

[Federal Register: February 26, 2007 (Volume 72, Number 37)]
[Notices]               
[Page 8406-8408]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26fe07-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55292; File No. SR-Amex-2006-86]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment Nos. 1, 2, and 3 Thereto, Relating to the Listing and Trading 
of Shares of the PowerShares DB U.S. Dollar Index Bullish Fund and the 
PowerShares DB U.S. Dollar Index Bearish Fund

February 14, 2007.

I. Introduction

    On September 13, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ On November 17, 2006, Amex filed Amendment No. 1 to the 
proposed rule change. On December 19, 2006, Amex filed Amendment No. 2 
to the proposed rule change. On January 12, 2007, Amex filed Amendment 
No. 3 to the proposed rule change. The proposed rule change, as 
amended, was published for comment in the Federal Register on January 
24, 2007 for a 15-day comment period.\3\ The Commission received no 
comments on the proposal. This Order approves the proposed rule change, 
as modified by Amendment Nos. 1, 2, and 3, on an accelerated basis.
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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. 55110 (January 16, 
2007), 72 FR 3171 (``Notice'').
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II. Description of the Proposal

    Pursuant to Commentary .07 of Amex Rule 1202, the Exchange proposes 
to list and trade shares of the PowerShares DB U.S. Dollar Index 
Bullish Fund (the ``Bullish Fund'') and the PowerShares DB U.S. Dollar 
Index Bearish Fund (the ``Bearish Fund,'' and together with the Bullish 
Fund, the ``Funds''), each of which represents a series of the DB U.S. 
Dollar Index Trust (the ``Trust''). The shares of each of the Funds 
(the ``Shares'') represent beneficial ownership interests in the 
corresponding common units of beneficial interests of the DB U.S. 
Dollar Index Master Bullish Fund (the ``Master Bullish Fund'') and the 
DB U.S. Dollar Index Master Bearish Fund (the ``Master Bearish Fund,'' 
and together with the Master Bullish Fund, the ``Master

[[Page 8407]]

Funds''), respectively. Each of the Funds and each of the Master Funds 
are commodity pools operated by DB Commodity Services LLC (the 
``Managing Owner''). The Trust and the Funds will not be subject to 
registration and regulation under the Investment Company Act of 1940.
    In its proposal, the Exchange provided detailed descriptions 
regarding the overall investment objectives of the Funds, the 
calculation methodology and components of the underlying indexes, the 
structure and operation of the Funds, and the listing and trading of 
the Shares. Key features of the proposal are noted below.
    The Underlying Indexes. The overall investment objective of each of 
the Funds and the Master Funds is to reflect the performance of their 
respective benchmark index, less expenses, plus the excess, if any, of 
the corresponding Master Fund's interest income from its holdings of 
U.S. Treasury and other high-credit-quality, short-term fixed income 
securities over its expenses. The Bullish Fund will seek to track the 
``Long Index'' by investing in long positions in futures contracts 
(``DX Contracts'') on the U.S. Dollar Index[supreg] (``USDX''), and the 
Bearish Fund will seek to track the ``Short Index'' by investing in 
short positions in DX Contracts on the USDX. Both the Long Index and 
Short Index (collectively, the ``Indexes'') are designed to reflect the 
return from investing in the first-to-expire DX Contract. DX Contracts 
are traded through the FINEX currency markets of the New York Board of 
Trade (``NYBOT''). As discussed more fully in the Notice, the USDX is 
composed of six underlying foreign currencies (the ``Index 
Currencies''), and the value of the USDX reflects a general indication 
of the international value of the USD by averaging the exchange rates 
between the U.S. Dollar (``USD'') and the Index Currencies.
    The use of a long position in a DX Contract in the construction of 
the Long Index would cause the Long Index level to rise as a result of 
any upward price movement in the DX Contract. Conversely, the use of a 
short position in a DX Contract in the construction of the Short Index 
would cause the Short Index level to rise as a result of any downward 
price movement in the DX Contract. As a result, the performance of the 
Long Index and Short Index would reflect any rise or fall of the USD 
versus the underlying basket of Index Currencies.
    Creation and Redemption of Shares. Issuances of the Shares will be 
made only in one or more blocks of 200,000 Shares (each such block, a 
``Basket''). Each of the Funds will issue and redeem Shares on a 
continuous basis, by or through participants that have entered into 
participant agreements (each, an ``Authorized Participant'') with the 
Managing Owner at the net asset value (``NAV'') per Share next 
determined after an order to purchase a Basket is received in proper 
form. A Basket will be issued in exchange for a cash amount equal to 
the NAV per Share times 200,000 Shares (the ``Cash Deposit Amount''). 
The Bank of New York (the ``Administrator'') will determine the Cash 
Deposit Amount on each business day. An Authorized Participant that 
wishes to purchase a Basket must transfer the Cash Deposit Amount to 
the Administrator. 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.
    Availability of Information. As set forth in the Notice, 
information regarding the Shares will be available through Exchange, 
the Index Sponsor, and various independent sources. Deutsche Bank AG 
London (the ``Index Sponsor'') will calculate the values of the Indexes 
during the trading day and such values will be disseminated at least 
every 15 seconds through major market data vendors and the Index 
Sponsor's Web site.\4\ The Exchange will also disseminate for each of 
the Funds on a per-Share basis an updated ``Indicative Fund Value,'' 
which reflects the cash required for creations and redemptions for each 
Fund, adjusted to reflect the price changes of the DX Contracts and the 
holdings of U.S. Treasury securities and other high-credit-quality, 
short-term fixed income securities, at least every 15 seconds during 
regular Amex trading hours of 9:30 a.m. to 4:15 p.m. Eastern Time 
(``ET''). Shortly after 4 p.m. ET each business day, the Administrator 
will determine the NAV for each of the Funds, and the NAV per Share for 
each of the Funds will be disseminated to all market participants at 
the same time.\5\
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    \4\ Amex has represented that the Managing Owner would seek to 
arrange to have each Index calculated and disseminated at least 
every 15 seconds on a daily basis through a third party if the Index 
Sponsor ceases to calculate and disseminate an Index. If, however, 
the Managing Owner is unable to arrange the calculation and 
dissemination of any Index value, the Exchange will undertake to 
delist the Shares related to such Index.
    \5\ The Exchange stated that if the NAV per Share for any Fund 
is not disseminated to all market participants at the same time, it 
would halt trading in the Shares of such Fund.
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    On each business day, the Administrator will make available 
immediately prior to the opening of trading on Amex the most recent 
Cash Deposit Amount for the creation of a Basket, and the Exchange will 
disseminate the current value of the Cash Deposit Amount on a per-Share 
basis at least every 15 seconds throughout the trading day. The daily 
settlement prices of the DX Contracts, specific contract 
specifications, and delayed futures contract information on current and 
past trading sessions, including futures quotes and last sale 
information, are publicly available on NYBOT's Web site and on the Web 
sites of various market data vendors, news publications, automated 
quotation systems, or other financial information services.
    The Exchange also intends to disseminate on a daily basis for each 
of the Funds information with respect to the daily trading volume of 
each of the Shares, the number of Shares outstanding, the closing 
prices of each Fund's Shares, the corresponding NAV, and a hyperlink on 
its Web site to the Index Sponsor's Web site. The Web site for each of 
the Funds and/or the Exchange will also contain the following 
information: (1) The current NAV per Share daily, the prior business 
day's NAV, and the reported closing price; (2) 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''); (3) the calculation of the premium 
or discount of such price against such NAV; (4) 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; (5) the prospectus; and (6) other 
applicable quantitative information.
    The Exchange further states that each of the Funds is subject to 
the criteria in Commentary .07 of Amex Rule 1202, and for purposes of 
the initial and continued listing requirements, the Shares would be in 
compliance with Section 803 of the Amex Company Guide and Rule 10A-3 
under the Act.\6\ Because the Shares would trade as equity securities, 
the Shares would be subject to applicable Amex rules governing the 
trading of equity securities, including, among others, rules governing 
priority, parity, and precedence of orders; specialist 
responsibilities; account opening; and customer suitability (Amex Rule 
411).
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    \6\ 17 CFR 240.10A-3.
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III. Discussion and Commission's Findings

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent

[[Page 8408]]

with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\7\ In 
particular, the Commission finds that the proposal is consistent with 
the requirements of Section 6(b)(5) of the Act,\8\ 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. 
The Commission notes that these Funds are substantially similar to 
other funds, the listing and trading of shares of which have previously 
been approved by the Commission. Such shares are currently trading 
pursuant to Commentary .07 to Amex Rule 1202.\9\
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    \7\ 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).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ See e.g., Securities Exchange Act Release Nos. 55029 
(December 29, 2006), 72 FR 806 (January 8, 2007) (SR-Amex-2006-76) 
(DB Multi-Sector Commodity Trust); 54450 (September 14, 2006), 71 FR 
55230 (September 21, 2006) (SR-Amex-2006-44) (PowerShares DB G10 
Harvest Fund, formerly known as DB Currency Index Value Fund); and 
53105 (January 11, 2006), 71 FR 3129 (January 19, 2006) (SR-Amex-
2005-059) (DB Commodity Index Tracking Fund).
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Exchange Act,\10\ which sets 
forth Congress' 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. Key information will be disseminated at 
least every 15 seconds throughout the trading day, including the value 
of each Index \11\ and the Indicative Fund Value on a per-Share basis 
for each Fund. The NAV of each of the Funds will be calculated once 
each trading day and disseminated to all market participants at the 
same time. In addition, daily settlement prices, futures quotes, and 
last-sale information for the DX Contracts will be disseminated through 
a variety of major market data vendors, and complete real-time data for 
such futures are available by subscription from such vendors. The 
Exchange's Web site will also disclose information regarding the 
Shares, including among other things, the current value of the Cash 
Deposit Amount for the creation of a Basket, daily trading volume, the 
closing price, and the number of Shares outstanding.
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    \10\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \11\ A number of independent sources verify both the intraday 
and closing Index values. See Notice, 72 FR at 3173, note 13.
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    In support of this proposal, the Exchange has made the following 
representations:
    (1) Amex would rely on its existing surveillance procedures, which 
are adequate to monitor the trading of the Shares and to deter and 
detect violations of applicable rules. Specifically, the Exchange will 
rely on its surveillance procedures applicable to trust-issued 
receipts, portfolio depository receipts, and index fund shares and will 
incorporate and rely upon existing Amex surveillance procedures 
governing options and equities. In addition, Amex has in place an 
information sharing agreement with NYBOT, which is a member of the 
Intermarket Surveillance Group.
    (2) The Index Sponsor has in place procedures to prevent the 
improper sharing of information between different affiliates, 
departments, and employees of the Index Sponsor. Specifically, an 
information barrier exists between the personnel of the Index Sponsor 
that calculate and reconstitute the Indexes and other personnel of the 
Index Sponsor, including, without limitation, the Managing Owner, 
employees involved in sales and trading activities, internal and 
external fund managers, and certain bank personnel.
    (3) Amex will distribute an Information Circular to its members 
providing guidance with regard to the special characteristics and risks 
of trading this type of security, the creation and redemption 
procedures, applicable Amex rules, the various fees and expenses, and 
the prospectus delivery requirements applicable to the Funds.
    This Order is conditioned on Amex's adherence to the foregoing 
representations.
    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment Nos. 1, 2, and 3 thereto, prior to the 
thirtieth day after publication for comment in the Federal Register 
pursuant to Section 19(b)(2) of the Act.\12\ The Shares are similar to 
certain trust-issued receipts, the listing and trading of which have 
previously been approved by the Commission, and do not appear to 
present any new regulatory concerns.\13\ Furthermore, the Commission 
did not receive any comments on the proposal. Accelerating approval 
will allow the Shares to trade on Amex without undue delay and should 
generate additional competition in the market for such products.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ See supra note 9.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-Amex-2006-86), as modified 
by Amendment Nos. 1, 2, and 3, be, and it hereby is, approved on an 
accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-3158 Filed 2-23-07; 8:45 am]

BILLING CODE 8010-01-P
