
[Federal Register: April 24, 2009 (Volume 74, Number 78)]
[Notices]               
[Page 18771-18777]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap09-109]                         


[[Page 18771]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59781; File No. SR-NYSEArca-2009-28]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to Listing and Trading of Shares of the ETFS Silver Trust

April 17, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 6, 2009, NYSE Arca, Inc. (``NYSE Arca'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons and is approving the proposed rule change on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares (``Shares'') of the 
ETFS Silver Trust (the ``Trust'') pursuant to NYSE Arca Equities Rule 
8.201. The text of the proposed rule change is available on the 
Exchange's Web site at http://www.nyx.com, at the Exchange's principal 
office and at the Commission's Public Reference Room.

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 self-regulatory organization 
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 those statements may be examined at 
the places specified in Item III below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts 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 the Shares under NYSE Arca 
Equities Rule 8.201. Under NYSE Arca Equities Rule 8.201, the Exchange 
may propose to list and/or trade pursuant to unlisted trading 
privileges (``UTP'') ``Commodity-Based Trust Shares.'' \3\ The 
Commission has previously approved listing on the Exchange under Rule 
8.201 shares of the iShares Silver Trust and the streetTRACKS Gold 
Trust,\4\ and, prior to their listing on the Exchange, approved listing 
of the iShares Silver Trust on the American Stock Exchange LLC (now 
known as ``NYSE Amex LLC'').\5\ In addition, the Commission has 
approved trading of the iShares Silver Trust and the streetTRACKS Gold 
Trust on the Exchange pursuant to UTP.\6\
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    \3\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust.
    \4\ See Securities Exchange Act Release Nos. 58956 (November 14, 
2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124) 
(approving listing on the Exchange of the iShares Silver Trust); 
56224 (August 8, 2007) 72 FR 45850 (August 15, 2007) (SR-NYSEArca-
2007-76) (approving listing on the Exchange of the streetTRACKS Gold 
Trust).
    \5\ See Securities Exchange Act Release No. 53521 (March 20, 
2006), 71 FR 14967 (March 24, 2006) (SR-Amex-2005-72).
    \6\ See Securities Exchange Act Release Nos. 53520 (March 20, 
2006), 71 FR 14977 (March 24, 2006) (SR-PCX-2005-117) (approving 
trading on the Exchange pursuant to UTP of the iShares Silver 
Trust); 51245 (February 23, 2005), 70 FR 10731 (March 4, 2005) (SR-
PCX-2004-117) (approving trading on the Exchange of the streetTRACKS 
Gold Trust pursuant to UTP).
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    The Trust will issue ETFS Silver Shares (``Shares'') which 
represent units of fractional undivided beneficial interest in and 
ownership of the Trust. The investment objective of the Trust is for 
the Shares to reflect the performance of the price of silver bullion, 
less the Trust's expenses.\7\
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    \7\ See the Registration Statement for the ETFS Silver Trust on 
Form S-1, filed with the Commission on March 20, 2009 (No. 333-
156307). The descriptions of the Trust, the Shares and the silver 
market contained herein are based on the Registration Statement.
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    ETFS Services USA LLC is the sponsor of the Trust,\8\ Bank of New 
York Mellon is the trustee of the Trust (``Trustee''),\9\ and HSBC Bank 
U.S.A., N.A.is the custodian of the Trust (``Custodian'').\10\
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    \8\ See e-mail from Michael Cavalier, Chief Counsel, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, Commission, dated 
April 14, 2009.
    \9\ The Trustee is generally responsible for the day-to-day 
administration of the Trust. This includes (1) selling the Trust's 
silver as needed to pay the Trust's expenses (silver sales are 
expected to occur approximately monthly in the ordinary course), (2) 
calculating the net asset value (``NAV'') of the Trust and the NAV 
per Share, (3) receiving and processing orders from Authorized 
Participants to create and redeem Baskets and coordinating the 
processing of such orders with the Custodian and The Depository 
Trust Company (``DTC'') and (4) monitoring the Custodian.
    \10\ The Custodian is responsible for the safekeeping of the 
Trust's silver deposited with it by Authorized Participants in 
connection with the creation of Baskets. The Custodian also 
facilitates the transfer of silver in and out of the Trust through 
silver accounts it will maintain for Authorized Participants and the 
Trust. The Custodian is a market maker, clearer and approved weigher 
under the rules of the London Bullion Market Association (``LBMA'').
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    The Exchange represents that the Shares satisfy the requirements of 
Rule 8.201 and thereby qualify for listing on the Exchange.\11\
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    \11\ With respect to application of Rule 10A-3 (17 CFR 240.10A-
3) under the Act, the Trust relies on the exemption contained in 
Rule 10A-3(c)(7).
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Global Over-The-Counter Market
    According to the Registration Statement, the global trade in silver 
consists of Over-the-Counter (``OTC'') transactions in spot, forwards, 
and options and other derivatives, together with exchange-traded 
futures and options.
    The OTC silver market includes spot, forward, and option and other 
derivative transactions conducted on a principal-to-principal basis. 
While this is a global, nearly 24-hour per day market, its main centers 
are London (the biggest venue), New York and Zurich.
    Market makers, as well as others in the OTC market, trade with each 
other and with their clients on a principal-to-principal basis. All 
risks and issues of credit are between the parties directly involved in 
the transaction. Market makers include the market-making members of the 
LBMA, the trade association that acts as the coordinator for activities 
conducted on behalf of its members and other participants in the London 
bullion market. The eleven market-making members of the LBMA are: 
Barclays Bank plc, Deutsche Bank AG, HSBC Bank USA, N.A. (through its 
London branch), Goldman Sachs International, JPMorgan Chase Bank, 
ScotiaMocatta (a division of the Bank of Nova Scotia), 
Soci[eacute]t[eacute] G[eacute]n[eacute]rale, Mitsui & Co. Precious 
Metals Inc., Bear Stearns Forex Inc., Royal Bank of Canada, and UBS AG. 
The OTC market provides a relatively flexible market in terms of 
quotes, price, size, destinations for delivery and other factors. 
Bullion dealers customize transactions to meet clients' requirements. 
The OTC market has no formal structure and no open-outcry meeting 
place.

[[Page 18772]]

    The main centers of the OTC market are London, New York and Zurich. 
Mining companies, central banks, manufacturers of jewelry and 
industrial products, together with investors and speculators, tend to 
transact their business through one of these market centers. Centers 
such as Dubai and several cities in the Far East also transact 
substantial OTC market business, typically involving jewelry and small 
bars (1 kilogram or less). Bullion dealers have offices around the 
world and most of the world's major bullion dealers are either members 
or associate members of the LBMA. Of the eleven market-making members 
of the LBMA, six offer clearing services. There are a further 59 full 
members, plus a number of associate members around the world. These 
numbers may change from time to time as new members are added and 
existing members drop out.
The London Bullion Market
    Although the market for physical silver is distributed globally, 
most OTC market trades are cleared through London. In addition to 
coordinating market activities, the LBMA acts as the principal point of 
contact between the market and its regulators. A primary function of 
the LBMA is its involvement in the promotion of refining standards by 
maintenance of the ``London Good Delivery Lists,'' which are the lists 
of LBMA accredited melters and assayers of silver. The LBMA also 
coordinates market clearing and vaulting, promotes good trading 
practices and develops standard documentation.\12\
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    \12\ Terms relating to the Trust and the Shares referred to, but 
not defined, herein are defined in the Registration Statement.
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    The term ``loco London'' silver refers to silver physically held in 
London that meets the specifications for weight, dimensions, fineness 
(or purity), identifying marks (including the assay stamp of a LBMA 
acceptable refiner) and appearance set forth in ``The Good Delivery 
Rules for Gold and Silver Bars'' published by the LBMA. Silver bars 
meeting these requirements are described in the Trust's prospectus as 
``London Good Delivery Bars.'' The unit of trade in London is the troy 
ounce, whose conversion between grams is: 1,000 grams = 32.1507465 troy 
ounces and 1 troy ounce = 31.1034768 grams. A London Good Delivery Bar 
is acceptable for delivery in settlement of a transaction on the OTC 
market. A London Good Delivery must contain between 750 ounces and 1100 
ounces of silver with a minimum fineness (or purity) of 999.0 parts per 
1000. A London Good Delivery Bar must also bear the stamp of one of the 
refiners who are on the LBMA-approved list. Unless otherwise specified, 
the silver spot price always refers to that of a London Good Delivery 
Bar. Business is generally conducted over the phone and through 
electronic dealing systems.
    Once daily during London trading hours there is a fix (``London 
Fix'') which provides reference silver prices for that day's trading. 
According to the Registration Statement, many long-term contracts will 
be priced on the basis of the London Fix, and market participants will 
usually refer to this price when looking for a basis for valuations. 
The London Fix is the most widely used benchmark for daily silver 
prices and is quoted by various financial information sources.
    Three market making members of the LBMA conduct the Silver Fixing 
meeting under the chairmanship of The Bank of Nova Scotia-ScotiaMocatta 
by telephone at 12 noon London time each working day. The other two 
members of the Silver Fixing are Deutsche Bank AG and HSBC Bank USA, 
NA.
    Orders are placed either with one of the three fixing members or 
with another bullion dealer who will then be in contact with a fixing 
member during the fixing. The fixing members net-off all orders when 
communicating their net interest at the fixing. The fix begins with the 
fixing chairman suggesting a ``trying price,'' reflecting the market 
price prevailing at the opening of the fix. This is relayed by the 
fixing members to their dealing rooms which have direct communication 
with all interested parties. Any market participant may enter the 
fixing process at any time, or adjust or withdraw his order. The silver 
price is adjusted up or down until all the buy and sell orders are 
matched, at which time the price is declared fixed. All fixing orders 
are transacted on the basis of this fixed price, which is instantly 
relayed to the market through various media. According to the 
Registration Statement, the London Fix is widely viewed as a full and 
fair representation of all market interest at the time of the fix.
Futures Exchanges
    According to the Registration Statement, the most significant 
silver futures exchanges are the COMEX, operated by Commodities 
Exchange, Inc., a subsidiary of New York Mercantile Exchange, Inc. 
(``NYMEX''), and the Tokyo Commodity Exchange (TOCOM). Trading on these 
exchanges is based on fixed delivery dates and transaction sizes for 
the futures and options traded. Trading costs on these exchanges is 
negotiable. The Exchange represents that, as a matter of practice, only 
a small percentage of the futures market turnover ever comes to 
physical delivery of the silver represented by the contracts traded. 
Both COMEX and TOCOM permit trading on margin. COMEX operates through a 
central clearance system. TOCOM has a similar clearance system. In each 
case, the exchange acts as a counterparty for each member for clearing 
purposes.
Market Regulation
    The global silver markets are overseen and regulated by both 
governmental and self-regulatory organizations. In addition, certain 
trade associations have established rules and protocols for market 
practices and participants. In the United Kingdom, responsibility for 
the regulation of the financial market participants, including the 
major participating members of the LBMA, falls under the authority of 
the Financial Services Authority (``FSA'') as provided by the Financial 
Services and Markets Act 2000 (``FSM Act''). Under this act, all UK-
based banks, together with other investment firms, are subject to a 
range of requirements, including fitness and properness, capital 
adequacy, liquidity, and systems and controls.
    The FSA is responsible for regulating investment products, 
including derivatives, and those who deal in investment products. 
Regulation of spot, commercial forwards, and deposits of gold and 
silver not covered by the FSM Act is provided for by The London Code of 
Conduct for Non-Investment Products, which was established by market 
participants in conjunction with the Bank of England.
    The TOCOM has authority to perform financial and operational 
surveillance on its members' trading activities, scrutinize positions 
held by members and large-scale customers, and monitor the price 
movements of futures markets by comparing them with cash and other 
derivative markets' prices. To act as a Futures Commission Merchant 
Broker, a broker must obtain a license from Japan's Ministry of 
Economy, Trade and Industry (METI), the regulatory authority that 
oversees the operations of the TOCOM.
    According to the Registration Statement, the Trust will not trade 
in silver futures contracts on COMEX or on any other futures exchange. 
The Trust will take delivery of physical silver that complies with the 
LBMA silver delivery rules. Because the Trust will not trade in silver 
futures contracts on any futures exchange, the Trust will not be 
regulated by the Commodity Futures Trading Commission (``CFTC'') under 
the Commodity Exchange Act (``CEA'')

[[Page 18773]]

as a ``commodity pool,'' and will not be operated by a CFTC-regulated 
commodity pool operator. Investors in the Trust will not receive the 
regulatory protections afforded to investors in regulated commodity 
pools, nor may COMEX or any futures exchange enforce its rules with 
respect to the Trust's activities. In addition, investors in the Trust 
will not benefit from the protections afforded to investors in silver 
futures contracts on regulated futures exchanges.
Product Description
    The activities of the Trust will be limited to (1) issuing Baskets 
(as defined below) of Shares in exchange for the silver deposited with 
the Custodian as consideration, (2) selling silver as necessary to 
cover the Sponsor's Fee, Trust expenses not assumed by the Sponsor and 
other liabilities, and (3) delivering silver in exchange for Baskets of 
Shares surrendered for redemption. The Trust will not be actively 
managed. It will not engage in any activities designed to obtain a 
profit from, or to ameliorate losses caused by, changes in the price of 
silver.
    The investment objective of the Trust is for the Shares to reflect 
the performance of the price of silver bullion, less the Trust's 
expenses. The Shares are intended to constitute a simple and cost-
effective means of making an investment similar to an investment in 
silver. An investment in physical silver requires expensive and 
sometimes complicated arrangements in connection with the assay, 
transportation, warehousing and insurance of the metal. Although the 
Shares will not be the exact equivalent of an investment in silver, 
they provide investors with an alternative that allows a level of 
participation in the silver market through the securities market.
    According to the Registration Statement, the Trust is not 
registered as an investment company under the Investment Company Act of 
1940 and is not required to register under such act. The Trust will not 
hold or trade in commodity futures contracts regulated by the CEA, as 
administered by the CFTC. According to the Registration Statement, the 
Trust is not a commodity pool for purposes of the CEA, and the Sponsor 
and Trustee are not subject to regulation as a commodity pool operator 
or a commodity trading adviser in connection with the Shares.
Creation and Redemption Process
    Issuances of Shares will be made only in baskets of 100,000 shares 
or multiples thereof (``Baskets'').\13\ The Trust will issue and redeem 
Baskets daily, by or through registered broker-dealers that have 
entered into participant agreements (each, an ``Authorized 
Participant'') \14\ with the Trustee. The creation and redemption of 
Baskets will only be made in exchange for the delivery to the Trust or 
the distribution by the Trust of the amount of silver and any cash 
represented by the Baskets being created or redeemed, the amount of 
which will be based on the combined net asset value (``NAV'') of the 
number of Shares included in the Baskets being created or redeemed 
determined on the day the order to create or redeem Baskets is properly 
received.
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    \13\ Initially, each Share represents one ounce of silver.
    \14\ An ``Authorized Participant'' is a person who (1) is a 
registered broker-dealer or other securities market participant such 
as a bank or other financial institution which is not required to 
register as a broker-dealer to engage in securities transactions, 
(2) is a participant in DTC, (3) has entered into a Participant 
Agreement with the Trustee and the Sponsor, and (4) has established 
an Authorized Participant Unallocated Account with the Custodian.
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    The total deposit required to create each Basket (the ``Creation 
Basket Deposit'') will be an amount of silver and cash, if any, that is 
in the same proportion to the total assets of the Trust (net of 
estimated accrued but unpaid fees, expenses and other liabilities) on 
the date the order to purchase is properly received as the number of 
Shares to be created under the purchase order is in proportion to the 
total number of Shares outstanding on the date the order is received. 
The Sponsor anticipates that in the ordinary course of the Trust's 
operations a cash deposit will not be required for the creation of 
Baskets.\15\
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    \15\ The amount of any required cash deposit is determined as 
follows. The estimated unpaid fees, expenses and liabilities of the 
Trust accrued through the purchase order date are subtracted from 
any cash held or receivable by the Trust as of the purchase order 
date. The remaining amount is divided by the number of Shares 
outstanding immediately before the purchase order date and then 
multiplied by the number of Shares being created pursuant to the 
purchase order. If the resulting amount is positive, this amount is 
the required cash deposit. If the resulting amount is negative, the 
amount of the required silver deposit will be reduced by the number 
of fine ounces of silver equal in value to that resulting amount, 
determined at the price of silver used in calculating the NAV of the 
Trust on the purchase order date.
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    The amount of the required silver deposit is determined by dividing 
the number of ounces of silver held by the Trust by the number of 
Baskets outstanding, as adjusted for estimated accrued but unpaid fees 
and expenses, as described in the Registration Statement.
    The Shares will not be individually redeemable but will only be 
redeemable in Basket size. To redeem, an Authorized Participant will be 
required to accumulate enough Shares to constitute a Basket (i.e., 
100,000 Shares). Redeeming Authorized Participants will receive an 
allocation of silver to their accounts, in accordance with procedures 
set forth in the Registration Statement. Shares will be registered in 
book-entry form through DTC.
    The Exchange states that the Creation Basket Deposit necessary for 
the creation of a Basket will slightly diminish each day depending on 
the Trust's daily expense accrual and the market price of silver. The 
initial Creation Basket Deposit will be a specified number of ounces of 
silver (with each Share initially representing one ounce of silver). On 
each day that the Exchange is open for regular trading, The Bank of New 
York Mellon will adjust the quantity of silver constituting the 
Creation Basket Deposit as appropriate to reflect sales of silver 
needed for payment of the Sponsor's fee (which is similar to an expense 
ratio) and any extraordinary expenses or liabilities not assumed by the 
Sponsor. The Bank of New York Mellon will determine the Creation Basket 
Deposit for a given business day by subtracting the daily expense 
accrual from the previous day's total ounces of silver in the Trust and 
then dividing the number of Baskets outstanding. Fractions of an ounce 
of silver smaller than .001 will be disregarded.
    The creation/redemption process in connection with the Shares is an 
in-kind exchange of silver for Shares, rather than an exchange of 
silver for cash. Except for the accrual of the Sponsor's fee or 
extraordinary expenses or liabilities, the process is based entirely on 
the delivery of silver in exchange for Shares. Thus, throughout each 
business day, the Exchange states that the actual number of ounces 
required for the Creation Basket Deposit usually will not change even 
though the value of the Creation Basket Deposit may change based on the 
market price of silver.
Valuation of Silver, Definition of Net Asset Value and Adjusted Net 
Asset Value (``ANAV'')
    According to the Registration Statement, as of the London Fix on 
each day that the Exchange is open for regular trading or, if there is 
no London Fix on such day or the London Fix has not been announced by 
12 noon New York time on such day, as of 12 noon New York time on such 
day (the ``Evaluation Time''), the Trustee will

[[Page 18774]]

evaluate the silver held by the Trust and determine both the ANAV and 
the NAV of the Trust.
    At the Evaluation Time, the Trustee will value the Trust's silver 
on the basis of that day's London Fix or, if no London Fix is made on 
such day or has not been announced by the Evaluation Time, the next 
most recent London Fix determined prior to the Evaluation Time will be 
used, unless the Trustee, in consultation with the Sponsor, determines 
that such price is inappropriate as a basis for evaluation. In the 
event the Trustee and the Sponsor determine that the London Fix or last 
prior London Fix is not an appropriate basis for evaluation of the 
Trust's silver, they shall identify an alternative basis for such 
evaluation to be employed by the Trustee.\16\
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    \16\ The Exchange, pursuant to Rule 7.12, has discretion to halt 
trading in the Shares if the London Fix is not determined or 
available for an extended time period based on extraordinary 
circumstances or market conditions.
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    Once the value of the silver has been determined, the Trustee will 
subtract all estimated accrued but unpaid fees, expenses and other 
liabilities of the Trust from the total value of the silver and all 
other assets of the Trust (other than any amounts credited to the 
Trust's reserve account, if established). The resulting figure is the 
ANAV of the Trust. The ANAV of the Trust is used to compute the 
Sponsor's Fee.
    To determine the Trust's NAV, the Trustee will subtract the amount 
of estimated accrued but unpaid fees computed by reference to the ANAV 
of the Trust and to the value of the silver held by the Trust from the 
ANAV of the Trust. The resulting figure is the NAV of the Trust. The 
Trustee will also determine the NAV per Share by dividing the NAV of 
the Trust by the number of the Shares outstanding as of the close of 
trading on the Exchange (which includes the net number of any Shares 
created or redeemed on such evaluation day).
    Shortly after 4 p.m. E.T. each business day, the Trust will 
disseminate the NAV for the Shares and the Creation Basket Deposit (for 
orders properly placed by 4 during the day). The Creation Basket 
Deposit and NAV will be publicly available simultaneously to all market 
participants and will be communicated to all Authorized Participants 
via facsimile or electronic mail message and on the Trust's Web site. 
The Exchange also will disclose the NAV on its Web site.
Liquidity
    The Exchange states that the amount of the discount or premium in 
the trading price relative to the NAV per Share may be influenced by 
the non-concurrent trading hours between the major silver markets and 
the Exchange. While the Shares will trade on the Exchange from 4 a.m. 
to 8 p.m. E.T., liquidity in the OTC market for silver will be reduced 
after the close of the major world silver markets, including London, 
Zurich, and the COMEX. As a result, trading spreads and the resulting 
premium or discount on the Shares may widen as a result of reduced 
liquidity.
Availability of Information Regarding Silver Prices
    Although the spot price of silver will not be disseminated over the 
facilities of CTA, the last sale price for the Shares, as is the case 
for all equity securities traded on the Exchange will be disseminated 
over the CTA's Network B. In addition, there is a considerable amount 
of silver \17\ price and market information available on public Web 
sites and through professional and subscription services. Investors may 
obtain on a 24-hour basis silver pricing information based on the spot 
price of an ounce of silver from various financial information service 
providers, such as Reuters and Bloomberg. In addition, the daily London 
silver fix is also disseminated by various market data vendors and is 
available from the LBMA's Web site. Reuters and Bloomberg provide at no 
charge on their Web sites delayed information regarding the spot price 
of silver and last sale prices of silver futures contracts and related 
options, as well as information about news and developments in the 
silver market. Reuters and Bloomberg also offer a professional service 
to subscribers for a fee that provides information on silver prices 
directly from market participants.\18\ Complete real-time data for 
silver futures contracts and options prices traded on the COMEX is 
available by subscription from Reuters and Bloomberg and also on a 
delayed basis free of charge on the NYMEX Web site at http://
www.nymex.com. The Exchange also notes that there are a variety of 
other public Web sites providing information on silver, ranging from 
those specializing in precious metals to sites maintained by major 
newspapers, such as The Wall Street Journal. Current silver spot prices 
are also generally available with bid/ask spreads from silver bullion 
dealers.\19\
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    \17\ The period of greatest liquidity in the silver market is 
typically that time of the day when trading in the European time 
zones overlaps with trading in the United States, which is when OTC 
market trading in New York, London, Zurich and other centers 
coincides with futures and options trading on the COMEX division of 
the NYMEX. This period lasts for approximately four hours each New 
York business day morning.
    \18\ In addition, ICAP's EBS platform also provides an 
electronic trading platform to institutions such as bullion banks 
and dealers for the trading of spot silver, as well as a feed of 
live streaming prices to market data subscribers. Approximately 1.5 
million ounces in gold, 10 million ounces in silver and $190 billion 
a day in spot foreign exchange transactions is traded each day over 
the EBS trading platform. See http://www.icap.com.
    \19\ The silver spot price is indicative only, constructed using 
a variety of sources to compile a spot price that is intended to 
represent a theoretical quote that might be obtained from a market 
maker from time to time.
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Availability of Information Regarding Shares
    The Web site for the Trust, which will be publicly accessible at no 
charge, will contain the following information: (a) The prior business 
day's NAV and the reported closing price; (b) the mid-point of the bid-
ask price in relation to the NAV as of the time the NAV is calculated 
(the ``Bid-Asked 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,\20\ within appropriate ranges for each of the four 
previous calendar quarters; (e) the Creation Basket Deposit; (f) the 
Prospectus; and (g) other applicable quantitative information.
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    \20\ The bid-ask price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV.
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    As described above, the NAV for the Trust will be calculated and 
disseminated daily.
    The Exchange also will disseminate for the Trust on a daily basis 
by means of CTA/CQ High Speed Lines information with respect to the 
Indicative Trust Value (as discussed below), recent NAV, and shares 
outstanding. The Exchange will also make available on its Web site 
daily trading volume, closing prices, NAV and the Creation Basket 
Deposit. The London silver fix price is readily available from the LBMA 
at http://www.lbma.org.uk, automated quotation systems, published or 
other public sources, or online information services such as Bloomberg 
or Reuters. In addition, the Exchange will provide a hyperlink on its 
Web site at http://www.nyx.com to the Trust's Web site at http://
www.etfsecurities.com.
Dissemination of Indicative Trust Value
    The Trustee will calculate the NAV of the Trust once each trading 
day. In addition, the Trust will cause to be made available on a daily 
basis the required amount of silver to be

[[Page 18775]]

deposited in connection with the issuance of Shares in Basket size.
    In order to provide updated information relating to the Trust for 
use by investors, professionals, and Authorized Persons wishing to 
create or redeem Shares, the Exchange will disseminate through the 
facilities of CTA an updated Indicative Trust Value (``ITV''). The 
Indicative Trust Value will be disseminated on a per Share basis at 
least every 15 seconds during the Exchange's Core Trading Session (9:30 
a.m. to 4 p.m. ET). The Indicative Trust Value, as calculated by the 
Exchange or a third party financial data provider, will be calculated 
based on the amount of silver required for creations and redemptions 
and a price of silver derived from updated bids and offers indicative 
of the spot price of silver from silver dealer pricing.\21\ The ITV on 
a per Share basis disseminated during the Exchange's Core Trading 
Session should not be viewed as a real time update of the NAV, which is 
calculated only once a day.
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    \21\ See e-mail from Michael Cavalier, Chief Counsel, NYSE Arca, 
to Christoper W. Chow, Special Counsel, Commission, dated April 9, 
2009.
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    The Exchange believes that dissemination of the Indicative Trust 
Value based on the amount of silver required for a Basket Aggregation 
provides additional information that is not otherwise available to the 
public and is useful to professionals and investors in connection with 
Shares trading on the Exchange or the creation or redemption of Shares.
Termination Events
    The Trustee will terminate and liquidate the Trust if the aggregate 
market capitalization of the Trust, based on the closing price for the 
Shares, was less than $350 million (as adjusted for inflation) at any 
time after the first anniversary after the Trust's formation and the 
Trustee receives, within six months after the last of those trading 
days, notice from the Sponsor of its decision to terminate the Trust. 
The Trustee will terminate the Trust if the CFTC determines that the 
Trust is a commodities pool under the CEA. The Trustee may also 
terminate the Trust upon the agreement of the owners of beneficial 
interests in the Shares (``Shareholders'') owning at least 75% of the 
outstanding Shares. Additional termination events are described in the 
Registration Statement.
Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in Rule 8.201(d) for 
initial and continued listing of the Shares.
    It is anticipated that a minimum of 100,000 Shares will be required 
to be outstanding at the start of trading. The minimum number of shares 
required to be outstanding is comparable to requirements that have been 
applied to previously listed shares of the iShares Silver Trust, the 
streetTRACKS Gold Trust, the iShares COMEX Gold Trust and exchange-
traded funds. It is anticipated that the initial price of a Share will 
be approximately $10.00. The Exchange believes that the anticipated 
minimum number of Shares outstanding at the start of trading is 
sufficient to provide adequate market liquidity.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Fund 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 all trading sessions. The minimum trading 
increment for Shares on the Exchange will be $0.01.
    Further, NYSE Arca Equities Rule 8.201 sets forth certain 
restrictions on ETP Holders acting as registered Market Makers in the 
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule 
8.201(h), an ETP Holder acting as a registered Market Maker in the 
Shares is required to provide the Exchange with information relating to 
its trading in the underlying silver, related futures or options on 
futures, or any other related derivatives. NYSE Arca Equities Rule 
8.201(i) prohibits an 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 underlying silver, 
related futures or options on futures or any other related derivative 
(including the Shares). In addition, NYSE Arca Equities Rule 8.201(g) 
prohibits an ETP Holder acting as a registered Market Maker in the 
Shares from being affiliated with a market maker in the underlying 
silver, related futures or options on futures or any other related 
derivative unless adequate information barriers are in place, as 
provided in NYSE Arca Equities Rule 7.26.
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder, as well as 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 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.
    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 conditions in the underlying silver 
market have caused disruptions and/or lack of trading, 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.\22\
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    \22\ See NYSE Arca Equities Rule 7.12.
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Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (including Commodity-Based 
Trust Shares) 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 and applicable federal securities laws.
    The Exchange's current trading surveillance focuses 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. Also, pursuant to NYSE 
Arca Equities Rule 8.201(h), the Exchange is able to obtain information 
regarding trading in the Shares and the underlying silver, silver 
futures contracts, options on silver futures, or any other silver 
derivative, through ETP Holders acting as registered Market Makers, in 
connection with such ETP Holders' proprietary or customer trades which 
they effect on any relevant market. In addition, the Exchange may 
obtain trading information via the Intermarket Surveillance Group 
(``ISG'')

[[Page 18776]]

from other exchanges who are members of the ISG.\23\ Also, the Exchange 
has an Information Sharing Agreement with NYMEX for the purpose of 
sharing information in connection with trading in or related to COMEX 
silver futures contracts.
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    \23\ A list of ISG members is available at http://
www.isgportal.org. The Exchange notes that TOCOM is not an ISG 
member and the Exchange does not have in place a comprehensive 
surveillance sharing agreement with such market.
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Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Baskets (including noting that 
Shares are not individually redeemable and that silver is a wasting 
asset); (2) NYSE Arca Equities Rule 9.2(a), 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 ITV is disseminated; (4) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; (5) the 
possibility that trading spreads and the resulting premium or discount 
on the Shares may widen as a result of reduced liquidity of silver 
trading during the Core and Late Trading Sessions after the close of 
the major world silver markets, and (6) trading information. For 
example, the Information Bulletin will advise ETP Holders, prior to the 
commencement of trading, of the prospectus delivery requirements 
applicable to the Trust. The Exchange notes that investors purchasing 
Shares directly from the Trust (by delivery of the Creation Basket 
Deposit) will receive a prospectus. ETP Holders purchasing Shares from 
the Trust for resale to investors will deliver a prospectus to such 
investors.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also reference the fact that 
there is no regulated source of last sale information regarding 
physical silver, that the Commission has no jurisdiction over the 
trading of silver as a physical commodity, and that the CFTC has 
regulatory jurisdiction over the trading of silver futures contracts 
and options on silver futures contracts.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \24\ of 
the Act in general and furthers the objectives of Section 6(b)(5) \25\ 
in particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transaction in 
securities, and, in general to protect investors and the public 
interest. The Exchange believes that the proposal will facilitate the 
listing and trading of an additional type of commodity-based product 
that will enhance competition among market participants, to the benefit 
of investors and the marketplace.
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    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2009-28 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2009-28. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of 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 publicly available. All 
submissions should refer to File Number SR-NYSEArca-2009-28 and should 
be submitted on or before May 15, 2009.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\26\ In particular, the Commission believes that the proposal 
is consistent with Section 6(b)(5) \27\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transaction in securities, and, in general to protect investors and the 
public interest. The listing and trading of an additional type of

[[Page 18777]]

commodity-based product should enhance competition among market 
participants and thereby benefit investors and the marketplace.
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    \26\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \27\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\28\ which sets forth Congress's finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. The Exchange will make 
available, through the facilities of the CTA, the last sale price 
information for the Shares. In addition, the Exchange will disseminate 
each day through the facilities of the CTA the number of Shares 
outstanding and the ITV on a per-Share basis at least every 15 seconds 
from 9:30 a.m. to 4 p.m. ET. The Web site for the Trust, which will be 
publicly accessible, contains information related to the NAV, including 
the Bid-Asked Price, the Creation Basket Deposit, calculation 
information and data related to the premium or discount of the Bid-
Asked Price against the NAV, the Prospectus, and other applicable 
quantitative information, including trading volume data, NAV, and 
closing prices. Shortly after 4 p.m. ET each business day, the Trust 
will disseminate the NAV for the Shares, and the Creation Basket 
Deposit. Information on silver prices and markets is available on 
public Web sites and through professional and subscription services, 
and investors may obtain on a 24-hour basis silver pricing information 
based on the spot price of an ounce of silver from various financial 
information service providers. Complete real-time data for silver 
futures contracts and options prices traded on the COMEX is available 
by subscription from information services such as Reuters or Bloomberg, 
and information on silver is available from published or other public 
sources. NYMEX also provides delayed futures and options information 
free of charge.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    Furthermore, the Commission believes that the proposal to list and 
trade the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately. 
The Commission notes that the Exchange has represented that the Trustee 
will calculate, and the Trust will disseminate, the NAV per Share 
daily, and make the NAV available to all market participants at the 
same time. In addition, NYSE Arca Equities Rule 8.201(i) provides that, 
in connection with trading in an underlying physical commodity, related 
commodity futures or options on commodity futures, or any other related 
commodity derivative, including Commodity-Based Trust Shares, an ETP 
Holder acting as a Market Maker (as defined in NYSE Arca Equities Rule 
1.1(u)) in the Shares is restricted from using any material non-public 
information received from any person associated with such ETP Holder 
regarding by such person in the underlying physical commodity, related 
commodity futures or options on commodity futures, or other related 
commodity derivatives.
    The Commission also believes that the Exchange's trading halt rules 
are reasonably designed to prevent trading in the Shares when 
transparency is impaired. NYSE Arca Equities Rule 8.201(e)(2) provides 
that, when the Exchange is the listing market, if the value of the 
underlying commodity or ITV is no longer calculated or available on at 
least a 15-second delayed basis, the Exchange would consider suspending 
trading in the Shares. The Exchange has further represented that 
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 conditions in the underlying silver market have caused 
disruptions and/or lack of trading; 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. NYSE Arca Equities 
Rule 8.201(e)(2) also provides that the Exchange may seek to delist the 
Shares in the event the value of the underlying silver or the ITV is no 
longer calculated or available as required.
    The Commission further believes that the trading rules and 
procedures to which the Shares will be subject pursuant to this 
proposal are consistent with the Act. The Exchange has represented that 
any securities listed pursuant to this proposal will be deemed equity 
securities, and subject to existing Exchange rules governing the 
trading of equity securities.
    In support of this proposal, the Exchange has made representations, 
including:
    (1) The Exchange's surveillance procedures are adequate to deter 
and detect violations of Exchange rules and applicable federal 
securities laws.
    (2) The Exchange will distribute an Information Bulletin, the 
contents of which are more fully described above, to ETP Holders in 
connection with the trading of the Shares.
    This approval order is conditioned on the Exchange's 
representations.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\29\ for approving the proposed rule change prior to the 30th 
day after the date of publication of notice in the Federal Register. 
The Exchange's proposal to list and trade the Shares does not present 
any novel or significant regulatory issues. Previously, the Commission 
approved a proposal by the Exchange to list and trade shares of another 
trust that holds silver bullion pursuant to NYSE Arca Equities Rule 
8.201.\30\
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    \29\ 15 U.S.C. 78s(b)(2).
    \30\ See Securities Exchange Act Release No. 58956 (November 14, 
2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124) 
(approving listing and trading of shares of the iShares Silver 
Trust). See also Securities Exchange Act Release No. 53521 (March 
20, 2006); 71 FR 14967 (March 24, 2006) (SR-Amex-2005-072) 
(approving listing and trading of shares of the iShares Silver Trust 
on the American Stock Exchange LLC).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\31\ that the proposed rule change (SR-NYSEArca-2009-28) be, and it 
hereby is, approved on an accelerated basis.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-9385 Filed 4-23-09; 8:45 am]

BILLING CODE 8010-01-P
