

[Federal Register: February 20, 2008 (Volume 73, Number 34)]
[Notices]               
[Page 9381-9395]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe08-131]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57318; File No. SR-NYSEArca-2007-91]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of a Proposed Rule Change, and Amendment No. 1 Thereto, Relating to the 
Listing and Trading of Six iShares[supreg] S&P GSCI\TM\ Commodity-
Indexed Trusts

February 12, 2008.
    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 30, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its

[[Page 9382]]

wholly-owned subsidiary NYSE Arca Equities, Inc. (``NYSE Arca 
Equities''), 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 February 11, 2008, the Exchange filed 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to list and trade shares of the following trusts 
under NYSE Arca Equities Rule 8.203: iShares [supreg] S&P GSCI 
TM Energy Commodity-Indexed Trust; iShares [supreg] S&P GSCI 
TM Natural Gas Commodity-Indexed Trust; iShares [supreg] S&P 
GSCI TM Industrial Metals Commodity-Indexed Trust; iShares 
[supreg] S&P GSCI TM Light Energy Commodity-Indexed Trust; 
iShares [supreg] S&P GSCI TM Livestock Commodity-Indexed 
Trust; and iShares [supreg] S&P GSCI TM Non-Energy 
Commodity-Indexed Trust.\3\ The shares will represent units of 
beneficial interest representing fractional undivided beneficial 
interests in the net assets of the issuing trust.
---------------------------------------------------------------------------

    \3\ iShares [supreg] is a registered trademark of Barclays 
Global Investors, N.A. ``S&P GSCI'' is a trademark of Standard & 
Poor's, a division of The McGraw-Hill Companies, Inc.
---------------------------------------------------------------------------

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
    The Exchange proposes to list and trade, under NYSE Arca Equities 
Rule 8.203, shares (``Shares'') of the following trusts: iShares 
[supreg] S&P GSCI TM Energy Commodity-Indexed Trust; iShares 
[supreg] S&P GSCI TM Natural Gas Commodity-Indexed Trust; 
iShares [supreg] S&P GSCI TM Industrial Metals Commodity-
Indexed Trust; iShares [supreg] S&P GSCI TM Light Energy 
Commodity-Indexed Trust; iShares [supreg] S&P GSCI TM 
Livestock Commodity-Indexed Trust; and iShares [supreg] S&P GSCI 
TM Non-Energy Commodity-Indexed Trust (collectively, the 
``Trusts'').\4\ The objective of each Trust is for the performance of 
the Shares to correspond generally to the performance of the following 
indexes, respectively, before payment of the Trust's and the Investing 
Pool's (as described below) expenses and liabilities: the S&P GSCI 
TM Energy Total Return Index; S&P GSCI TM Natural 
Gas Total Return Index; S&P GSCI TM Industrial Metals Total 
Return Index; S&P GSCI TM Light Energy Total Return Index; 
S&P GSCI TM Livestock Total Return Index; and S&P GSCI 
TM Non-Energy Total Return Index (collectively, the ``Total 
Return Indexes'').\5\
---------------------------------------------------------------------------

    \4\ The Sponsor (defined infra) filed Form S-1 for the iShares 
GS Commodity Industrial Metals Indexed Trust, iShares GS Commodity 
Light Energy Indexed Trust, iShares GS Commodity Livestock Indexed 
Trust and iShares GS Commodity Non-Energy Indexed Trust on August 
31, 2006. See Registration Nos. 333-135823 through 135826. The 
Sponsor filed Pre-Effective Amendment No 3 to the Form S-1 for the 
iShares [supreg] S&P GSCI TM Industrial Metals Commodity-
Indexed Trust and iShares [supreg] S&P GSCI TM Non-Energy 
Commodity-Indexed Trust on June 18, 2007. See Registration Nos. 333-
135825 and 333-135824. The Sponsor filed Form S-1 for the iShares 
[supreg] S&P GSCI TM Energy Commodity-Indexed Trust and 
iShares [supreg] S&P GSCI TM Natural Gas Commodity-
Indexed Trust on January 23, 2007 and Amendment No. 1 thereto on 
June 18, 2007. See Registration Nos. 333-140162 and 333-140164. 
These filings are referred to collectively herein as the 
``Registration Statements.''
    \5\ The Commission approved for listing on the New York Stock 
Exchange LLC (``NYSE'') shares of the iShares GS Commodity Light 
Energy Indexed Trust, shares of the iShares GS Commodity Industrial 
Metals Indexed Trust, shares of the iShares GS Commodity Livestock 
Indexed Trust, and shares of the iShares GS Commodity Non-Energy 
Indexed Trust. See Securities Exchange Act Release No. 55585 (April 
5, 2007), 72 FR 18500 (April 12, 2007) (SR-NYSE-2006-75). None of 
the Trusts, however, have commenced trading on the NYSE and, 
following Commission approval of this proposed rule change, will be 
listed on NYSE Arca rather than on NYSE and will not trade on NYSE.
---------------------------------------------------------------------------

    The commodity component of each of the Total Return Indexes is 
comprised of either one or a group of commodities included in the S&P 
GSCI TM Commodity Index (``S&P GSCI TM''), which 
is a production-weighted index of the prices of a diversified group of 
futures contracts on physical commodities. Each Total Return Index 
reflects the return of the corresponding S&P GSCI TM Excess 
Return Index, described below, together with the return on specified 
U.S. Treasury securities that are deemed to have been held to 
collateralize a hypothetical long position in the futures contracts 
comprising the corresponding index.
    Each S&P GSCI TM Excess Return Index is calculated based 
on the same commodities as those in the respective Total Return Index 
and S&P GS Index (defined below), and reflects the returns that are 
potentially available through a rolling uncollateralized investment in 
the contracts comprising the applicable S&P GS Index, as described 
below. An S&P GSCI TM Excess Return Index does not reflect 
the return on U.S. Treasury securities used to collateralize positions 
in futures contracts comprising that index.\6\
---------------------------------------------------------------------------

    \6\ S&P acquired the S&P GSCI (formerly known as the ``Goldman 
Sachs Commodity Index''), the S&P GSCI-ER and the Total Return 
Indexes from Goldman Sachs & Co., the prior Index Sponsor, effective 
May 2007. According to the Registration Statements, S&P has 
represented that it will not modify the determination methodology 
for the S&P GSCI Total Return Indexes from that existing on the date 
of transfer (May 9, 2007) for at least one year. Thereafter, there 
can be no assurance as to whether the methodology will be changed. 
To date, the Registration Statements for iShares GS Commodity Light 
Energy Indexed Trust and iShares GS Commodity Livestock Indexed 
Trust have not been updated to reflect S&P's index acquisitions from 
Goldman Sachs. The Sponsor of the Trusts, Barclays Global Investors 
International, Inc., has represented that the Registration 
Statements for iShares GS Commodity Light Energy Indexed Trust and 
iShares GS Commodity Livestock Indexed Trust will be updated to 
reflect S&P's acquisitions prior to commencement of secondary market 
trading of Shares of such Trusts.
---------------------------------------------------------------------------

    Each Trust will attempt to approximate its respective Total Return 
Index by holding interests in an Investing Pool (described below), 
which, in turn, holds futures contracts (referred to as CERFs) on the 
corresponding Excess Return Index, together with cash or other short-
term securities used to collateralize the futures positions.
a. The Trusts and Investing Pools
    Each Trust is a Delaware statutory trust that will issue units of 
beneficial interest called Shares, representing fractional undivided 
beneficial interests in its net assets. Substantially all of the assets 
of each Trust consist of holdings of the limited liability company 
interests of a specified commodity pool (``Investing Pool Interests''), 
which are the only securities in which the Trust may invest. 
Specifically, the Trusts will hold interests in the following commodity 
pools, respectively: iShares [supreg] S&P GSCI TM Energy 
Commodity-Indexed Investing Pool; iShares [supreg] S&P GSCI 
TM Natural Gas Commodity-Indexed Investing Pool; iShares 
[supreg] S&P GSCI TM Industrial Metals Commodity-Indexed 
Investing Pool; iShares [supreg] S&P GSCI TM Light Energy 
Commodity-Indexed Investing Pool;

[[Page 9383]]

iShares [supreg] S&P GSCI TM Livestock Commodity-Indexed 
Investing Pool; and iShares [supreg] S&P GSCI TM Non-Energy 
Commodity-Indexed Investing Pool (collectively, ``Investing Pools'').
    Each commodity pool holds long positions in futures contracts on 
the following indexes, respectively, (collectively, the ``Excess Return 
Indexes'') and will post margin in the form of cash or short-term 
securities to collateralize these futures positions: S&P GSCI 
TM Energy Excess Return Index (``S&P GS Energy-ER''); S&P 
GSCI TM Natural Gas Excess Return Index (``S&P GS Natural 
Gas-ER''); S&P GSCI TM Industrial Metals Excess Return Index 
(``S&P GS Industrial Metals-ER''); S&P GSCI TM Light Energy 
Excess Return Index (``S&P GSLE-ER''); S&P GSCI TM Livestock 
Excess Return Index (``S&P GS-Livestock-ER''); and S&P GSCI 
TM Non-Energy Excess Return Index (``S&P GSNE-ER''). Trading 
on the Chicago Mercantile Exchange (``CME'') Globex electronic trading 
platform of CERFs based on the GSCI Excess Return Index commenced 
effective March 12, 2006 for trade date March 13, 2006. Trading in 
CERFs based on the other Excess Return Indexes is expected to begin 
shortly before the initial sale of the Shares to the public.
    The Trusts and the Investing Pools are each commodity pools managed 
by a commodity pool operator registered as such with the Commodity 
Futures Trading Commission (``CFTC''). According to the Registration 
Statements, neither the Trusts nor the Investing Pools are investment 
companies registered under the Investment Company Act of 1940 
(``Investment Company Act'').\7\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 80a et seq.
---------------------------------------------------------------------------

    According to the Registration Statements, the Shares are intended 
to constitute a relatively cost-effective means of achieving investment 
exposure to the performance of the respective Total Return Indexes, 
which are intended to reflect the performance of a specified group of 
commodities. Although the Shares will not be the exact equivalent of an 
investment in the underlying futures contracts and Treasury securities 
represented by the Total Return Indexes, the Shares are intended to 
provide investors with an alternative way of participating in the 
commodities market.
b. The Sponsor and Trustee
    The Sponsor of the Trusts is Barclays Global Investors 
International, Inc. The Sponsor's primary business function is to act 
as Sponsor and commodity pool operator of the Trusts and Manager of the 
Investing Pools, as discussed below.\8\ The Advisor to the Investing 
Pools is Barclays Global Fund Advisors, a California corporation and an 
indirect subsidiary of Barclays Bank PLC.
---------------------------------------------------------------------------

    \8\ Barclays Global Investors International, Inc. is a commodity 
pool operator registered with the CFTC.
---------------------------------------------------------------------------

    Barclays Global Investors International, Inc. will also serve as 
the Manager of the Investing Pools, in which capacity it will serve as 
commodity pool operator of the Investing Pools and be responsible for 
their administration. The Manager will arrange for and pay the costs of 
organizing the Investing Pools. The Manager has delegated some of its 
responsibilities for administering the Investing Pools to the 
Administrator, State Street Bank and Trust Company which, in turn, has 
employed the Investing Pool Administrator and the Tax Administrator 
(PriceWaterhouse Coopers) to maintain various records on behalf of the 
Investing Pools.
    The Trustee is Barclays Global Investors, N.A., a national banking 
association affiliated with the Sponsor. The Trustee is responsible for 
the day-to-day administration of the Trusts. Day-to-day administration 
includes (1) processing orders for the creation and redemption of 
Baskets (each Basket an aggregation of 50,000 Shares), (2) coordinating 
with the Manager of the Investing Pools the receipt and delivery of 
consideration transferred to, or by, the Trusts in connection with each 
issuance and redemption of Baskets, and (3) calculating the net asset 
value (``NAV'') of the Trusts on each Business Day.\9\ The Trustee has 
delegated these responsibilities to the Trust Administrator, State 
Street Bank and Trust Company, a banking corporation that is not 
affiliated with the Sponsor or the Trustee.\10\ Pursuant to NYSE Arca 
Equities Rule 8.203(e)(4)(ii), a change in the Trustee would require 
prior notice to and approval by the Exchange.
---------------------------------------------------------------------------

    \9\ The Registration Statements define ``Business Day'' as any 
day (1) on which none of the following occurs: (a) the NYSE is 
closed for regular trading, (b) the CME is closed for regular 
trading or (c) the Federal Reserve transfer system is closed for 
cash wire transfers, or (2) the Trustee determines that it is able 
to conduct business.
    \10\ Except as otherwise specifically noted, the information 
provided in this proposed rule change relating to the Trusts and the 
Shares, commodities markets, and related information is based 
entirely on information included in the Registration Statements.
---------------------------------------------------------------------------

c. The Investing Pools
    The Investing Pools will hold long positions in CERFs, which are 
cash-settled futures contracts listed on the CME that have a term of 
approximately five years after listing and whose settlement at 
expiration is based on the value of the respective Excess Return 
Indexes at that time. The Investing Pools will also earn interest on 
the assets used to collateralize its holdings of CERFs.
d. The Total Return Indexes
    The S&P GSCI TM Industrial Metals Total Return Index is 
intended to reflect the performance of a group of industrial metal 
commodities (currently including copper, aluminum, zinc, nickel and 
lead). The S&P GSCI TM Light Energy Total Return Index is 
intended to reflect the performance of the same group of commodities 
included in the S&P GSCI[supreg], but with a reduced weighting for 
energy commodities. The S&P GSCI TM Livestock Total Return 
Index is intended to reflect the performance of a group of commodities 
comprising the livestock component of the S&P GSCI TM 
(currently including live cattle, live hogs and feeder cattle). The S&P 
GSCI TM Non-Energy Total Return Index is intended to reflect 
the performance of a group of non-energy commodities. The S&P GSCI 
TM Energy Total Return Index is intended to reflect the 
performance of a group of commodities comprising the energy component 
of the S&P GSCITM. The S&P GSCI TM Natural Gas 
Total Return Index is intended to reflect the performance of the 
performance of natural gas included in the S&P GSCITM.
    Each relevant Index is administered, calculated and published by 
Standard & Poor's (the ``Index Sponsor''). The Excess Return Indexes 
reflect the return of an uncollateralized investment in the contracts 
comprising the S&P GSCI\TM\ Energy Index, the S&P GSCI\TM\ Natural Gas 
Index, the S&P GSCI\TM\ Industrial Metals Index, the S&P GSCI\TM\ Light 
Energy Index, the S&P GSCI\TM\ Livestock Index, and the S&P GSCI\TM\ 
Non-Energy Index, respectively (collectively, the ``S&P GS Indexes''). 
In addition, the Excess Return Indexes incorporate the economic effect 
of ``rolling'' the contracts included in the S&P GS Indexes as they 
near expiration. ``Rolling'' a futures contract means closing out a 
position in an expiring futures contract and establishing an equivalent 
position in the contract on the same commodity with the next expiration 
date. If S&P ceases to maintain the Total Return Indexes, the Trusts, 
through the Investing Pools, may seek investment results that 
correspond generally to the performance of a fully collateralized 
investment in a successor, or, in the opinion of the Manager, 
reasonably similar indexes to the Total Return Indexes.
    Each Trust, through its respective Investing Pool, will be a 
passive investor in CERFs and the cash or Short-

[[Page 9384]]

Term Securities \11\ posted as margin to collateralize the Investing 
Pool's CERF positions. Neither such Trust nor the respective Investing 
Pool will engage in any activities designed to obtain a profit from, or 
to ameliorate losses caused by, changes in the value of CERFs or 
securities posted as margin. Each Investing Pool, and some other types 
of market participants, will be required to deposit margin with a value 
equal to 100% of the value of each CERF position at the time it is 
established. Those market participants not subject to the 100% margin 
requirement are required to deposit margin generally with a value of 3% 
to 5% of the established position. Interest paid on the collateral 
deposited as margin, net of expenses, will be reinvested by the 
Investing Pool or, at the Trustee's discretion, may be distributed from 
time to time to the Shareholders. The Investing Pool's profit or loss 
on its CERF positions should correlate with increases and decreases in 
the value of the applicable Excess Return Index, although this 
correlation will not be exact. The interest on the collateral deposited 
by the Investing Pool as margin, together with the returns 
corresponding to the performance of the applicable Excess Return Index, 
is expected to result in a total return for the Investing Pool that 
corresponds generally, but is not identical, to the applicable Index. 
Differences between the returns of the Investing Pool and the 
applicable Index may be based on, among other factors, any differences 
between the return on the assets used by the Investing Pool to 
collateralize its CERF positions and the U.S. Treasury rate used to 
calculate the return component of the Index, timing differences, 
differences between the weighting of the Investing Pool's proportion of 
assets invested in CERFs versus the Index, and the payment of expenses 
and liabilities by the Investing Pool. Each Trust's net asset value 
will reflect the performance of the applicable Investing Pool, such 
Trust's sole investment.
---------------------------------------------------------------------------

    \11\ ``Short-Term Securities'' means U.S. Treasury Securities or 
other short-term securities and similar securities, in each case 
that are eligible as margin deposits under the rules of the CME.
---------------------------------------------------------------------------

    The Investing Pools will be managed by the Advisor, which will 
invest all of the Investing Pools' assets in long positions in 
respective CERFs and post margin in the form of cash or Short-Term 
Securities to collateralize the CERF positions. Any cash that the 
Investing Pool accepts as consideration from the Trusts for Investing 
Pool Interests will be used to purchase additional CERFs, in an amount 
that the Advisor determines will enable the Investing Pools to achieve 
investment results that correspond with the applicable Index, and to 
collateralize the CERFs. According to the Registration Statements, the 
Advisor will not engage in any activities designed to obtain a profit 
from, or to ameliorate losses caused by, changes in value of any of the 
commodities represented by the S&P GSCI\TM\-ER Indexes or the positions 
or other assets held by the Investing Pool.
e. Futures Contracts on the Excess Return Indexes
    The assets of the Investing Pools will consist of CERFs and cash or 
Short-Term Securities posted as margin to collateralize the Investing 
Pools' CERF positions. Futures contracts and options on futures 
contracts on the GSCI, which does not reflect the excess return 
embedded in the GSCI-ER, have been traded on the CME since 1992. CERFs 
are listed and traded separately from the S&P GSCI futures contracts 
and options on futures contracts.
    CERFs trading is subject to the rules of the CME. According to the 
Registration Statements, CERFs trade on GLOBEX, the CME's electronic 
trading system, and do not trade through open outcry on the floor of 
the CME.\12\ Transactions in CERFs are cleared through the CME 
clearinghouse by the trader's futures commission merchant acting as its 
agent. Under these clearing arrangements, the CME clearinghouse becomes 
the buyer to each member futures commission merchant representing a 
seller of the contract and the seller to each member futures commission 
merchant representing a buyer of the contract. As a result of these 
clearing arrangements, each trader holding a position in CERFs is 
subject to the credit risk of the CME clearinghouse and the futures 
commission merchant carrying its position in CERFs.
---------------------------------------------------------------------------

    \12\ Trading hours for CERFs on GLOBEX will be as follows: 
Sunday, 6 p.m. to 2:40 p.m. (next day) (New York Time); Monday to 
Thursday, 6 p.m. to 2:40 p.m. (next day) and 3 p.m. to 5 p.m. (New 
York Time).
---------------------------------------------------------------------------

    Each CERF is a contract that provides for cash settlement, at 
expiration, based upon the final settlement value of the applicable 
Excess Return Index at the expiration of the contract, multiplied by a 
fixed dollar multiplier. On a daily basis, most market participants 
with positions in CERFs are obligated to pay, or entitled to receive, 
cash (known as ``variation margin'') in an amount equal to the change 
in the daily settlement level of the CERF from the preceding trading 
day's settlement level (or, initially, the contract price at which the 
position was entered into). Specifically, if the daily settlement price 
of the contract increases over the previous day's price, the seller of 
the contract must pay the difference to the buyer, and if the daily 
settlement price is less than the previous day's price, the buyer of 
the contract must pay the difference to the seller.
    Futures contracts also typically require deposits of initial margin 
as well as payments of daily variation margin as the value of the 
contracts fluctuate. For most market participants, the initial margin 
requirement for CERFs is generally expected to be 3% to 5%. Certain 
market participants (known as ``100% margin participants''), however, 
will be required to deposit with their futures commission merchant 
(``FCM'') initial margin in an amount equal to 100% of the value of the 
CERF on the date the position is established. The FCM, in turn, will be 
required to deliver to the CME clearinghouse initial margin in a 
specified amount and pledge to the clearinghouse, pursuant to a 
separate custody arrangement, an amount equal to the remainder of the 
100% margin amount posted by 100% margin participants, either from 
amounts posted by those 100% margin participants or from its own 
assets. The separate custody arrangement will be either an account with 
the FCM or a third party custody account.
    As a result of these arrangements, a 100% margin participant buying 
a CERF will be subject to substantially greater initial margin 
requirements than other market participants, but will not be required 
to pay any additional amounts to its futures commission merchant as 
variation margin if the value of the CERFs declines. Instead, the 
futures commission merchant will be obligated to make variation margin 
payments to the clearinghouse in respect of CERFs held by 100% margin 
participants, which it will withdraw from the separate custody account 
(and, in turn, from the 100% margin posted by those participants).
    If the daily settlement price increases, the futures commission 
merchant will receive variation margin from the clearinghouse for the 
account of the 100% margin participant, which it will hold in the 
separate custody account for the benefit of 100% margin participants. 
The buyer will not, however, be entitled to receive this variation 
margin from its futures commission merchant (until the liquidation or 
final settlement of its CERF position). The buyer will be entitled to 
receive interest or other income on the assets it has deposited as

[[Page 9385]]

margin or that are credited to the custody account on its behalf from 
time to time.
    Upon liquidation or settlement of a CERF, a 100% margin participant 
will receive from its futures commission merchant its initial margin 
deposit, adjusted for variation margin paid or received by the futures 
commission merchant with respect to the contract during the time it was 
held by the participant (or the proceeds from liquidation of any 
investments made with such funds for the benefit of the participant 
under the terms of its custody arrangement with the carrying futures 
commission merchant).
    The 100% margin participants will include any market participant 
that is (1) an investment company registered under the Investment 
Company Act or (2) an investment fund, commodity pool, or other similar 
type of pooled trading vehicle (other than a pension plan or fund) that 
is offered to the public pursuant to an effective registration 
statement filed under the Securities Act of 1933,\13\ regardless of 
whether it is also registered under the Investment Company Act, and 
that has its principal place of business in the United States.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 77a, et seq.
---------------------------------------------------------------------------

    The Investing Pools will be a 100% margin participants. The 
Investing Pools will satisfy the 100% margin requirement by depositing 
with the Clearing FCM \14\ cash or Short-Term Securities with a value 
equal to 100% of the value of each long position in CERFs.
---------------------------------------------------------------------------

    \14\ The term ``Clearing FCM'' is defined in the Registration 
Statement as Goldman, Sachs & Co. or any other futures commission 
merchant appointed by the Manager as clearing futures commission 
merchant for the Investing Pool.
---------------------------------------------------------------------------

    According to the Registration Statements, CERFs also differ from 
traditional futures contracts in another significant respect. In 
contrast to other types of futures contracts, which are typically 
listed with monthly, bimonthly or quarterly expirations, CERFs will be 
listed only with approximately five-year expirations. A buyer or seller 
of CERFs will be able to trade CERFs on the market maintained by the 
CME and will consequently be able to liquidate its position at any 
time, subject to the existence of a liquid market. If a party to a CERF 
wishes to hold its position to expiration, however, it will be 
necessary to maintain the position for up to five years. According to 
the Registration Statements, as a CERF nears expiration, it is 
anticipated, but there can be no assurance, that the CME will list an 
additional CERF with an approximately five-year expiration.
f. The S&P GSCI\TM\ and S&P GS Indexes
    The S&P GSCI\TM\ itself is an index on a production-weighted basket 
of principal physical commodities that satisfy specified criteria. The 
S&P GSCI\TM\ reflects the level of commodity prices at a given time and 
is designed to be a measure of the performance over time of the markets 
for these commodities. The commodities represented in the S&P GSCI\TM\ 
are those physical commodities on which active and liquid contracts are 
traded on trading facilities in major industrialized countries. The 
commodities included in the S&P GSCI\TM\ are weighted, on a production 
basis, to reflect the relative significance (in the view of the Index 
Sponsor) of those commodities to the world economy. The fluctuations in 
the level of the S&P GSCI\TM\ are intended generally to correlate with 
changes in the prices of those physical commodities in global markets.
    The Index Sponsor makes the official calculations of the value of 
the S&P GSCI\TM\ and S&P GS Indexes. At present, these calculations are 
performed continuously and are reported on Reuters Pages GSCI (for S&P 
GSCI), GSNG (for S&P GS Natural Gas), GSCO (for S&P GS Industrial 
Metals), GSLE (for S&P GS Light Energy), GSCL (for S&P GS Livestock), 
GSCN (for S&P GS Non-Energy), and GSCP (for S&P GS Energy), and is 
updated on Reuters at least every 15 seconds during NYSE Arca Core 
Trading Session and during business hours on each Business Day on which 
the offices of the Index Sponsor in New York City are open for 
business. The calculation for each applicable Index is also updated on 
Reuters at least every 15 seconds. The settlement price for each Excess 
Return Index is also reported on the Reuters Pages noted above. If 
Reuters ceases to publish the value of the S&P GSCI or applicable S&P 
GS Index or the settlement price of the S&P GSCI\TM\-ER or the Excess 
Return Indexes, the Index Sponsor has undertaken to use commercially 
reasonable efforts to ensure that a comparable reporting service 
publishes the S&P GSCI\TM\ or applicable S&P GS Index and the 
applicable Excess Return Index so long as any Shares are outstanding.
g. The Index Committee and Index Advisory Panel
    The Index Sponsor has established an Index Committee to oversee the 
daily management and operations of the S&P GSCI\TM\, and is responsible 
for all analytical methods and calculations. The Index Committee is 
comprised of three full-time professional members of S&P's staff and 
two members of Goldman Sachs Group. At each meeting, the Index 
Committee reviews any issues that may affect index constituents, 
statistics comparing the composition of the indices to the market, 
commodities that are being considered as candidates for addition to an 
index, and any significant market events. In addition, the Index 
Committee may revise index policy covering rules for selecting 
commodities, or other matters.
    S&P considers information about changes to its indices and related 
matters to be potentially market moving and material. Therefore, all 
Index Committee discussions are confidential.
    In addition, the Index Sponsor has established an Index Advisory 
Panel to assist it with the operation of the S&P GSCI\TM\. The 
principal purpose of the Index Advisory Panel is to advise the Index 
Sponsor with respect to, among other things, the calculation of the S&P 
GSCI\TM\, the effectiveness of the S&P GSCI\TM\ as a measure of 
commodity futures market performance and the need for changes in the 
composition or the methodology of the S&P GSCI\TM\. The Index Advisory 
Panel acts solely in an advisory and consultative capacity. All 
decisions with respect to the composition, calculation and operation of 
the S&P GSCI\TM\ are made by the Index Committee.
    The Index Advisory Panel generally meets in October of each year. 
Prior to the meeting, the Index Sponsor determines the commodities to 
be included in the S&P GSCI\TM\ for the following calendar year and the 
weighting factors for each commodity. The Index Advisory Panel's 
members receive the proposed composition of the S&P GSCI\TM\ in advance 
of the meeting and discuss the composition at the meeting. The Index 
Sponsor also consults the Index Advisory Panel on any other significant 
matters with respect to the calculation and operation of the S&P 
GSCI\TM\. The Index Advisory Panel may, if necessary or practicable, 
meet at other times during the year as issues arise that warrant its 
consideration.
h. Composition of the S&P GSCI\TM\
    In order to be included in the S&P GSCI\TM\, and the S&P GS 
Indexes, a contract must satisfy the following eligibility criteria:
    (1) The contract must:
    (a) Be in respect of a physical commodity and not a financial 
commodity;
    (b) have a specified expiration or term, or provide in some other 
manner for delivery or settlement at a specified

[[Page 9386]]

time, or within a specified period, in the future; and
    (c) be available, at any given point in time, for trading at least 
five months prior to its expiration or such other date or time period 
specified for delivery or settlement.
    (2) The commodity must be the subject of a contract that:
    (a) Is denominated in U.S. dollars; and
    (b) Is traded on or through an exchange, facility or other 
platform, referred to as a ``trading facility,'' that has its principal 
place of business or operations in a country that is a member of the 
Organization for Economic Cooperation and Development and:
    i. Makes price quotations generally available to its members or 
participants (and, if the Index Sponsor is not such a member or 
participant, to the Index Sponsor) in a manner and with a frequency 
that is sufficient to provide reasonably reliable indications of the 
level of the relevant market at any given point in time;
    ii. Makes reliable trading volume information available to the 
Index Sponsor with at least the frequency required by the Index Sponsor 
to make the monthly determinations;
    iii. Accepts bids and offers from multiple participants or price 
providers; and
    iv. Is accessible by a sufficiently broad range of participants.
    (3) The price of the relevant contract that is used as a reference 
or benchmark by market participants, referred to as the ``daily 
contract reference price,'' generally must have been available on a 
continuous basis for at least two years prior to the proposed date of 
inclusion in the S&P GSCI\TM\. In appropriate circumstances, however, 
the Index Sponsor may determine that a shorter time period is 
sufficient or that historical daily contract reference prices for that 
contract may be derived from daily contract reference prices for a 
similar or related contract. The daily contract reference price may be 
(but is not required to be) the settlement price or other similar price 
published by the relevant trading facility for purposes of margining 
transactions or for other purposes.
    (4) At and after the time a contract is included in the S&P 
GSCI\TM\, the daily contract reference price for that contract must be 
published between 10:00 a.m. and 4:00 p.m., New York Time, on each 
Business Day relating to that contract by the trading facility on or 
through which it is traded and must generally be available to all 
members of, or participants in, that trading facility (and, if the 
Index Sponsor is not such a member or participant, to the Index 
Sponsor) on the same day from the trading facility or through a 
recognized third-party data vendor. Such publication must include, at 
all times, daily contract reference prices for at least one expiration 
or settlement date that is five months or more from the date the 
determination is made, as well as for all expiration or settlement 
dates during that five-month period.
    (5) Volume data with respect to the contract must be available for 
at least the three months immediately preceding the date on which the 
determination is made.
    (6) A contract that is not included in the S&P GSCI\TM\ at the time 
of determination and that is based on a commodity that is not 
represented in the S&P GSCI\TM\ at that time must, in order to be added 
to the S&P GSCI\TM\ at that time, have a total dollar value traded, 
over the relevant period, as the case may be and annualized, of at 
least $15 billion. The total dollar value traded is the dollar value of 
the total quantity of the commodity underlying transactions in the 
relevant contract over the period for which the calculation is made, 
based on the average of the daily contract reference prices on the last 
day of each month during the period.
    (7) A contract that is already included in the S&P GSCI\TM\ at the 
time of determination and that is the only contract on the relevant 
commodity included in the S&P GSCI\TM\ must, in order to continue to be 
included in the S&P GSCI\TM\ after that time, have a total dollar value 
traded, over the relevant period, as the case may be and annualized, of 
at least $5 billion and at least $10 billion during at least one of the 
three most recent annual periods used in making the determination.
    (8) A contract that is not included in the S&P GSCITM at 
the time of determination and that is based on a commodity on which 
there are one or more contracts already included in the S&P 
GSCITM at that time must, in order to be added to the S&P 
GSCITM at that time, have a total dollar value traded, over 
the relevant period, as the case may be and annualized, of at least $30 
billion.
    (9) A contract that is already included in the S&P 
GSCITM at the time of determination and that is based on a 
commodity on which there are one or more contracts already included in 
the S&P GSCITM at that time must, in order to continue to be 
included in the S&P GSCITM after that time, have a total 
dollar value traded, over the relevant period, as the case may be and 
annualized, of at least $10 billion and at least $20 billion during at 
least one of the three most recent annual periods used in making the 
determination.
    (10) A contract that is:
    (a) Already included in the S&P GSCITM at the time of 
determination must, in order to continue to be included after that 
time, have a reference percentage dollar weight of at least 0.10%. The 
``reference percentage dollar weight'' of a contract represents the 
current value of the quantity of the underlying commodity that is 
included in the Index at a given time. This figure is determined by 
multiplying the contract production weight of a contract, or ``CPW,'' 
by the average of its daily contract reference prices on the last day 
of each month during the relevant period. These amounts are summed for 
all contracts included in the S&P GSCITM and each contract's 
percentage of the total is then determined. The CPW of a contract is 
its weight in the Index.
    (b) not included in the S&P GSCITM at the time of 
determination must, in order to be added to the S&P GSCITM 
at that time, have a reference percentage dollar weight of at least 
0.75%.
    (11) In the event that two or more contracts on the same commodity 
satisfy the eligibility criteria:
    (a) Such contracts will be included in the S&P GSCITM in 
the order of their respective total quantity traded during the relevant 
period (determined as the total quantity of the commodity underlying 
transactions in the relevant contract), with the contract having the 
highest total quantity traded being included first, provided that no 
further contracts will be included if such inclusion would result in 
the portion of the S&P GSCITM attributable to that commodity 
exceeding a particular level.
    (b) if additional contracts could be included with respect to 
several commodities at the same time, that procedure is first applied 
with respect to the commodity that has the smallest portion of the S&P 
GSCITM attributable to it at the time of determination. 
Subject to the other eligibility criteria described above, the contract 
with the highest total quantity traded on that commodity will be 
included. Before any additional contracts on the same commodity or on 
any other commodity are included, the portion of the S&P 
GSCITM attributable to all commodities is recalculated. The 
selection procedure described above is then repeated with respect to 
the contracts on the commodity that then has the smallest portion of 
the S&P GSCITM attributable to it.
    Beginning in 2007, in order for a contract to be included in the 
S&P

[[Page 9387]]

GSCITM, (1) the trading facility in which the contract is 
traded must allow market participants to execute spread transactions, 
through a single order entry, between the pairs of contract expirations 
included in the S&P GSCITM that at any given point in time 
will be involved in the rolls to be effected in the next three roll 
periods and (2) a contract that is not included in the S&P 
GSCITM at the time of determination must, in order to be 
added to the S&P GSCITM at that time, have a reference 
percentage dollar weight of at least 1.00%.
    The contracts currently included in the S&P GSCITM are 
all futures contracts traded on the New York Mercantile Exchange, Inc. 
(``NYM''), the ICE Futures (``ICE'') and its subsidiary, the New York 
Board of Trade (``NYBOT''), the CME, the Chicago Board of Trade 
(``CBT''), the Coffee, Sugar & Cocoa Exchange, Inc. (``CSC''), the New 
York Cotton Exchange (``NYC''), the Kansas City Board of Trade 
(``KBT''), the COMEX Division of the New York Mercantile Exchange, Inc. 
(``CMX'') and the London Metal Exchange (``LME'').
    The futures contracts currently included in the S&P 
GSCITM Energy Index, Average Daily Trading Volume (``ADTV'') 
for January 2007 through July 2007, percentage dollar weights (as of 
August 13, 2007), market symbols and the exchanges on which they are 
traded are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Weight  8/13/       ADTV
             Commodity               07  (percent)    (contracts)       Market  symbol         Trading  facility                    Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
WTI Crude Oil.....................           51.43         200,605  CL....................  NYM...................  1,000 index points.
Brent Crude Oil...................           20.86         235,918  LCO...................  ICE...................  1,000 barrels.
Natural Gas.......................           10.23         111,548  NG....................  NYM...................  42,000 U.S. gallons.
Heating Oil.......................            8.27          70,791  HO....................  NYM...................  42,000 U.S. gallons.
Gas Oil...........................            7.39          88,417  LGO...................  ICE...................  100 metric tons.
RBOB Oil..........................            1.82          79,665  RB....................  NYM...................  50,000 X PADD.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The futures contracts currently included in the S&P 
GSCITM Natural Gas Index, ADTV for January 2007 through July 
2007, percentage dollar weights (as of August 13, 2007), market symbols 
and the exchanges on which they are traded are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Weight 8/13/07       ADTV
             Commodity                 (percent)      (contracts)        Market symbol         Trading facility                     Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
Natural Gas.......................          100.00         111,548  NG....................  NYM...................  42,000 U.S. gallons.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The futures contracts currently included in the S&P 
GSCITM Industrial Metals Index, ADTV for January 2007 
through July 2007, percentage dollar weights (as of August 13, 2007), 
market symbols and the exchanges on which they are traded are as 
follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Weight 8/13/07       ADTV
             Commodity                 (percent)      (contracts)        Market symbol         Trading facility                     Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
Copper............................           40.66          14,793  MCU...................  NYM...................  25,000 lbs.
Aluminum..........................           30.14         155,886  MAL...................  LME...................  25 metric tons.
Primary Nickel....................           11.13          14,543  MNI...................  LME...................  6 metric tons.
Zinc..............................           11.05          48,483  MZN...................  LME...................  25 metric tons.
Standard Lead.....................            7.02          16,998  MPB...................  LME...................  25 metric tons.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The futures contracts currently included in the S&P 
GSCITM Light Energy Index, ADTV for January 2007 through 
July 2007, percentage dollar weights (as of August 13, 2007), market 
symbols and the exchanges on which they are traded are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Weight 8/13/07       ADTV
             Commodity                 (percent)      (contracts)        Market symbol         Trading facility                     Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
WTI Crude Oil.....................           18.97         200,605  CL....................  NYM...................  1,000 index points.
Copper............................            8.56          14,793  MCU...................  NYM...................  25,000 lbs.
Chicago Wheat.....................            8.10          75,587  W.....................  CBOT..................  5,000 bushels.
Brent Crude Oil...................            7.69         235,918  LCO...................  ICE...................  1,000 barrels.
Aluminum..........................            6.35         155,886  MAL...................  LME...................  25 metric tons.
Corn..............................            6.24         244,756  C.....................  CBOT..................  5,000 bushels.
Live Cattle.......................            5.50          36,530  LC....................  CME...................  40,000 lbs.
Gold..............................            4.21          89,976  GC....................  NYM...................  100 troy ounces.
Soybeans..........................            4.17         121,036  S.....................  CBOT..................  5,000 bushels.
Natural Gas.......................            3.77         111,548  NG....................  NYM...................  42,000 U.S. gallons.
Lean Hogs.........................            3.16          30,698  LH....................  CME...................  40,000 lbs.
Heating Oil.......................           3.05%          70,791  HO....................  NYM...................  42,000 U.S. gallons.
Kansas City Wheat.................            2.76          17,238  KW....................  KCE...................  5,000 bushels.

[[Page 9388]]


Gas Oil...........................            2.72          88,417  LGO...................  ICE...................  100 metric tons.
Nickel............................            2.34          14,543  MNI...................  LME...................  6 metric tons.
Zinc..............................            2.33          48,483  MZN...................  LME...................  25 metric tons.
Sugar.............................            2.17          90,166  SB....................  NYBOT.................  112,000 lbs.
Cotton............................            1.91          26,092  CT....................  NYBOT.................  50,000 lbs.
Coffee............................            1.51          20,383  KC....................  NYBOT.................  37,500 lbs.
Lead..............................            1.48          16,998  MPB...................  LME...................  25 metric tons.
Feeder Cattle.....................            1.32           4,416  FC....................  CME...................  50,000 lbs.
RBOB Gas..........................            0.67          79,665  RB....................  NYM...................  50,000 X PADD.
Silver............................            0.57          24,292  SI....................  NYM...................  5,000 troy ounces.
Cocoa.............................            0.45          13,397  CC....................  NYBOT.................  10 metric tons.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The futures contracts currently included in the S&P 
GSCITM Livestock Index, ADTV for January 2007 through July 
2007, percentage dollar weights (as of August 13, 2007), market symbols 
and the exchanges on which they are traded are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Weight 8/13/07       ADTV
             Commodity                 (percent)      (contracts)        Market symbol         Trading facility                     Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
Live Cattle.......................           55.08          36,530  LC....................  CME...................  40,000 lbs.
Lean Hogs.........................           31.72          30,698  LH....................  CME...................  40,000 lbs.
Feeder Cattle.....................           13.20           4,416  FC....................  CME...................  50,000 lbs.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The futures contracts currently included in the S&P 
GSCITM Non-Energy Index, ADTV for January 2007 through July 
2007, percentage dollar weights (as of August 13, 2007), market symbols 
and the exchanges on which they are traded are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Weight 8/13/07       ADTV
             Commodity                 (percent)      (contracts)        Market symbol         Trading facility                     Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
Copper............................           13.56          14,793  MCU...................  NYM...................  25,000 lbs.
Chicago Wheat.....................           12.83          75,587  W.....................  CBOT..................  5,000 bushels.
Aluminum..........................           10.06         155,886  MAL...................  LME...................  25 metric tons.
Corn..............................            9.89         244,756  C.....................  CBOT..................  5,000 bushels.
Live Cattle.......................            8.71          36,530  LC....................  CME...................  40,000 lbs.
Gold..............................            6.66          89,976  GC....................  NYM...................  100 troy ounces.
Soybeans..........................            6.61         121,036  S.....................  CBOT..................  5,000 bushels.
Lean Hogs.........................            5.01          30,698  LH....................  CME...................  40,000 lbs.
Kansas City Wheat.................            4.37          17,238  KW....................  KCE...................  5,000 bushels.
Nickel............................            3.71          14,543  MNI...................  LME...................  6 metric tons.
Zinc..............................            3.69          48,483  MZN...................  LME...................  25 metric tons.
Sugar.............................            3.44          90,166  SB....................  NYBOT.................  112,000 lbs.
Cotton............................            3.03          26,092  CT....................  NYBOT.................  50,000 lbs.
Coffee............................            2.39          20,383  KC....................  NYBOT.................  37,500 lbs.
Lead..............................            2.34          16,998  MPB...................  LME...................  25 metric tons.
Feeder Cattle.....................            2.09           4,416  FC....................  CME...................  50,000 lbs.
Silver............................            0.90          24,292  SI....................  NYM...................  5,000 troy ounces.
Cocoa.............................            0.71          13,397  CC....................  NYBOT.................  10 metric tons.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The hours of trading (New York Time) of the commodities in the 
charts above are as follows:

----------------------------------------------------------------------------------------------------------------
               Commodity                               Trading facility                 Trading hours (NY time)
----------------------------------------------------------------------------------------------------------------
Crude Oil..............................  NYM.........................................  10 a.m.-2:30 p.m.
Brent Crude Oil........................  ICE.........................................  8 p.m.-5 p.m. (next day).
Natural Gas............................  NYM.........................................  10 a.m.-2:30 p.m.
Heating Oil............................  NYM.........................................  10:05 a.m.-2:30 p.m.
RBOB Gasoline..........................  NYM.........................................  10:05 a.m.-2:30 p.m.
Gas Oil................................  ICE.........................................  8 p.m.-5 p.m. (next day).
Live Cattle............................  CME.........................................  10:05 a.m.-2 p.m.
Wheat..................................  CBT.........................................  10:30 a.m.-2:15 p.m.
Aluminum...............................  LME.........................................  6:55 a.m.-12 p.m.

[[Page 9389]]


Corn...................................  CBT.........................................  10:30 a.m.-2:15 p.m.
Copper.................................  LME.........................................  7 a.m.-12 p.m.
Soybeans...............................  CBT.........................................  10:30 a.m.-2:15 p.m.
Lean Hogs..............................  CME.........................................  9:10 a.m.-1 p.m.
Gold...................................  CMX.........................................  8:20 a.m.-1:30 p.m.
Sugar..................................  CSC.........................................  9 a.m.-12 p.m.
Cotton.................................  NYC.........................................  10:30 a.m.-2:15 p.m.
Red Wheat..............................  KBT.........................................  10:30 a.m.-2:15 p.m.
Coffee.................................  CSC.........................................  9:15 a.m.-12:30 p.m.
Standard Lead..........................  LME.........................................  7:05 a.m.-11:50 a.m.
Feeder Cattle..........................  CME.........................................  10:05 a.m.- 2 p.m.
Zinc...................................  LME.........................................  7:10 a.m.-11:55 a.m.
Primary Nickel.........................  LME.........................................  7:10 a.m.-11:55 a.m.
Cocoa..................................  CSC.........................................  8 a.m.-11:50 a.m.
Silver.................................  CMX.........................................  8:25 a.m.-1:25 p.m.
----------------------------------------------------------------------------------------------------------------

    The quantity of each of the contracts included in the S&P GSCI\TM\ 
is determined on the basis of a five-year average, referred to as the 
``world production average,'' of the production quantity of the 
underlying commodity as published by the United Nations Statistical 
Yearbook, the Industrial Commodity Statistics Yearbook and other 
official sources. However, if a commodity is primarily a regional 
commodity, based on its production, use, pricing, transportation or 
other factors, the Index Sponsor, may calculate the weight of that 
commodity based on regional, rather than world, production data. At 
present, natural gas is the only commodity the weights of which are 
calculated on the basis of regional production data, with the relevant 
region defined as North America.
    The five-year moving average is updated annually for each commodity 
included in the S&P GSCI\TM\, based on the most recent five-year period 
(ending approximately two years prior to the date of calculation and 
moving backwards) for which complete data for all commodities is 
available. The CPWs used in calculating the S&P GSCI\TM\ are derived 
from world or regional production averages, as applicable, of the 
relevant commodities, and are calculated based on the total quantity 
traded for the relevant contract and the world or regional production 
average, as applicable, of the underlying commodity. However, if the 
volume of trading in the relevant contract, as a multiple of the 
production levels of the commodity, is below specified thresholds, the 
CPW of the contract is reduced until the threshold is satisfied. This 
is designed to ensure that trading in each contract is sufficiently 
liquid relative to the production of the commodity.
    In addition, the Index Sponsor performs this calculation on a 
monthly basis and, if the multiple of any contract is below the 
prescribed threshold, the composition of the S&P GSCI\TM\ is 
reevaluated, based on the criteria and weighting procedure described 
above. This procedure is undertaken to allow the S&P GSCI\TM\ to shift 
from contracts that have lost substantial liquidity into more liquid 
contracts during the course of a given year. As a result, it is 
possible that the composition or weighting of the S&P GSCI\TM\ will 
change on one or more of these monthly evaluation dates. The likely 
circumstances under which the Index Sponsor would be expected to change 
the composition of the Index during a given year, however, are (1) a 
substantial shift of liquidity away from a contract included in the 
Index or its subsidiaries as described above, or (2) an emergency, such 
as a natural disaster or act of war or terrorism, that causes trading 
in a particular contract to cease permanently or for an extended period 
of time. In either event, the Index Sponsor will consult with the Index 
Committee in connection with the changes to be made and will publish 
the nature of the changes, through Web sites, news media or other 
outlets, with as much prior notice to market participants as is 
reasonably practicable. Moreover, regardless of whether any changes 
have occurred during the year, the Index Sponsor reevaluates the 
composition of the S&P GSCI\TM\, in consultation with its Index 
Committee, at the conclusion of each year, based on the above criteria. 
Other commodities that satisfy that criteria, if any, will be added to 
the S&P GSCI\TM\. Commodities included in the S&P GSCI\TM\ that no 
longer satisfy that criteria, if any, will be deleted.
    The Index Sponsor also determines whether modifications in the 
selection criteria or the methodology for determining the composition 
and weights of and for calculating the S&P GSCI\TM\ are necessary or 
appropriate in order to assure that the S&P GSCI\TM\ represents a 
measure of commodity market performance. The Index Sponsor has the 
discretion to make any such modifications.
i. Total Dollar Weight of the S&P GSCI and S&P GS Indexes
    The total dollar weight of the S&P GSCI\TM\ and each S&P GS Index 
is the sum of the dollar weight of each of the underlying commodities. 
The dollar weight of each such commodity on any given day is equal to:
     The daily contract reference price;
     Multiplied by the appropriate CPW; and
     During a roll period, the appropriate ``roll 
weights''(discussed below).
    The daily contract reference price used in calculating the dollar 
weight of each commodity on any given day is the most recent daily 
contract reference price made available by the relevant trading 
facility, except that the daily contract reference price for the most 
recent prior day will be used if the exchange is closed or otherwise 
fails to publish a daily contract reference price on that day. In 
addition, if the trading facility fails to make a daily contract 
reference price available or publishes a daily contract reference price 
that, in the reasonable judgment of the Index Sponsor, reflects 
manifest error, the relevant calculation will be delayed until the 
price is made available or corrected; provided, that, if the price is 
not made available or corrected by 4 p.m. New York Time, the Index 
Sponsor may, if it deems that action to be appropriate under the 
circumstances, determine the appropriate daily contract reference price 
for the applicable futures contract in its reasonable judgment for 
purposes of the relevant Index calculation.
j. Calculation of Total Return Indexes
    The Total Return Indexes to which the performance of the Shares is 
linked

[[Page 9390]]

were established in May of 1991, with the exception of the S&P GSCI\TM\ 
Light Energy Total Return Index, which was established in April, 2004. 
Each Total Return Index reflects the return of the applicable Excess 
Return Index, together with the return on specified U.S. Treasury 
securities that are deemed to have been held to collateralize a 
hypothetical long position in the futures contracts comprising the 
applicable S&P GS Index.
k. Calculation of the Excess Return Indexes
    Because futures contracts have scheduled expirations, or delivery 
months, as one contract nears expiration it becomes necessary to close 
out the position in that delivery month and establish a position in the 
next available delivery month. This process is referred to as 
``rolling'' the position forward. Each Excess Return Index is designed 
to reflect the return from rolling each contract included in the S&P 
GSCI\TM\ or applicable S&P GS Index in this manner into the next 
available delivery month as it nears expiration. This is accomplished 
by selling the position in the first delivery month and purchasing a 
position of equivalent value in the second delivery month. If the price 
of the second contract is lower than the price of the first contract, 
the ``rolling'' process results in a greater quantity of the second 
contract being acquired for the same value. Conversely, if the price of 
the second contract is higher than the price of the first contract, the 
``rolling'' process results in a smaller quantity of the second 
contract being acquired for the same value.
    The value of each Excess Return Index on any S&P GSCI\TM\ Business 
Day is equal to the product of (1) the value of the applicable Excess 
Return Index on the immediately preceding S&P GSCI\TM\ Business Day 
multiplied by (2) one plus the contract daily return on the S&P 
GSCI\TM\ Business Day on which the calculation is made.
    The value of each Total Return Index on any S&P GSCI\TM\ Business 
Day is equal to the product of (1) the value of the Index on the 
immediately preceding S&P GSCI\TM\ Business Day multiplied by (2) one 
plus the sum of the contract daily return \15\ and the Treasury bill 
return on the S&P GSCI\TM\ Business Day on which the calculation is 
made, multiplied by (3) one plus the Treasury bill return for each non-
S&P GSCI\TM\ Business Day since the immediately preceding S&P GSCI\TM\ 
Business Day. The Treasury bill return is the return on a hypothetical 
investment at a rate equal to the interest rate on a specified U.S. 
Treasury bill.
---------------------------------------------------------------------------

    \15\ The contract daily return on any given day is equal to the 
sum, for each of the commodities included in the S&P GSCI\TM\ or the 
applicable S&P GS Index, of the applicable daily contract reference 
price on the relevant contract multiplied by the appropriate CPW and 
the appropriate ``roll weight,'' divided by the total dollar weight 
of the such Index on the preceding day, minus one.
    The ``roll weight'' of each commodity reflects the fact that the 
positions in contracts must be liquidated or rolled forward into 
more distant contract expirations as they near expiration. If actual 
positions in the relevant markets were rolled forward, the roll 
would likely need to take place over a period of days. Since the S&P 
GSCI\TM\ and S&P GS Indexes are designed to replicate the 
performance of actual investments in the underlying contracts, the 
rolling process incorporated in such Indexes also takes place over a 
period of days at the beginning of each month, referred to as the 
``roll period.'' On each day of the roll period, the ``roll 
weights'' of the first nearby contract expirations on a particular 
commodity and the more distant contract expiration into which it is 
rolled are adjusted, so that the hypothetical position in the 
contract on the commodity that is included in the applicable Index 
is gradually shifted from the first nearby contract expiration to 
the more distant contract expiration.
---------------------------------------------------------------------------

2. Valuation of CERFs; Computation of Trusts' Net Asset Value
    On each Business Day on which the NYSE is open for regular trading, 
as soon as practicable after the close of regular trading of the Shares 
on the NYSE (normally, 4:15 p.m., New York Time), the Trustee will 
determine the NAV of the Trusts as of that time.
    The Trustee will value the Trusts' assets based upon the 
determination by the Manager, which may act through the Investing Pool 
Administrator, of the net asset value of the Investing Pool. The 
Manager will determine the net asset value of the Investing Pool as of 
the same time that the Trustee determines the net asset value of the 
Trusts.
    The Manager will value the Investing Pools' long position in CERFs 
on the basis of that day's announced CME settlement price for the 
CERFs. The value of the Investing Pools' CERF position (including any 
related margin) will equal the product of (a) the number of CERF 
contracts owned by the particular Investing Pool and (b) the settlement 
price on the date of calculation. If there is no announced CME 
settlement price for the CERF on a Business Day, the Manager will use 
the most recently announced CME settlement price unless the Manager 
determines that that price is inappropriate as a basis for 
evaluation.\16\ The daily settlement price for the CERF is established 
by the CME shortly after the close of trading in Chicago on each 
trading day.
---------------------------------------------------------------------------

    \16\ The Exchange states that the Manager's use of a price that 
is not the most recently announced CME settlement price, other than 
on a temporary basis based on extraordinary circumstances, would 
require Commission approval of an Exchange proposed rule change 
pursuant to Rule 19b-4.
---------------------------------------------------------------------------

    Once the value of the CERFs and interest earned on any assets 
posted as margin and any other assets of the Investing Pool has been 
determined, the Manager will subtract all accrued expenses and 
liabilities of each Investing Pool as of the time of calculation in 
order to calculate the net asset value of the Investing Pool. The 
Manager, or the Investing Pool Administrator on its behalf, will then 
calculate the value of the applicable Trust's Investing Pool Interest 
and provide this information to the Trustee.
    Once the value of the Trusts' Investing Pool Interests have been 
determined and provided to the Trustee, the Trustee will subtract all 
accrued expenses and other liabilities of each Trust from the total 
value of the assets of the Trust, in each case as of the calculation 
time. The resulting amount is the net asset value of the Trust. The 
Trustee will determine the NAV by dividing the net asset value of the 
Trust by the number of Shares outstanding at the time the calculation 
is made.
    The NAV for each Business Day on which the NYSE is open for regular 
trading will be distributed through major market data vendors and will 
be published online at http://www.ishares.com, or any successor 

thereto. The Trusts will update the NAV as soon as practicable after 
each subsequent NAV is calculated.
3. Creations of Baskets
    According to the Registration Statements, creation and redemption 
of interests in the Trusts, and the corresponding creation and 
redemption of interests in the respective Investing Pools, will 
generally be effected through transactions in ``exchanges of futures 
for physicals,'' or ``EFPs.'' EFPs involve contemporaneous transactions 
in futures contracts and the underlying cash commodity or a closely 
related commodity. In a typical EFP, the buyer of the futures contract 
sells the underlying commodity to the seller of the futures contract in 
exchange for a cash payment reflecting the value of the commodity and 
the relationship between the price of the commodity and the related 
futures contract. According to the Registration Statements, in the 
context of CERFs, CME rules permit the execution of EFPs consisting of 
simultaneous purchases (sales) of CERFs and sales (purchases) of 
Shares. This mechanism will generally be used by the Trusts in 
connection with the creation and redemption of Baskets. Specifically, 
it is anticipated that an Authorized Participant (as described

[[Page 9391]]

below) requesting the creation of additional Baskets typically will 
transfer CERFs and cash (or, in the discretion of the Trustee, Short-
Term Securities in lieu of cash) to the Trusts in return for Shares. 
Baskets may be created and redeemed only by Authorized Participants. 
Each Authorized Participant must: (1) Be a registered broker-dealer 
and, if required in connection with its activities, a registered 
futures commission merchant; (2) be a DTC Participant; (3) have entered 
into an Authorized Participant Agreement; and (4) be in a position to 
transfer CERFs and the required cash or Short-Term Securities to, and 
take delivery of these assets from, the Trustee through one or more 
accounts.
    The Trusts will simultaneously contribute to the Investing Pools 
the CERFs (and any cash or securities) received from the Authorized 
Participant in return for an increase in its Investing Pool Interests. 
If an EFP is executed in connection with the redemption of one or more 
Baskets, an Authorized Participant will transfer to the applicable 
Trust the interests being redeemed and the Trust will transfer to the 
Authorized Participant CERFs, cash or Short-Term Securities. In order 
to obtain the CERFs, cash or Short-Term Securities to be transferred to 
the Authorized Participant, the Trust will redeem an equivalent portion 
of its interest in the Investing Pool Interests.
    The Trusts will offer Shares on a continuous basis on each Business 
Day, but only in Baskets consisting of 50,000 Shares. Baskets will be 
typically issued only in exchange for an amount of CERFs and cash (or, 
in the discretion of the Trustee, Short-Term Securities in lieu of 
cash) equal to the Basket Amount \17\ for the Business Day on which the 
creation order was received by the Trustee. The Basket Amount for a 
Business Day will have a per Share value equal to the NAV as of such 
day. However, orders received by the Trustee after 2:40 p.m., New York 
Time, will be treated as received on the next following Business Day. 
The Trustee will notify the Authorized Participants of the Basket 
Amount on each Business Day.
---------------------------------------------------------------------------

    \17\ The Basket Amount represents the amount of CERFs and cash 
(or, in the discretion of the Sponsor, Short-Term Securities in lieu 
of cash), that an Authorized Participant must transfer in exchange 
for one Basket, or that an Authorized Participant is entitled to 
receive in exchange for each Basket surrendered for redemption. The 
value of the Basket Amount will equal the product of the NAV per 
Share and the number of Shares constituting a Basket, in each case 
as of the time of determination.
---------------------------------------------------------------------------

    Before the Trusts will issue any Baskets to an Authorized 
Participant, that Authorized Participant must deliver to the Trustee a 
creation order indicating the number of Baskets it intends to purchase 
and providing other details with respect to the procedures by which the 
Baskets will be transferred. The Trustee will acknowledge the creation 
order unless it or the Sponsor decides to refuse the order as described 
in the prospectus.
    Upon the transfer of (1) the required consideration of CERFs and 
cash (or, in the discretion of the Trustee, Short-Term Securities in 
lieu of cash) in the amounts, and to the accounts, specified by the 
Trustee, and (2) the Trustee's transaction fee per Basket (described 
below), the Trustee will deliver the appropriate number of Baskets to 
the Depository Trust Company (``DTC'') account of the Authorized 
Participant. In limited circumstances and with the approval of the 
Trustee, Baskets may be created for cash, in which case the Authorized 
Participant will be required to pay any additional issuance costs, 
including the costs to the applicable Investing Pool of establishing 
the corresponding CERF position.
    Only Authorized Participants can transfer the required 
consideration and receive Baskets in exchange. Authorized Participants 
may act for their own accounts or as agents for broker-dealers, 
custodians and other securities market participants that wish to create 
or redeem Baskets. An Authorized Participant will have no obligation to 
create or redeem Baskets for itself or on behalf of other persons. An 
order for one or more baskets may be placed by an Authorized 
Participant on behalf of multiple clients. The Sponsor and the Trustee 
will maintain a current list of Authorized Participants.
    No Shares will be issued unless and until the Trustee receives 
confirmation that (1) the required consideration has been received in 
the account or accounts specified by the Trustee and (2) the Manager 
confirms that Investing Pool Interests with an initial value equal to 
the consideration received for the Shares have been issued to the 
Trust. It is expected that delivery of the Shares will be made against 
transfer of consideration on the next Business Day (T+1) following the 
Business Day on which the creation order is received by the Trustee. If 
the Trustee has not received the required consideration for the Shares 
to be delivered on the delivery date, by 11 a.m., New York Time, the 
Trustee may cancel the creation order.\18\
---------------------------------------------------------------------------

    \18\ The price at which the Shares trade should be disciplined 
by arbitrage opportunities created by the ability to purchase or 
redeem shares of the Trust in Basket size. This should help ensure 
that the Shares will not trade at a material discount or premium to 
their net asset value or redemption value.
---------------------------------------------------------------------------

4. Redemptions of Baskets
    Authorized Participants may typically surrender Baskets in exchange 
only for an amount of CERFs and cash (or, in the discretion of the 
Trustee, Short-Term Securities in lieu of cash) equal to the Basket 
Amount on the Business Day the redemption request is received by the 
Trustee. However, redemption requests received by the Trustee after 
2:40 p.m., New York Time (or, on any day on which the CME is scheduled 
to close early, after the close of trading of CERFs on the CME on such 
day), will be treated as received on the next following Business Day. 
Holders of Baskets who are not Authorized Participants will be able to 
redeem their Baskets only through an Authorized Participant. It is 
expected that Authorized Participants may redeem Baskets for their own 
accounts or on behalf of Shareholders who are not Authorized 
Participants, but they are under no obligation to do so.
    Before surrendering Baskets for redemption, an Authorized 
Participant must deliver to the Trustee a written request indicating 
the number of Baskets it intends to redeem and providing other details 
with respect to the procedures by which the required Basket Amount will 
be transferred. The Trustee will acknowledge the redemption order 
unless it or the Sponsor decides to refuse the redemption order as 
described in the Trusts' prospectuses.
    After the delivery by the Authorized Participant to the Trustee's 
DTC account of the total number of Shares to be redeemed by an 
Authorized Participant, the Trustee will deliver to the order of the 
redeeming Authorized Participant redemption proceeds consisting of 
CERFs and cash (or, in the discretion of the Trustee, Short-term 
Securities in lieu of cash). In connection with a redemption order, the 
redeeming Authorized Participant authorizes the Trustee to deduct from 
the proceeds of redemption a transaction fee per Basket (described 
below). In limited circumstances and with the approval of the Trustee, 
Baskets may be redeemed for cash, in which case the Authorized 
Participants will be required to pay any additional redemption costs, 
including the costs to the Investing Pool of liquidating the 
corresponding CERF position. The Trust will receive these redemption 
proceeds pursuant to the Trust's contemporaneous redemption of 
Investing Pool Interests of

[[Page 9392]]

corresponding value. Shares can be surrendered for redemption only in 
Baskets consisting of 50,000 Shares each.
    It is expected that delivery of the CERFs, cash or Short-term 
Securities to the redeeming Shareholder will be made against transfer 
of the Baskets on the next Business Day following the Business Day on 
which the redemption request is received by the Trustee. If the 
Trustee's DTC account has not been credited with the total number of 
Shares to be redeemed pursuant to the redemption order by 11 a.m., New 
York Time, on the delivery date, the Trustee may cancel the redemption 
order.
    DTC will accept the Shares for settlement through its book-entry 
settlement system. Shares do not have any voting rights.
5. Fees and Expenses of the Trustee
    Each order for the creation of Baskets must be accompanied by a 
payment to the Trustee of a transaction fee per Basket of $6.50 
multiplied by the number of CERFs included in the Basket Amount. For 
redemption orders, the redeeming Authorized Participant will authorize 
the Trustee to deduct from the proceeds of the redemption a transaction 
fee per Basket equal to $6.50 multiplied by the number of CERFs 
included in the Basket Amount, plus any expenses, taxes or charges 
(such as stamp taxes or stock transfer taxes or fees) related to the 
creation or surrender for redemption. The creation and redemption 
transaction fee per basket is subject to modification from time to 
time.
    The Trustee will be entitled to reimburse itself from the assets of 
the Trusts for all expenses and disbursements incurred by it for 
extraordinary services it may provide to the Trusts or in connection 
with any discretionary action the Trustee may take to protect the 
Trusts or the interests of the holders to the extent not paid by the 
Sponsor.
6. Dissemination of Information Relating to the Shares
    The Web site for the Trusts (http://www.ishares.com), which will be 

publicly accessible at no charge, will contain the following 
information: (a) The prior Business Day's NAV on a per Share basis and 
the reported closing price; (b) the mid-point of the bid-ask price \19\ 
in relation to the NAV as of the time the NAV is calculated (the ``Bid-
Ask Price''); (c) calculation of the premium or discount of such price 
against such NAV; (d) data in chart form displaying the frequency 
distribution of discounts and premiums of the Bid-Ask Price against the 
NAV, within appropriate ranges for each of the four previous calendar 
quarters; (e) the prospectus; (f) the holdings of the Trusts, including 
CERFs, cash and Treasury securities; (g) the Basket Amount, and (h) 
other applicable quantitative information. The Exchange on its Web site 
at http://www.nyse.com will include a hyperlink to the Trusts' Web site at http://www.ishares.com.

---------------------------------------------------------------------------

    \19\ The bid-ask price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV.
---------------------------------------------------------------------------

    As described above, the NAV for the Fund will be calculated and 
disseminated daily. In addition, during the NYSE Arca Core Trading 
Session (9:30 a.m. to 4:15 p.m., New York Time) for the Trusts, one or 
more major market data vendors will disseminate information with 
respect to the Indicative Intra-day Value (as discussed below), recent 
NAV, and Shares outstanding on a daily basis.
    The Sponsor for the Trusts (Barclays Global Investors 
International, Inc.) has represented to the Exchange that the Trustee 
for the Trusts will make the NAV per Share available to all market 
participants at the same time.
    At present, official calculation by the Index Sponsor of the value 
of each GS Index is performed continuously and is updated on Reuters at 
least every 15 seconds during NYSE trading hours for the Shares and 
during business hours on each Business Day (as defined above) on which 
the offices of the Index Sponsor in New York City are open for 
business. In the event that the Exchange is open for business on a day 
that is not an S&P GSCI Business Day, the Exchange will not permit 
trading of the Shares on that day.
    In addition, values updated at least every 15 seconds are 
disseminated on Reuters for the Total Return Indexes during Exchange 
trading hours. Daily settlement values for the S&P GSCI and S&P GS 
Indexes, Total Return Indexes and Excess Return Indexes are also widely 
disseminated.
    If the relevant trading facility fails to make a daily contract 
reference price available or publishes a daily contract reference price 
that, in the reasonable judgment of the Index Sponsor, reflects 
manifest error, the relevant calculation will be delayed until the 
price is made available or corrected; provided, that, if the price is 
not made available or corrected by 4 p.m. New York Time, the Index 
Sponsor may, if it deems that action to be appropriate under the 
circumstances, determine the appropriate daily contract reference price 
for the applicable futures contract in its reasonable judgment for 
purposes of the relevant calculation. If such actions by the Index 
Sponsor are implemented on more than a temporary basis, the Exchange 
will contact the Commission Staff and, as necessary, make an 
appropriate filing under Rule 19b-4.
    Various data vendors and news publications publish futures prices 
and data. Futures quotes and last sale information for the commodities 
underlying the Index are widely disseminated through a variety of 
market data vendors worldwide, including Bloomberg and Reuters. In 
addition, complete real-time data for such futures is available by 
subscription from Reuters and Bloomberg. The futures exchanges or which 
the underlying commodities and CERFs trade also provide delayed futures 
information on current and past trading sessions and market news 
generally free of charge on their respective Web sites. The specific 
contract specifications for the futures contracts are also available 
from the futures exchanges on their Web sites as well as other 
financial informational sources.
7. Indicative Intra-day Value
    In order to provide updated information relating to the Trusts for 
use by investors, professionals, and other persons, one or more major 
market data vendors will disseminate an updated Indicative Intra-day 
Value (``IIV'') on a per Share basis. The IIV will be disseminated at 
least every 15 seconds from 9:30 a.m. to 4:15 p.m., New York Time. The 
IIV will be calculated based on the cash and collateral in a Basket 
Amount divided by 50,000, adjusted to reflect the market value of the 
investments held by the applicable Investing Pool, i.e. CERFs. The IIV 
will not reflect price changes to the price of an underlying commodity 
between the close of trading of the futures contract at the relevant 
futures exchange and the close of the Core Trading Session on NYSE Arca 
at 4:15 p.m. New York Time. The value of a Share may accordingly be 
influenced by non-concurrent trading hours between NYSE Arca and the 
various futures exchanges on which the futures contracts based on the 
Index commodities are traded. The table above lists the trading hours 
for each of the Index commodities underlying the futures contracts.
    When the market for futures trading for each of the relevant Index 
commodities is open, the IIV can be expected to approximate the value 
per Share of the Basket Amount. IIV on a per Share basis disseminated 
during the NYSE Arca Core Trading Session should

[[Page 9393]]

not be viewed as a real time update of the NAV, which is calculated 
only once a day.
8. Other Characteristics of the Shares
    General Information. A minimum of two Baskets, representing 100,000 
Shares, will be outstanding for each Trust at the commencement of 
trading on the Exchange.
    The trading hours for the Shares on the Exchange are the same as 
those set forth in NYSE Arca Equities Rule 7.34 (Opening, Core Trading, 
and Late Trading Sessions, 4 a.m. to 8 p.m., New York Time). The 
minimum trading increment for Shares on the Exchange will be $0.01.
    Continued Listing Criteria. Under the applicable continued listing 
criteria, the Shares may be delisted as follows: (1) Following the 
initial twelve-month period beginning upon the commencement of trading 
of the Shares, there are fewer than 50 record and/or beneficial holders 
of the Shares for 30 or more consecutive trading days; (2) the value of 
the Total Return Indexes cease to be calculated by or available from a 
major market data vendor on at least a 15-second basis from a source 
unaffiliated with the Sponsor, the Trust or the Trustee; (3) the IIV 
ceases to be available on at least a 15-second delayed basis from a 
major market data vendor; or (4) such other event shall occur or 
condition exist that, in the opinion of the Exchange, makes further 
dealings on the Exchange inadvisable. The Exchange will remove Shares 
from listing and trading upon termination of the Trust.
    In addition, the Exchange will file a proposed change pursuant to 
Rule 19b-4 under the Act seeking approval to continue trading the 
Shares and, unless approved, the Exchange will commence delisting the 
Shares, if: (1) The Index Sponsor substantially changes either the 
applicable Index component selection methodology or the weighting 
methodology; (2) a new component is added to the Index (or pricing 
information is used for a new or existing component) that constitutes 
more than 10% of the weight of the Index with whose principal trading 
market the Exchange does not have a comprehensive surveillance sharing 
agreement; (3) the Manager uses a price to value the Investing Pool's 
long position in CERFs based on a price other than the most recently 
announced CME settlement price, other than on a temporary basis based 
on extraordinary circumstances; or (4) a successor or substitute index 
is used in connection with the Shares. With respect to the successor or 
substitute index, the Rule 19b-4 filing will address, among other 
things, the listing and trading characteristics of such index and the 
Exchange's surveillance procedures applicable thereto.
9. Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Trading in the Shares 
on the Exchange will occur in accordance with NYSE Arca Equities Rule 
7.34(a). The Exchange has appropriate rules to facilitate transactions 
in the Shares during this time.
    Further, NYSE Arca Equities Rules 8.203(g)-(i) sets forth certain 
restrictions on equity trading permit holders (``ETP Holders'') acting 
as registered Market Makers in Commodity Index Trust Shares to 
facilitate surveillance. NYSE Arca Equities Rule 8.203(h) requires that 
the ETP Holder acting as a registered Market Maker in the Shares 
provide the Exchange with information relating to its trading in the 
applicable physical commodities included in, or options, futures or 
options on futures on, the applicable Index or any other derivatives 
based on the Index. NYSE Arca Equities Rule 8.203(i) prohibits the ETP 
Holder acting as a registered Market Maker in the Shares from using any 
material nonpublic information received from any person associated with 
an ETP Holder or employee of such person regarding trading by such 
person or employee in the applicable physical commodities included in, 
or options, futures or options on futures on, the Index or any other 
derivatives based on the Index (including the Shares). In addition, as 
stated above, NYSE Arca Equities Rule 8.203(g) prohibits the ETP Holder 
acting as a registered Market Maker in the Shares from being affiliated 
with a market maker in the applicable physical commodities included in, 
or options, futures or options on futures on, the Index or any other 
derivatives based on the Index unless adequate information barriers are 
in place, as provided in NYSE Arca Equities Rule 7.26.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in CERFs or 
the futures contracts included in the applicable Index or Indexes; or 
(2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\20\ If the value of the Total Return Index associated 
with a Trust's Shares or the applicable IIV is not being disseminated 
on at least a 15 second basis during the hours the Shares trade on the 
Exchange, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or the Index value occurs. 
If the interruption to the dissemination of the IIV or the Index value 
persists past the trading day in which it occurred, the Exchange will 
halt trading no later than the beginning of the trading day following 
the interruption. Additionally, if the Exchange becomes aware that the 
NAV is not disseminated to all market participants at the same time, it 
will halt trading in the Shares until such time as the NAV is available 
to all market participants.
---------------------------------------------------------------------------

    \20\ See NYSE ARCA Equities Rule 7.12.
---------------------------------------------------------------------------

    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and any person or entity controlling an ETP Holder. The 
Exchange also has regulatory jurisdiction over a subsidiary or 
affiliate of an ETP Holder that is in the securities business. A 
subsidiary or affiliate of an ETP Holder that does business only in 
commodities or futures contracts would not be subject to Exchange 
jurisdiction, but the Exchange could obtain certain information 
regarding the activities of such subsidiary or affiliate through 
surveillance sharing agreements with regulatory organizations of which 
such subsidiary or affiliate is a member.
10. Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange represents that these procedures are adequate to 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules.
    The Exchange's current trading surveillances focus on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. The Exchange is able to 
obtain information regarding trading in the Shares, the physical 
commodities

[[Page 9394]]

included in, or options, futures or options on futures on, an index 
underlying an issue of Commodity Index Trust Shares or any other 
derivatives based on such index, through ETP Holders, in connection 
with such ETP Holders' proprietary or customer trades which they effect 
on any relevant market. With regard to the Index components, the 
Exchange can obtain market surveillance information, including customer 
identity information, with respect to transactions occurring on the 
NYM, the Kansas City Board of Trade, ICE and the LME, pursuant to its 
comprehensive information sharing agreements with each of those 
exchanges. All of the other trading venues on which current Index 
components are traded are members of the Intermarket Surveillance Group 
(``ISG'') and the Exchange therefore has access to all relevant trading 
information with respect to those contracts without any further action 
being required on the part of the Exchange. A list of ISG members and 
affiliate members is available at http://www.isgportal.com.

    In addition, the Exchange will file a proposed change pursuant to 
Rule 19b-4 under the Act seeking approval to continue trading the 
Shares if the Index Sponsor adds a new component to an Index (or 
pricing information is used for a new or existing component) that 
constitutes more than 10% of the weight of the Index where the 
principal trading market for such component is not a member or 
affiliate of ISG or where the Exchange does not have a comprehensive 
surveillance sharing agreement with such market.
11. Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares, including risks inherent 
with trading the Shares during the Opening and Late Trading Sessions 
when the updated IIV is not calculated and disseminated and suitability 
recommendation requirements.
    Specifically, the Information Bulletin will discuss the following: 
(1) The procedures for purchases and redemptions of Shares in Baskets; 
(2) NYSE Arca Equities Rule 9.2(a),\21\ which imposes a duty of due 
diligence on its ETP Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (3) how information 
regarding the IIV is disseminated; (4) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (5) 
trading information. For example, the Information Bulletin will advise 
ETP Holders, prior to the commencement of trading, of the prospectus 
delivery requirements applicable to the Trusts. The Exchange notes that 
investors purchasing Shares directly from the Trusts (by delivery of 
the Basket Amount) will receive a prospectus. ETP Holders purchasing 
Shares from the Trusts for resale to investors will deliver a 
prospectus to such investors.
---------------------------------------------------------------------------

    \21\ NYSE Arca Equities Rule 9.2(a) (``Diligence as to 
Accounts'') provides that ETP Holders, before recommending a 
transaction, must have reasonable grounds to believe that the 
recommendation is suitable for the customer based on any facts 
disclosed by the customer as to his other security holdings and as 
to his financial situation and needs. Further, the rule provides, 
with a limited exception, that prior to the execution of a 
transaction recommended to a non-institutional customer, the ETP 
Holders shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that they believe would be 
useful to make a recommendation. See Securities Exchange Act Release 
No. 54026 (June 21, 2006), 71 FR 36850 (June 28, 2006) (SR-PCX-2005-
115).
---------------------------------------------------------------------------

    In addition, the Information Bulletin will reference that the 
Trusts are subject to various fees and expenses described in the 
Registration Statements. The Information Bulletin will also reference 
the fact that there is no regulated source of last sale information 
regarding physical commodities, that the Commission has no jurisdiction 
over the trading of physical commodities or the futures contracts on 
which the value of the Shares is based.
12. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \22\ that an Exchange have rules that 
are 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
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 the self-regulatory organization 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.

The Commission is considering granting accelerated approval of the 
proposed rule change at the end of a 15-day comment period.\23\
---------------------------------------------------------------------------

    \23\ NYSE Arca requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of 
the notice of the filing thereof.
---------------------------------------------------------------------------

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-NYSEArca-2007-91 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-NYSEArca-2007-91. 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/


[[Page 9395]]

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 such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2007-91 and should 
be submitted on or before March 6, 2008.
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-3042 Filed 2-19-08; 8:45 am]

BILLING CODE 8011-01-P
