    DBCHI is intended to reflect the return from investing assets in 
long currency futures positions for certain currencies associated with 
relatively high yielding interest rates and an equal amount in short 
currency futures positions for certain currencies associated with 
relatively low yielding interest rates.\8\ The Index is designed to 
exploit the trend of currencies associated with relatively high 
interest rates, on average, tending to rise in value relative to 
currencies associated with relatively low interest rates.
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    \8\ This is known as the ``Interest Rate Parity'' or ``Covered 
Interest Arbitrage'' formula.
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    The Index, at any time, is comprised of futures positions on six 
(6) currencies from The Group Ten (``G10'') countries,\9\ each of which 
is traded on the Chicago Mercantile Exchange (the ``CME''). The sponsor 
of the Index is Deutsche Bank AG London (``DB London'' or ``Index 
Sponsor'').
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    \9\ The G10 currencies are the United States Dollar, the Euro, 
the Japanese Yen, the Canadian Dollar, the Swiss Franc, the British 
Pound, the Australian Dollar, the New Zealand Dollar, the Norwegian 
Krone, and the Swedish Krona (collectively, the ``Eligible Index 
Currencies'').
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    As described below, the Index will be calculated and disseminated 
every fifteen (15) seconds on the Consolidated Tape (``CT'') and 
through major market data vendors during the time the Shares are traded 
on the Exchange. DB London calculates the closing level of the Index on 
the basis of closing prices on CME for the applicable futures contracts 
relating to the Index Currencies \10\ and applies a set of rules to 
these values to calculate the closing level of the Index.\11\ The CME-
traded futures contract of each applicable Index Currency that is 
closest to expiration is used in the Index calculation. The futures 
contracts on the Index Currencies are rolled during the period in which 
the Index is re-weighted (the ``Index Re-Weighting Period'').\12\ The 
new futures contract on an Index Currency that has the next closest 
expiration date is selected. The calculation of the Index on an excess-
return basis is the weighted average return on the change in price of 
the futures contracts relating to the Index Currencies.
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    \10\ The Index Sponsor calculates the level of the Index 
intraday and at the end of the day. The intraday calculation is 
based on feeds of real-time data relating to the underlying futures 
contracts and updates intermittently approximately every 15 seconds. 
The Index Sponsor uses independent feeds from Reuters to verify all 
prices. A number of currency market participants independently 
verify the correctness of the disseminated intraday Index value and 
closing Index value. Telephone conversation between Sudhir C. 
Bhattacharyya, Assistant General Counsel, Amex, and Edward Cho, 
Special Counsel, Division of Market Regulation, Commission, on 
September 14, 2006.
    \11\ The notional amounts of each Index Currency included in the 
Index are based on the Index closing level as of the Index Re-
Weighting Period (as defined herein). The Index closing level 
reflects an arithmetic weighted average of the change in the futures 
positions on the Index Currencies'' exchange rates against the U.S. 
Dollar (``USD'') since March 12, 1993. On such date, the closing 
Index level was $100.
    \12\ The Index Sponsor reviews and re[pi]weights the Index on a 
quarterly basis, in accordance with its rules. The futures contracts 
held by the Fund are, therefore, three (3) months in duration. The 
Index Re-Weighting Period takes place just prior to the third 
Wednesday in each of March, June, September, and December months, 
which are traditional settlement dates in the International Money 
Market (the ``IMM Dates''). Upon re-weighting, the high yielding 
Index Currencies are allocated a base weight of 33\1/3\%, and the 
low yielding Index Currencies are allocated a base weight of -33\1/
3\%. These new weights are applied during the Index Re-Weighting 
Period. The futures contracts on the Index Currencies are rolled 
during the Index Re-Weighting Period, which will occur over the 
fourth and third business days prior to each of the IMM Dates.
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Investment Objective and Strategy

    The Exchange states that the investment objective of the Fund is to 
reflect the performance of the DBCHI, over time, less the expenses of 
the operation 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. Each Share will correlate with a Master Fund share 
issued by the Master Fund and held by the Fund.
    The Master Fund's portfolio is managed with a view to reflect the 
performance of the Index over time. The Exchange stated that the Master 
Fund is not traditionally ``managed,'' which typically involves 
effecting changes in the composition of a portfolio on the

[[Page 55232]]

basis of judgments relating to economic, financial, and market 
considerations. Instead, the Managing Owner seeks to maintain the 
relationship between the composition and weightings of the CME futures 
positions in the Index Currencies to the Master Fund's long and short 
currency futures positions from time to time. The Managing Owner 
adjusts the portfolio on a quarterly basis to conform to periodic 
changes in the composition and relative weightings of the Index 
Currencies and may make certain adjustments or changes to the portfolio 
more frequently in the case of significant changes in the foreign 
currency markets due to volatility.
    The Fund will pursue its investment objective by investing 
substantially all of its assets in the Master Fund. To track the Index, 
the Master Fund generally will establish long futures positions in the 
three Index Currencies associated with the highest interest rates and 
short futures positions in the three Index Currencies associated with 
the lowest interest rates \13\ and will adjust its holdings quarterly 
as the Index is adjusted. However, if the USD is among the Index 
Currencies, the Master Fund will not establish a long or short futures 
position (as the case may be) in USD because USD is the Fund's home 
currency and, as a consequence, the Exchange states that the Master 
Fund never can enjoy profit or suffer loss from long or short futures 
positions in USD. When the USD is not associated with the highest or 
lowest interest rates among the Eligible Index Currencies, the 
aggregate notional value of the Master Fund's futures contracts at the 
time they are established will be double the value of the Master Fund's 
holdings of U.S. Treasury Bills and other high credit quality short-
term fixed income securities, (i.e., a ratio of 2:1).\14\ If the USD is 
associated with the highest or lowest interest rates among the Eligible 
Index Currencies, the aggregate notional value of the Master Fund's 
futures contracts at the time they are established will be 
approximately 1.66 times the value of the Master Fund's holdings of 
U.S. Treasury Bills and other high credit quality short-term fixed 
income securities (i.e., a ratio of 1.66:1). Holding futures positions 
with a notional amount in excess of the Master Fund's NAV \15\ 
increases the potential for both trading profits and losses, depending 
on the performance of the Index. The Master Fund's ability to track the 
Index will not be affected by the presence or absence of the USD among 
the Index Currencies. Because the notional value of the Master Fund's 
futures positions can rise or fall over time, the ratio of long and 
short futures positions could be higher or lower between quarterly 
adjustments of the Index Currencies.
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    \13\ The use of long and short positions in the construction of 
the Index causes the Index to rise as a result of any upward price 
movement of Index Currencies expected to gain relative to the USD 
(as a result of the long positions), and likewise, to rise as a 
result of any downward price movement of Index Currencies expected 
to lose relative to the USD (as a result of the short positions).
    \14\ See supra note 6.
    \15\ NAV is the total assets of the Master Fund, less total 
liabilities of the Master Fund, determined on the basis of generally 
accepted accounting principles. NAV per Master Fund share is the NAV 
of the Master Fund divided by the number of outstanding Master Fund 
shares. This will be the same for the Shares of the Fund because of 
a one-to-one correlation between the Shares and the shares of the 
Master Fund.
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Product Description

A. Creation and Redemption of Shares
    Issuances of the Shares will be made only in one or more blocks of 
200,000 Shares (the ``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'') \16\ with the Managing Owner at the NAV per Share next 
determined after an order to purchase the Shares in a Basket is 
received in proper form. Following issuance, the Shares will be traded 
on the Exchange similar to other equity securities. The Shares will be 
registered in book entry form through DTC.
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    \16\ 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 (``DTC'') participant, and (iii) has in 
effect a valid participant agreement.
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    Baskets will be issued in exchange for a cash amount equal to the 
NAV per Share times 200,000 Shares (the ``Basket Amount''). The Basket 
Amount will be determined on each business day by the Bank of New York, 
the Fund administrator.\17\ Authorized Participants that wish to 
purchase a Basket must transfer the Basket Amount to the Administrator 
(the ``Cash Deposit Amount''). Authorized Participants that wish to 
redeem a Basket will receive cash in exchange for each Basket 
surrendered in an amount equal to the NAV per Basket (the ``Cash 
Redemption Amount''). The Commodity Broker will be the custodian for 
the Master Fund and responsible for safekeeping the Master Fund's 
assets.\18\
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    \17\ As described in the Notice, the Bank of New York is the 
administrator for both the Fund and the Master Fund. The 
Administrator will perform or supervise the performance of services 
necessary for the operation and administration of the Fund and the 
Master Fund (other than making investment decisions), including NAV 
calculations, accounting, and other administrative services.
    \18\ The Commodity Broker is Deutsche Bank Securities, Inc., an 
affiliate of the Managing Owner and registered with the CFTC as a 
futures commission merchant.
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B. Net Asset Value (NAV)
    As stated in the proposal, shortly after 4 p.m. ET each business 
day, the Administrator will determine the NAV for the Fund, utilizing 
the current settlement value of the futures contracts on the Index 
Currencies. Also shortly after 4 p.m. ET each business day, the 
Administrator, Amex, and the Managing Owner will disseminate the NAV 
for the Shares and the Basket Amount (for orders placed during the 
day). The NAV and Basket Amount will be communicated by the 
Administrator to all Authorized Participants via facsimile or 
electronic mail message and will be available on the Index Sponsor's 
Internet Web site at http://index.db.com The Amex will also disclose the NAV and Basket Amount on its Internet Web site (http://.

http://www.amex.com). The Exchange represented that the NAV would be made 

available to all market participants at the same time.
    The NAV for the Fund is total assets of the Master Fund less total 
liabilities of the Master Fund. The NAV is calculated by including any 
unrealized profit or loss on futures contracts and any other credit or 
debit accruing to the Master Fund but unpaid or not received by the 
Master Fund. The NAV is then used to compute all fees (including the 
management and administrative fees) that are calculated from the value 
of Master Fund assets. The Administrator will calculate the NAV per 
share by dividing the NAV by the number of Shares outstanding.
    The Exchange believes that generally the Shares will not trade at a 
material discount or premium to the NAV of the Shares based on 
potential arbitrage opportunities. Nevertheless, the value of a Share 
may be influenced by non-concurrent trading hours between the Amex and 
the various futures exchanges on which the Index Currencies are traded. 
As a result, during periods when the Amex is open and the futures 
exchanges on which the Index Currencies are traded are closed, trading 
spreads and the resulting premium or discount on the Shares may widen, 
and, therefore, increase the difference between the price of the Shares 
and the NAV of the Shares.

[[Page 55233]]

C. Dissemination of the Index and Underlying Futures Contracts 
Information
    DB London, as the Index Sponsor, will publish the value of the 
Index at least once every fifteen (15) seconds throughout each trading 
day on the CT, Bloomberg, Reuters, and on its Internet Web site at 
http://index.db.com. The Exchange stated that the disseminated value of 

the Index will not reflect changes to the prices of the Index 
Currencies between the close of trading of each respective futures 
contract on the relevant futures exchange, i.e., 3 p.m. ET (close of 
trading on the CME futures market), and the close of trading on the 
Amex at 4:15 p.m. ET. The closing Index level will similarly be 
provided by DB London. In addition, any adjustments or changes to the 
Index will also be provided by DB London and the Exchange on their 
respective Internet Web sites.\19\
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    \19\ The Sponsor 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 associated with the Sponsor, 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 composition of the 
Index.
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    The daily settlement prices for the foreign currency futures 
contracts comprising the Index and held by the Master Fund are publicly 
available on the Internet Web sites of the futures exchanges trading 
the particular contracts, as well as automated quotation systems, 
published or other public sources, or on-line information services such 
as Bloomberg or Reuters. In addition, the Exchange will provide a 
hyperlink on its Internet Web site to the Index Sponsor's Internet Web 
site. All of the foreign currency futures contracts in which the Master 
Fund currently expects to invest are traded on the CME, although 
currency futures contracts on the Eligible Index Currencies also trade 
on other futures exchanges in the United States and the Master Fund may 
invest in such contracts.\20\
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    \20\ Other futures exchanges may include, for example, the New 
York Board of Trade and other futures exchanges which have a 
Comprehensive Surveillance Sharing Agreement (``CSSA'') with Amex or 
is an Intermarket Surveillance Group (``ISG'') member. Telephone 
conversation between Jeffrey P. Burns, Associate General Counsel, 
Amex, and Florence Harmon, Senior Special Counsel, Division of 
Market Regulation, Commission, on September 13, 2006.
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    In addition, various data vendors and news publications publish 
futures prices and data. The Exchange represented that futures quotes 
and last sale information for the Index Currencies are widely 
disseminated through a variety of market data vendors worldwide, 
including Bloomberg and Reuters. In addition, the Exchange further 
noted that complete real-time data for such futures is available by 
subscription from Reuters and Bloomberg. The specific contract 
specifications for the futures contracts are also available from CME on 
its Internet Web site, as well as other financial informational 
sources.
D. Availability of Information Regarding the Shares
    The Internet Web sites for the Fund and/or the Exchange, which are 
publicly accessible at no charge, will contain the following 
information: (a) Current NAV per Share daily and the prior business 
day's NAV and the reported closing price; (b) the mid-point of the bid-
ask price in relation to the NAV as of the time the NAV is calculated 
(the ``Bid-Ask Price''); \21\ (c) the calculation of the premium or 
discount of such price against such NAV; (d) data in chart form 
displaying the frequency of 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. The Exchange will also make 
available on its Internet Web site the daily trading volume of the 
Shares.
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    \21\ The Bid-Ask Price of the Shares is determined using the 
highest bid and lowest offer as of the time of calculation of the 
NAV.
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E. Foreign Currency Pricing
    In its proposal, the Exchange stated that investors may also 
obtain, on a 24-hour basis, currency pricing information from various 
financial information service providers. The Exchange stated that 
current currency spot prices are also generally available with bid/ask 
spreads from foreign exchange dealers. Complete real-time data for 
futures and options prices traded on CME and Phlx are also available by 
subscription from information service providers. CME and Phlx also 
provide delayed futures and options information on current and past 
trading sessions and market news free of charge on their respective Web 
sites. There are a variety of other public Internet Web sites that 
provide information on currency, such as Bloomberg (http://www.bloomberg.com/markets/currecies/eurafr_currencies.html
), which 

regularly reports current foreign currency pricing for a fee. Other 
service providers include CBS Market Watch (http://marketwatch.com/tools.stockresearch/globalmarkets) and Yahoo! Finance (http://

finance.yahoo.com/currency). Many of these Internet Web sites offer 
price quotations drawn from other published sources, and as the 
information is supplied free of charge, it generally is subject to time 
delays.
F. Dissemination of Indicative Fund Value
    As noted above, the Administrator calculates the NAV of the Fund 
once each trading day and disseminates such NAV to all market 
participants at the same time. In addition, the Administrator causes to 
be made available on a daily basis the Cash Deposit Amount to be 
deposited in connection with the issuance of the Shares in Baskets. 
Other investors can also request such information directly from the 
Administrator.
    In order to provide updated information relating to the Fund for 
use by investors, professionals, and persons wishing to create or 
redeem the Shares, the Exchange will disseminate through the facilities 
of the CT an updated Indicative Fund Value (the ``Indicative Fund 
Value''). The Indicative Fund Value will be disseminated on a per Share 
basis every fifteen (15) seconds during regular Amex trading hours of 
9:30 a.m. to 4:15 p.m. ET. The Indicative Fund Value will be calculated 
based on the cash required for creations and redemptions (i.e., Basket 
Amount), adjusted to reflect the price changes of the Index Currencies 
through investments held by the Master Fund, i.e., futures contracts 
and options on futures and/or forwards.\22\
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    \22\ On each business day, the Administrator will make available 
immediately prior to the opening of trading on the Amex via the 
facilities of the CT the most recent Basket Amount for the creation 
of a Basket.
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    While the market for futures trading for each of the Index 
Currencies is open, the Indicative Fund Value can be expected to 
closely approximate the value per Share of the Basket Amount. The 
Indicative Fund Value will not reflect price changes to the price of an 
underlying currency between the close of trading of the futures 
contract at the relevant futures exchange and the close of trading on 
the Amex at 4:15 p.m. ET. While the Shares will trade on the Amex from 
9:30 a.m. to 4:15 p.m. ET, regular trading hours for each of the Index 
Currencies on the CME are 8:20 a.m. to 3 p.m. ET. Therefore, the value 
of a Share may be influenced by non-concurrent trading hours between 
the Amex and the various futures exchanges on which the futures 
contracts based on

[[Page 55234]]

the Index Currencies are traded. Accordingly, the Exchange cautioned 
that Indicative Fund Value on a per Share basis disseminated during 
Amex trading hours should not be viewed as a real time update of the 
NAV, which is calculated only once a day.
G. Events Requiring Notice to and/or Approval by the Commission
    The Exchange represented that should the Index Sponsor 
substantially change either the Index component selection or weighting 
methodology, the Exchange would file a proposed rule change pursuant to 
Rule 19b-4 under the Act, which must be approved by the Commission for 
continued trading of the Shares.
    The Exchange represented that if a successor or substitute index is 
used by the Managing Owner, Amex will file with the Commission a 
proposed rule change pursuant to Rule 19b-4 under the Act to address, 
among other things, the listing and trading characteristics of the 
successor index and Amex's surveillance procedures applicable to the 
successor index, which must be approved by the Commission to continue 
trading the Shares relating to the successor index.
    In the case of a temporary disruption in connection with the 
trading of the futures contracts comprising the Index, the Index 
Sponsor may use a currency futures contract on the same Index Currency 
from a different futures exchange than CME or use the prior day's price 
for such Index Currency contract. In exceptional cases, the Index 
Sponsor may employ a ``fair value'' price (i.e., the price for 
unwinding the position by dealers in the OTC market). However, the 
Exchange represented that if the use of such alternative pricing 
methods is more than of a temporary nature, the Exchange will file a 
proposed rule change with the Commission pursuant to Rule 19b-4 under 
the Act seeking Commission approval to continue trading the Shares. 
Unless approved for continued trading, the Exchange would commence 
delisting proceedings.
    The Exchange represented that it would halt trading of the Shares 
if (a) the value of the Index is no longer calculated or available on 
at least a fifteen (15) second basis through the facilities of the CT 
or major market data vendors during the time the Shares trade on 
Amex,\23\ (b) if the Indicative Fund Value, updated at least every 
fifteen (15) seconds, is no longer calculated or available, or (c) the 
NAV is no longer disseminated to all market participants at the same 
time.\24\
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    \23\ The Managing Owner represents that it will seek to arrange 
to have the Index calculated and disseminated on a daily basis 
through a third party if DB London ceases to calculate and 
disseminate the Index. If, however, the Managing Owner is unable to 
arrange for the calculation and dissemination of the Index (or 
another index which succeeds the Index), the Exchange will undertake 
to delist the Shares. If the Index is discontinued or suspended, the 
Managing Owner, in its sole discretion, may substitute the Index 
with an index substantially similar to the discontinued or suspended 
Index. Such successor Index may be calculated and/or published by 
any other third party.
    \24\ The Exchange further represents that it would immediately 
contact the Commission to discuss measures that may be appropriate 
under the circumstances
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Criteria for Initial and Continued Listing

    The Fund will be subject to the criteria in Commentary .07(d) of 
Amex Rule 1202 for initial and continued listing of the Shares. The 
proposed continued listing criteria provides for the delisting or 
removal from listing of the Shares under any of the following 
circumstances:
     Following the initial twelve-month period from the date of 
commencement of trading of the Shares: (i) If the Fund has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of the Shares for 30 or more consecutive 
trading days; (ii) if the Fund has fewer than 50,000 Shares issued and 
outstanding; or (iii) if the market value of all Shares is less than 
$1,000,000;
     If the value of the underlying Index is no longer 
calculated or available on at least a 15-second delayed basis through 
one or more major market data vendors; \25\
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    \25\ In the event the Index value is no longer calculated or 
disseminated by one or more major market data vendors, the Exchange 
would immediately contact the Commission to discuss measures that 
may be appropriate under the circumstances.
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     The Indicative Fund Value is no longer made available on 
at least a 15-second delayed basis through the facilities of the CT; 
\26\
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    \26\ In the event the Indicative Fund Value is no longer 
calculated or disseminated through the facilities of the CT, the 
Exchange would immediately contact the Commission to discuss 
measures that may be appropriate under the circumstances.
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     The calculation or dissemination of the NAV is disrupted 
such that the NAV is no longer disseminated to all market participants 
at the same time; \27\
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    \27\ In the event the NAV is no longer calculated or 
disseminated to all market participants at the same time, the 
Exchange would immediately contact the Commission to discuss 
measures that may be appropriate under the circumstances.
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     Unless approval is received from the Commission to 
continue to list and trade the Shares after a proposed rule change 
pursuant to Rule 19b-4 under the Act is properly filed by the Exchange, 
(i) more than a temporary disruption exists in connection with the 
pricing of the futures contracts comprising the Index, (ii) a successor 
or substitute index is used by the Managing Owner in connection with 
the Shares, (iii) calculation or dissemination of the NAV is more than 
temporarily disrupted, or (iv) the Index Sponsor substantially changes 
either the Index component selection methodology or weighting 
methodology; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The initial purchaser (the ``Initial Purchaser'') will initially 
purchase and take delivery of 200,000 Shares, which comprises the 
initial Basket, at a purchase price of $25.00 per Share ($5,000,000 per 
Basket) pursuant to an Initial Purchaser Agreement. The Initial 
Purchaser proposes to offer to the public these 200,000 Shares at a 
per-Share offering price that will vary depending on, among other 
factors, the trading price of the Shares on the Amex, the NAV per 
Share, and the supply of and demand for the Shares at the time of the 
offer. The Exchange submitted that the anticipated minimum number of 
Shares outstanding at the start of trading would be sufficient to 
provide adequate market liquidity and to further the Fund's objective 
to seek to provide a simple and cost effective means of accessing the 
currency futures markets. The Exchange also represented that, for the 
initial and continued listing, the Shares must be in compliance with 
Section 803 of the Amex Company Guide and Rule 10A-3 under the Act.\28\
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    \28\ See 17 CFR 240.10A-3.
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    The Amex original listing fee applicable to the listing of the Fund 
is $5,000. In addition, the annual listing fee applicable under Section 
141 of the Amex Company Guide will be based upon the year-end aggregate 
number of Shares in all series of the Fund outstanding at the end of 
each calendar year.

Trading Rules

    The Shares are equity securities subject to Amex rules governing 
the trading of equity securities, including, among others, rules 
governing priority, parity and precedence of orders, specialist 
responsibilities and account opening and customer suitability (Amex 
Rule 411). Initial equity margin requirements of 50% will apply to 
transactions in the Shares. Shares will trade on the Amex until 4:15 
p.m. ET each business day and will trade in a

[[Page 55235]]

minimum price variation of $0.01 pursuant to Amex Rule 127. Trading 
rules pertaining to odd-lot trading in Amex equities (Amex Rule 205) 
will also apply.
    Amex Rule 154, Commentary .04(c), provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto) the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i)-(v). The Exchange 
has designated the Shares as eligible for this treatment.\29\
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    \29\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991) (noting the Exchange's 
designation of equity derivative securities as eligible for such 
treatment under Amex Rule 154, Commentary .04(c)).
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    The Shares will be deemed ``Eligible Securities'', as defined in 
Amex Rule 230, for purposes of the Intermarket Trading System (``ITS'') 
plan and therefore will be subject to the trade-through provisions of 
Amex Rule 236, which require that Amex members avoid initiating trade-
throughs for ITS securities.
    Specialist transactions of the Shares made in connection with the 
creation and redemption of Shares will not be subject to the 
prohibitions of Amex Rule 190.\30\ Unless exemptive or no-action relief 
is available, the Shares will be subject to the short sale rule, Rule 
10a-1 and other rules under the Act. If exemptive or no-action relief 
is provided, the Exchange will issue a notice detailing the terms of 
the exemption or relief. The Shares will generally be subject to the 
Exchange's stabilization rule, Amex Rule 170, except that specialists 
may buy on ``plus ticks'' and sell on ``minus ticks,'' in order to 
bring the Shares into parity with the underlying currency and/or 
futures contract price. Commentary .07(f) to Amex Rule 1202 sets forth 
this limited exception to Amex Rule 170.
---------------------------------------------------------------------------

    \30\ See Commentary .05 to Amex Rule 190.
---------------------------------------------------------------------------

    The trading of the Shares will be subject to certain conflict of 
interest provisions set forth in Commentary .07(e) to Amex Rule 1202. 
Specifically, Commentary .07(e) provides that the prohibitions in Amex 
Rule 175(c) apply to a specialist in the Shares so that the specialist 
or affiliated person may not act or function as a market maker in an 
underlying asset, related futures contract or option, or any other 
related derivative. An affiliated person of the specialist consistent 
with Amex Rule 193 may be afforded an exemption to act in a market 
making capacity, other than as a specialist in the Shares on another 
market center, in the underlying asset, related futures, or options or 
any other related derivative. Commentary .07(e) further provides that 
an approved person of an equity specialist that has established and 
obtained Exchange approval for procedures restricting the flow of 
material, non-public market information between itself and the 
specialist member organization, and any member, officer, or employee 
associated therewith, may act in a market making capacity, other than 
as a specialist in the Shares on another market center, in the 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives.
    Commentary .07(g)(1) and (2) to Amex Rule 1202 also ensures that 
specialists 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 members, member organizations, and approved 
persons of a member organization. The Exchange also has regulatory 
jurisdiction over any person or entity controlling a member 
organization, as well as a subsidiary or affiliate of a member 
organization that is in the securities business. A subsidiary or 
affiliate of a member organization 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.\31\
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    \31\ All applicable provisions of Amex Rule 1202 and 
Commentaries thereto will govern the trading of the Shares. 
Telephone conversation between Sudhir C. Bhattacharyya, Assistant 
General Counsel, Amex, and Edward Cho, Special Counsel, Division of 
Market Regulation, Commission, on September 14, 2006.
---------------------------------------------------------------------------

Trading Halts

    Prior to the commencement of trading, the Exchange will issue an 
Information Circular (described below) to members informing them of, 
among other things, Exchange policies regarding trading halts in the 
Shares. First, the circular will advise that trading will be halted in 
the event the market volatility trading halt parameters set forth in 
Amex Rule 117 have been reached. Second, the circular will advise that, 
in addition to the parameters set forth in Amex Rule 117, the Exchange 
will halt trading in the Shares if trading in the underlying related 
futures contract(s) is halted or suspended. Third, with respect to a 
halt in trading that is not specified above, the Exchange may also 
consider other relevant factors and the existence of unusual conditions 
or circumstances that may be detrimental to the maintenance of a fair 
and orderly market. The Exchange will halt trading in the Shares if the 
value of the Index is no longer calculated or available on at least a 
fifteen (15) second basis through one or more major market data vendors 
during the time the Shares trade on Amex, or if the Indicative Fund 
Value per Share updated at least every fifteen (15) seconds is no 
longer calculated or available the facilities of the CT, or if the NAV 
is no longer calculated or disseminated for the benefit of all market 
participants at the same time.\32\
---------------------------------------------------------------------------

    \32\ See supra notes 25-27 and accompanying text.
---------------------------------------------------------------------------

Suitability

    The Information Circular (described below) will inform members and 
member organizations of the characteristics of the Fund and of 
applicable Exchange rules, as well as of the requirements of Amex Rule 
411 (Duty to Know and Approve Customers).
    The Exchange noted that pursuant to Amex Rule 411, members and 
member organizations are required in connection with recommending 
transactions in the Shares to have a reasonable basis to believe that a 
customer is suitable for the particular investment given reasonable 
inquiry concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such member.

Information Circular

    The Amex will distribute an Information Circular to its members in 
connection with the trading of the Shares. The Circular, will discuss 
the special characteristics and risks of trading this type of security, 
such as currency fluctuation risk. Specifically, the Circular, among 
other things, will discuss what the Shares are, how a Basket is created 
and redeemed, applicable Amex rules, dissemination information, trading 
information, and applicable suitability rules. The Circular will also 
explain that the Fund is subject to various fees and expenses described 
in the Registration Statement. The Circular will also reference the 
fact that the CFTC has regulatory jurisdiction over the trading of 
futures contracts.
    The Circular will also notify members and member organizations 
about the

[[Page 55236]]

procedures for purchases and redemptions of Shares in Baskets that are 
described in the prospectus, and that Shares are not individually 
redeemable but are redeemable only in one or more Baskets only through 
an Authorized Participant. The Circular will advise members of their 
suitability obligations with respect to recommended transactions to 
customers in the Shares. The Circular will also discuss any relief, if 
granted, by the Commission or the staff from any rules under the Act.
    Additionally, the Circular will disclose that the NAV for Shares 
will be calculated shortly after 4 p.m. ET each trading day and that 
information about the Shares and the Index will be publicly available 
on the Internet Web site of Amex and the Fund. In the Information 
Circular, the Exchange will inform members and member organizations, 
prior to commencement of trading, of the prospectus delivery 
requirements applicable to the Fund. The Exchange noted that investors 
purchasing Shares directly from the Fund (in exchange for cash) will 
receive a prospectus. Amex members purchasing Shares from the Trust for 
resale to investors will deliver a prospectus to such investors.

Surveillance

    The Exchange represented that its surveillance procedures are 
adequate to properly monitor the trading of the Shares and to deter and 
detect violations of Amex rules. Specifically, Amex will rely on its 
existing surveillance procedures governing Index Fund Shares. Amex 
represents that its surveillance procedures for the Shares will be 
similar to those used for other TIRs (such as the Currency Trust Shares 
and the DB Commodity Index Tracking Fund) and exchange-traded funds and 
will incorporate and rely upon existing Amex surveillance procedures 
governing options and equities. The Exchange also noted that the CME is 
a member of the ISG. As a result, the Exchange asserted that market 
surveillance information is available from the CME, if necessary, due 
to regulatory concerns that may arise in connection with the CME 
futures contracts that are used in connection with the Index 
calculation and held by the Fund. In addition, the Exchange represented 
that, to the extent the Master Fund invests in foreign currency futures 
contracts traded on futures exchanges other than CME, the Exchange must 
have a CSSA with that futures exchange or the futures exchange must be 
an ISG member.

III. Discussion and Commission's Findings

    After careful consideration, 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.\33\ In particular, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of section 6(b)(5) of the Act,\34\ which requires, among other things, 
that the Exchange's rules be designed 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.
---------------------------------------------------------------------------

    \33\ In approving this proposed 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).
    \34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

A. Surveillance

    Information sharing agreements with primary markets are an 
important part of a self-regulatory organization's ability to monitor 
for trading abuses in derivative products. The Exchange represents that 
the CME, where the futures contract for each of the current Index 
components is traded, is a member of the ISG, and that the Exchange has 
access to all relevant trading information with respect to those 
contracts without any further action. In addition, the Exchange 
represents that, in the event that a successor or substitute index is 
used by the Managing Owner, Amex will file with the Commission a 
proposed rule change, which addresses, among other things, applicable 
surveillance procedures, and unless approved by the Commission, the 
Exchange will commence delisting of the Shares. The Exchange also 
represents that, to the extent the Master Fund invests in foreign 
currency futures contracts traded on futures exchanges other than CME, 
the Exchange must have a CSSA with that futures exchange or the futures 
exchange must be an ISG member.
    Moreover, Amex Rule 1202 requires Exchange specialists, upon the 
Exchange's request, to provide Amex with information that the 
specialist uses in connection with pricing and trading the Shares on 
the Exchange. In particular, Commentaries .07(g)(1) and (g)(2) to Amex 
Rule 1202 require that the specialist handling the Shares provide the 
Exchange with information relating to its trading in the Shares and the 
accounts of the member organization acting as specialist, member 
organization, or approved person of such member organization in the 
Index components, related futures or options on futures, or any other 
related derivatives.

B. Dissemination of Information

    The Commission believes that sufficient venues exist for obtaining 
reliable information so that investors in the Shares should be able to 
monitor the underlying Index relative to the Indicative Value of their 
Shares. There is a considerable amount of information about the Index 
and its components and related futures contracts and the Shares 
available through public Web sites and professional subscription 
services, including Reuters and Bloomberg.
    Real time information about the trading of the component currency 
futures contracts trading on CME related to the Index components and 
their daily settlement prices of such futures contracts is available 
from one or more major market data vendors. Delayed information is 
often available from futures exchanges trading futures contracts on the 
underlying Index components. The Exchange stated that daily settlement 
prices for the futures contracts comprising the Index and held by the 
Master Fund are publicly available on the Internet Web sites of the 
futures exchanges trading the particular contracts.\35\ The Exchange 
has further represented that the Index Sponsor, DB London, will publish 
the value of the Index at least every 15 seconds during Amex trading 
hours to the CT, Bloomberg, Reuters, and the Index Sponsor's Internet 
Web site, http://index.db.com.\36\ While the Index is calculated and 

disseminated by the Index Sponsor, an affiliate of a registered broker-
dealer,\37\ the Commission notes that a number of independent sources 
may verify both the intraday and closing Index values and the Index 
Sponsor uses independent feeds from Reuters to

[[Page 55237]]

verify all CME pricing information used to calculate the Index.
---------------------------------------------------------------------------

    \35\ All of the futures contracts in which the Master Fund 
currently expects to invest are traded on the CME, although currency 
futures contracts on the Eligible Index Currencies also trade on 
other futures exchanges in the United States, such as the New York 
Board of Trade, which is a member of ISG.
    \36\ The Exchange states that the disseminated value of the 
Index will not reflect changes to the prices of the Index Currencies 
between the close of trading of each respective futures contract on 
the relevant futures exchange, i.e., 3 p.m. ET (close of trading on 
the CME futures market), and the close of trading on the Amex at 
4:15 p.m. ET.
    \37\ Telephone conversation between Sudhir C. Bhattacharyya, 
Assistant General Counsel, Amex, and Edward Cho, Special Counsel, 
Division of Market Regulation, Commission, on September 14, 2006.
---------------------------------------------------------------------------

    Likewise, information about the Shares will also be widely 
available. The Indicative Fund Value will be disseminated every 15 
seconds during Amex regular trading hours through the facilities of the 
CT and will be displayed on the Exchange's Internet Web site (http://www.amex.com
).\38\ The Commission believes that dissemination of the 

Indicative Fund Value based on the cash amount required for a Basket 
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.
---------------------------------------------------------------------------

    \38\ The Commission notes that the Indicative Fund Value will 
not reflect price changes of an underlying currency between the 
close of trading of the relevant futures contract at the futures 
exchange and the close of trading on the Amex at 4:15 p.m. ET, and 
should not be viewed as a real-time update of the Fund's NAV.
---------------------------------------------------------------------------

    In addition, the Internet Web sites for the Fund and/or the 
Exchange will disseminate the NAV, Basket Amount, trading volume of the 
Shares, and other quantitative information related to the operation of 
the Fund and trading of the Shares. The Exchange has represented that 
the NAV and Basket Amount will be disseminated shortly after 4 p.m. ET 
each business day. The NAV will be made available to all market 
participants at the same time. The Commission notes that, if the NAV is 
not disseminated to all market participants at the same time, the 
Exchange has agreed to halt trading of the Shares.
    In sum, the Commission believes that the availability of 
information about the underlying futures contracts, the Index, and the 
Shares should facilitate transparency with respect to the proposed 
Shares.

C. Listing and Trading

    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of the proposed Shares are 
consistent with the Act. Shares will trade as equity securities subject 
to Amex rules including, among others, rules governing priority, parity 
and precedence of orders, specialist responsibilities,\39\ and account 
opening and customer suitability requirements. Finally, the Commission 
notes that the Information Circular the Exchange will distribute will 
inform members and member organizations about the terms, 
characteristics and risks in trading the Shares, including their 
prospectus delivery obligations.
---------------------------------------------------------------------------

    \39\ For example, Commentary .07(e) to Amex Rule 1202 prohibits 
the specialist in the Shares from being affiliated with a market 
maker in the Index commodities, related futures or options on 
futures, or any other related derivatives, unless information 
barriers are in place that satisfy the requirements of Amex Rule 
193. Commentary .07(g)(3) to Amex Rule 1202 also prohibits the 
specialist in the Shares from using any material nonpublic 
information received from any person associated with a member, 
member organization or employee of such person regarding trading by 
such person or employee in the Index commodities, related futures or 
options on futures, or any other related derivatives.
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D. Accelerated Approval of the Proposed Rule Change, as Amended by 
Amendments No. 1 and 2 Thereto

    The Commission finds good cause for approving the proposed rule 
change, as amended by Amendments No. 1 and 2, prior to the 30th day 
after the date of publication of the notice of filing thereof in the 
Federal Register. The Exchange has requested the Commission to approve 
the proposal, as amended, on an accelerated basis, after a 15-day 
comment period, to enable investors to begin trading the Shares 
promptly. The Commission notes that the proposed rule change, as 
amended, was noticed for a 15-day comment period and no comments were 
received. Therefore, the Commission finds good cause, consistent with 
section 19(b)(2) of the Act,\40\ to approve the proposal, as amended, 
on an accelerated basis.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
that the proposed rule change (SR-Amex-2006-44), as amended by 
Amendments No. 1 and 2, is approved on an accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-7841 Filed 9-20-06; 8:45 am]

BILLING CODE 8010-01-P
