

[Federal Register: October 1, 2007 (Volume 72, Number 189)]
[Notices]               
[Page 55843-55845]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc07-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56503; File No. SR-Amex-2007-97]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to Changes in the Name and Investment Objective to the 
PowerShares DB Precious Metals Fund, the PowerShares DB Gold Fund, and 
the PowerShares DB Silver Fund

September 24, 2007.
    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 August 23, 2007, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by the 
Exchange. On September 17, 2007, Amex submitted Amendment No. 1 to the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to continue to trade the shares (``Shares'') 
of each of the PowerShares DB Precious Metals Fund, the PowerShares DB 
Gold Fund, and the PowerShares DB Silver Fund (collectively, the 
``Funds''), each with a revised name and investment objective. The text 
of the proposed rule change is available at Amex, the Commission's 
Public Reference Room, and http://www.amex.com.


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 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 IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    On December 29, 2006, the Commission approved the listing and 
trading of the Shares of each of the Funds.\3\ The Shares represent 
beneficial ownership interests in each corresponding Master Fund's \4\ 
net assets, consisting solely of the common units of beneficial 
interests of the DB Precious Metals Master Fund, the DB Gold Master 
Fund, and the DB Silver Master Fund, as applicable. Each of the 
foregoing Master Funds primarily holds futures contracts on the 
commodities comprising (1) the Deutsche Bank Liquid Commodity Index--
Optimum Yield Precious Metals Excess ReturnTM, (2) the 
Deutsche Bank Liquid Commodity Index--Optimum Yield Gold Excess 
ReturnTM, and (3) the Deutsche Bank Liquid Commodity Index--
Optimum Yield Silver Excess ReturnTM (each, an ``Underlying 
Index,'' and collectively, the ``Underlying Indexes''), respectively. 
Other holdings of the Funds include cash and U.S. Treasury securities 
for deposit with futures commission merchants as margin and other high-
credit-quality, short-term fixed-income securities.
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    \3\ See Securities Exchange Act Release No. 55029 (December 29, 
2006), 72 FR 806 (January 8, 2007) (SR-Amex-2006-76) (approving the 
listing and trading of the Shares of each of the Funds); see also 
Securities Exchange Act Release No. 54770 (November 16, 2006), 71 FR 
67935 (November 24, 2006) (SR-Amex-2006-76) (providing notice of the 
proposal to list and trade the Shares of the Funds).
    \4\ The DB Multi-Sector Commodity Master Trust (the ``Master 
Trust'') was formed as a Delaware statutory trust in seven separate 
series (each, a separate ``Master Fund''). Each Master Fund is one 
series of the Master Trust.
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    The Exchange seeks to continue trading of the Shares based on 
changes to the names of each of the Funds. Specifically, the proposal 
contemplates changes in the names of the Funds so that the PowerShares 
DB Precious Metals Fund, the PowerShares DB Gold Fund, and the 
PowerShares DB Silver Fund would be changed to the PowerShares DB Ultra 
Precious Metals Fund, the PowerShares DB Ultra Gold Fund, and the 
PowerShares DB Ultra Silver Fund, respectively.\5\ In addition, Amex 
seeks to continue trading of the Shares based on a modified investment 
objective for each Fund. The Exchange represents that the modifications 
in the names and investment objective of the

[[Page 55844]]

Funds are the only changes proposed for each of the Funds.\6\
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    \5\ E-mail from Candice Fordin, Assistant General Counsel, Amex, 
to Edward Cho, Special Counsel, Division of Market Regulation, 
Commission, dated September 18, 2007 (clarifying the modifications 
to the names of the Funds) (``Amex Confirmation'').
    \6\ The Exchange states that the remaining structure of the 
Funds, which is more fully described in the notice and approval 
order for File No. SR-Amex-2006-76, will remain the same. See supra 
note 3.
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    Currently, the investment objective of the Funds and the Master 
Funds is to reflect the performance of the corresponding Underlying 
Index, less any expenses of the operations of such Fund and the related 
Master Fund. Pursuant to this proposal, each Fund's investment 
objective would be revised to seek investment results that correspond, 
before fees and expenses, to twice (200%) the daily performance of the 
respective Underlying Index. The revised investment objective would 
make the Funds and Master Funds ``Leveraged Funds.'' Each of the Funds, 
if successful in meeting its objective, should gain, on a percentage 
basis, approximately twice as much as the Fund's Underlying Index when 
the prices of the futures contracts comprising such Underlying Index 
increase on a given day, and should lose approximately twice as much 
when such prices decline on a given day. The modification of the 
investment objective is expected to provide Fund shareholders with a 
leveraged exposure to a Fund's Underlying Index, but will also result 
in the Master Fund becoming twice as volatile as the performance of the 
Underlying Index. This revised investment objective for each Fund would 
create funds that are substantially similar to other leveraged funds 
that are currently listed and traded on the Exchange.\7\
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    \7\ See, e.g., Securities Exchange Act Release Nos. 55117 
(January 17, 2007), 72 FR 3442 (January 25, 2007) (SR-Amex-2006-101) 
(approving the listing and trading of shares of funds of the 
ProShares Trust); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) 
(SR-Amex-2006-41) (approving the listing and trading of shares of 
additional funds of the ProShares Trust); and 52553 (October 3, 
2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62) (approving 
the listing and trading of shares of funds of the xtraShares Trust).
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    As a result of the modification to the investment objective of the 
Funds, the Exchange represents that, while DB Commodity Services LLC 
(the ``Managing Owner'') will attempt to minimize any ``tracking 
error'' between the investment results of a particular Fund and the 
performance (and specified multiple thereof) of its Underlying Index, 
certain factors may tend to cause the investment results of a Fund to 
vary from the performance of the relevant Underlying Index or specified 
multiple thereof.\8\ The Funds are expected to be highly correlated to 
the specified multiple of each applicable Underlying Index and 
investment objective (0.85 or greater).\9\ In each case, the Funds are 
expected to have a daily tracking error of less than 5% (500 basis 
points) relative to the specified multiple of the performance of the 
relevant Underlying Index.
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    \8\ The Exchange states that several factors may cause a Fund to 
vary from the relevant Underlying Index and investment objective 
including: (1) A Fund's expenses, including brokerage fees (which 
may be increased by high portfolio turnover) and the cost of the 
investment techniques employed by that Fund; (2) less than all of 
the securities in the benchmark Underlying Index being held by a 
Fund and securities not included in the benchmark Underlying Index 
being held by a Fund; (3) an imperfect correlation between the 
performance of instruments held by a Fund, such as futures 
contracts, and the performance of the underlying securities in the 
cash market; (4) bid-ask spreads (the effect of which may be 
increased by portfolio turnover); (5) holding instruments traded in 
a market that has become illiquid or disrupted; (6) a Fund's Share 
prices being rounded to the nearest cent; (7) changes to the 
benchmark Underlying Index that are not disseminated in advance; (8) 
the need to conform a Fund's portfolio holdings to comply with 
investment restrictions or policies or regulatory or tax law 
requirements; and (9) early and unanticipated closings of the 
markets on which the holdings of a Fund trade, resulting in the 
inability of the Fund to execute intended portfolio transactions.
    \9\ Correlation is the strength of the relationship between (1) 
the change in a Fund's net asset value and (2) the change in the 
benchmark Underlying Index (investment objective). The statistical 
measure of correlation is known as the ``correlation coefficient.'' 
A correlation coefficient of +1 indicates a perfect positive 
correlation, while a value of -1 indicates a perfect negative 
(inverse) correlation. A value of zero would mean that there is no 
correlation between the two variables
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    In addition, the Managing Owner in connection with the management 
of the Master Funds generally will seek to maintain positions in 
futures contracts with an aggregate notional value equal to double the 
value of the Master Fund's holdings of U.S Treasury securities and 
other high-credit-quality, short-term fixed-income securities. As a 
result, the Funds generally will have a leverage ratio of 2:1. The 
leverage ratio of the Master Fund will vary based on changes in the 
prices of the futures contracts held by the Master Fund. If the Master 
Fund's leverage ratio moves below 1.8:1 or above 2.2:1, then the Master 
Fund will rebalance its futures contracts to return to a 2:1 leverage 
ratio. The leverage ratio of the Master Fund will be calculated on each 
business day after the close of trading on Amex based on the settlement 
prices of the futures contracts held by the Master Fund. The Managing 
Owner believes that maintaining each Master Fund's leverage ratio 
between 1.8:1 and 2.2:1 will enable each Fund to achieve its investment 
objective.
    A special meeting of the shareholders of the Funds is planned to be 
held on October 9, 2007 to vote on the proposal to revise each Funds' 
investment objective and name. The Funds' proposal will become 
effective upon the affirmative vote of a majority of the shareholders, 
excluding the Shares held by the Managing Owner and its affiliates.\10\ 
The Managing Owner will, within a reasonable time thereafter, 
distribute a prospectus supplement indicating the change in name and 
investment objective to purchasers and current holders of the 
Funds.\11\ Based on each Fund's and each Master Fund's assets under 
management and trading volume of the Shares, as well as competing 
products in the market, the Managing Owner believes that each Fund 
should better serve the needs of current and future investors if the 
respective Master Fund provides investors with an exposure to changes 
in the Underlying Index of twice or 200%, whether positive or negative.
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    \10\ Although the proposal of the Funds will become effective 
upon the affirmative vote of a majority of the shareholders of such 
Funds, the Commission notes that Amex's proposal will not become 
effective until the Commission has granted its approval pursuant to 
Section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)).
    \11\ See Amex Confirmation, supra note 5.
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    Upon approval of the shareholders of the Funds, the Exchange will, 
in an Information Circular to Exchange members and member organizations 
prior to the commencement of trading, inform members and member 
organizations of the change in names and investment objective to the 
Funds.\12\ The Information Circular will further inform members and 
member organizations of the prospectus supplement delivery requirements 
that apply to the Funds. In addition, the Information Circular will set 
forth the requirements relating to Commentary .05 to Amex Rule 411 
(Duty to Know and Approve Customers). Specifically, the Information 
Circular will remind members of their obligations in recommending 
transactions in the Shares so that members have a reasonable basis to 
believe that (1) the recommendation is suitable for a customer given 
reasonable inquiry concerning the customer's investment objectives, 
financial situation, needs, and any other information known by such 
member, and (2) that the customer can evaluate the special 
characteristics, and is able to bear the financial risks, of such 
investment. In connection with the suitability obligation, the 
Information Circular will also provide that members make reasonable 
efforts to obtain the following information: (a) The customer's 
financial status; (b) the customer's tax status; (c) the customer's 
investment objectives; and (d) such

[[Page 55845]]

other information used or considered to be reasonable by such member or 
registered representative in making recommendations to the customer. In 
addition, the Information Circular will disclose that the procedures 
for purchases and redemptions of Shares are described in each Fund's 
prospectus and that Shares are not individually redeemable, but are 
redeemable only in prescribed aggregations or multiples thereof.
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    \12\ See id.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\13\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\14\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
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

    The Exchange states that no written comments were solicited or 
received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which Amex consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. 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-Amex-2007-97 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Amex-2007-97. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the 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-Amex-2007-97 and should be 
submitted on or before October 22, 2007.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Nancy M. Morris,
Secretary.
[FR Doc. E7-19270 Filed 9-28-07; 8:45 am]

BILLING CODE 8011-01-P
