Self-Regulatory Organizations; Order Granting Approval of Proposed Rule Change and Amendment Nos. 2, 3 and 4 and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 5 by the American Stock Exchange LLC Relating to the Listing and Trading of the iShares® COMEX Gold Trust, 3749-3756 [E5-283]
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Federal Register / Vol. 70, No. 16 / Wednesday, January 26, 2005 / Notices
facilitating transactions in securities,
and, in general, protect investors and
the public interest consistent with
Section 6(b)(5) of the Act.26
The requirements of Section 107A of
the Company Guide were designed to
address the concerns attendant to the
trading of hybrid securities, like the
Notes. For example, Section 107A of the
Company Guide provides that only
issuers satisfying substantial asset and
equity requirements may issue
securities such as the Notes. Amex
represents that Lehman meets these
requirements. In addition, the
Exchange’s ‘‘Other Securities’’ listing
standards further require that the Notes
have a market value of at least $4
million.27 The Commission also notes
that the Notes will be registered under
Section 12 of the Act.28 By imposing the
hybrid listing standards and the
suitability, disclosure, and compliance
requirements noted in the proposal
above, the Commission believes Amex
has addressed adequately the potential
problems that could arise from the
hybrid nature of the Notes.
In approving the product, the
Commission recognizes that the Index is
a modified capitalization-weighted
index of 2000 stocks traded on NYSE,
Nasdaq and Amex. The Commission
notes that the Index is broadly
diversified and that the overwhelming
majority of the stocks that comprise the
Index are not inactively traded. Thus,
the Commission believes that the listing
and trading of the Notes should not
unduly impact the market for the
underlying securities comprising the
Index or raise manipulative concerns.
Moreover, all of the component stocks
are either listed or traded on, or traded
through the facilities of, U.S. securities
markets.
The Commission also believes that
any concerns that a broker-dealer, such
as Lehman, or a subsidiary providing a
hedge for the issuer, will incur undue
position exposure are minimized by the
size of the Notes issuance in relation to
the net worth of Lehman.29
26 15 U.S.C. 78f(b)(5). In approving this rule, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
27 See Company Guide Section 107A.
28 15 U.S.C. 781.
29 See Securities Exchange Act Release Nos.
44913 (October 9, 2001), 66 FR 52469 (October 15,
2001) (SR–NASD–2001–73) (order approving the
listing and trading of notes whose return is based
on the performance of the Nasdaq–100 Index);
44483 (June 27, 2001), 66 FR 35677 (July 6, 2001)
(SR–Amex–2001–40) (order approving the listing
and trading of notes whose return is based on a
portfolio of 20 securities selected from the Amex
Institutional Index); and 37744 (September 27,
1996), 61 FR 52480 (October 7, 1996) (SR–Amex–
96–27) (order approving the listing and trading of
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Finally, the Commission notes that
the value of the Index will be widely
disseminated at least once every fifteen
seconds throughout the trading day. The
Exchange represents that the Index will
be determined, calculated and
maintained solely by Frank Russell.
The Commission finds good cause for
approving the proposed rule change, as
amended, prior to the 30th day after the
date of publication of the notice of filing
thereof in the Federal Register. The
Exchange has requested accelerated
approval because this product is similar
to several other instruments currently
listed and traded on the Amex.30 The
Commission believes that the Notes will
provide investors with an additional
investment choice and that accelerated
approval of the proposal will allow
investors to begin trading the Notes
promptly. Additionally, the Notes will
be listed pursuant to Amex’s existing
hybrid security listing standards as
described above. Therefore, the
Commission finds good cause,
consistent with Section 19(b)(2) of the
Act,31 to approve the proposal on an
accelerated basis.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,32 that the
proposed rule change, as amended (SR–
Amex–2004–99), is hereby approved on
an accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.33
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–278 Filed 1–25–05; 8:45 am]
3749
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51058; File No. SR–Amex–
2004–38]
Self-Regulatory Organizations; Order
Granting Approval of Proposed Rule
Change and Amendment Nos. 2, 3 and
4 and Notice of Filing and Order
Granting Accelerated Approval to
Amendment No. 5 by the American
Stock Exchange LLC Relating to the
Listing and Trading of the iShares
COMEX Gold Trust
January 19, 2005.
I. Introduction
On May 24, 2004, the American Stock
Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade under new
Amex Rules 1200A et seq. iShares
COMEX Gold Trust Shares (‘‘Gold
Shares’’). On November 9, 2004, Amex
amended its proposal; however, the
Exchange withdrew this amendment on
November 17, 2004. On November 10,
2004 the Exchange submitted a second
amendment.3 On November 16, 2004,
the Exchange submitted a third
amendment.4 On December 1, 2004, the
Exchange submitted a fourth
amendment.5 The proposed rule change,
as amended, was published for
comment in the Federal Register on
December 9, 2004.6 The Commission
received no comment letters regarding
the proposed rule change. On January 7,
2005, the Exchange submitted a fifth
amendment.7 This notice and order
BILLING CODE 8010–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b-4.
3 See Amendment No. 2, dated November 10,
2004 (‘‘Amendment No. 2’’). In Amendment No. 2,
the Exchange revised the proposed rule text and
corresponding description. Amendment No. 2
replaced Amex’s original filing in its entirety.
4 See Amendment No. 3, dated November 16,
2004 (‘‘Amendment No. 3’’). In Amendment No. 3,
the Exchange proposed clarifying changes to certain
aspects of Amendment No. 2 and modified the
proposed rule text.
5 See Amendment No. 4, dated December 1, 2004
(‘‘Amendment No. 4’’). In Amendment No. 4, the
Exchange provided additional description of the
creation and redemption process for the Gold Trust
shares and made clarifying changes to the proposed
rule text. Amendment No. 4 replaced Amex’s
amended proposal in its entirety.
6 See Securities Exchange Act Release No. 50792
(December 3, 2004), 69 FR 71446 (‘‘Notice’’).
7 See Amendment No. 5, dated January 7, 2005
(‘‘Amendment No. 5’’). In Amendment No. 5, the
Exchange proposed changes to Commentary .01 to
Rule 1202A for the purpose of clarifying that the
Exchange will submit separate rule filings under
2 17
notes whose return is based on a weighted portfolio
of healthcare/biotechnology industry securities).
30 See supra note 24.
31 15 U.S.C. 78f(b)(5) and 78s(b)(2).
32 Id.
33 17 CFR 200.30–3(a)(12).
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Federal Register / Vol. 70, No. 16 / Wednesday, January 26, 2005 / Notices
approves the Exchange’s rule change,
and Amendments 2, 3 and 4 thereto,
solicits comment from interested
persons on Amendment No. 5, and
approves Amendment No. 5 on an
accelerated basis.
II. Description of Proposal
The Amex proposes to add new
Exchange Rules 1200A et seq. for the
purpose of permitting the listing and
trading of Trust Issued Receipts 8 based
on commodity interests (‘‘CommodityBased Trust Shares’’), and to amend
Sections 140 and 141 of the Amex
Company Guide regarding original and
annual listing fees applicable to such
shares. Amex Rule 1201A will permit
the Exchange to list and trade
Commodity-Based Trust Shares. Under
the rule, for each series of CommodityBased Trust Shares, the Exchange will
submit for Commission review and
approval a filing pursuant to Section
19(b) of the Act.9 Proposed Amex Rule
1202A sets forth initial and continued
listing and trading criteria for
Commodity-Based Trust Shares.10
section 19(b)(2) of the Act in connection with the
listing and trading of each series of CommodityBased Trust Shares. Further, in Amendment No. 5
the Exchange represented that (1) as provided in the
Registration Statement to the Trust, the trustee will
charge a transaction fee in connection with the
redemption and/or creation of Baskets; (2) Barclays
Capital, Inc., the Initial Purchaser, will purchase
150,000 Shares of the Trust to compose the initial
Baskets; and (3) the Exchange’s surveillance
procedures are adequate to properly monitor the
trading of the Shares.
8 A Trust Issued Receipt or ‘‘TIR’’ is defined in
Exchange Rule 1200(b) as a security (a) that is
issued by a trust that holds specified securities
deposited with the trust; (b) that, when aggregated
in some specified minimum number, may be
surrendered to the trust by the beneficial owner to
receive the securities; and (c) that pays beneficial
owners dividends and other distributions on the
deposited securities, if any are declared and paid
to the trustee by an issuer of the deposited
securities. Under Amex Rule 1201, the Exchange
may approve for listing and trading TIRs based on
one or more securities. The Exchange defines a
‘‘security’’ or ‘‘securities’’ to include stocks, bonds,
options, and other interests or instruments
commonly known as securities. See Article I,
section 3(j) of the Amex Constitution.
9 15 U.S.C. 78s(b). Because of the structure of the
Gold Trust, representing an interest in underlying
gold, the Exchange’s existing listing and trading
rules that permit the listing and trading of TIRs,
pursuant to Rule 19b–4(e) under the Act, 17 CFR
240.19b–4(e), cannot be used to list this product.
10 Proposed Rule 1202A for Commodity-Based
Trust Shares tracks but is not identical to current
Rule 1202 relating to TIRs. The initial listing
standards set forth in Rule 1202(a) provide that the
Exchange establish a minimum number of TIRs
required to be outstanding at the time of the
commencement of trading on the Exchange. As set
forth in the section ‘‘Criteria for Initial and
Continued Listing,’’ the Exchange represents that
the minimum number of Gold Shares outstanding
at the time of trading will be 150,000. See
Amendment No. 5, supra note 7.
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19:33 Jan 25, 2005
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The Amex initially proposes to list
iShares COMEX 11 Gold Trust (the ‘‘Gold
Trust’’ or ‘‘Trust’’) shares that represent
beneficial ownership interests in the net
assets of a trust that holds gold bullion.
As explained further herein, Gold
Shares will be issued in baskets.
Initially, each basket of 50,000 shares
will correspond to 5,000 troy ounces of
gold. Thus, each Gold Share will
correspond to one-tenth of a troy ounce
of gold.12 The Gold Shares will conform
to the initial and continued listing
criteria under proposed Rule 1202A.
The Gold Trust will be formed under a
depositary trust agreement among Bank
of New York (‘‘BNY’’), the Trustee;
Barclays Global Investors, N.A.
(‘‘Barclays’’), the Sponsor; all
depositors; 13 and the holders of Gold
Shares.14
In effect, purchasing Gold Shares will
provide investors a new mechanism to
participate in the gold market. The
Trustee will not actively manage the
gold held by the Trust. Information
about the liquidity, depth, and pricing
mechanisms of the international gold
market, management and structure of
the Trust, and description of the Gold
Shares follows below.
A. Description of the Gold Market
The global trade in gold consists of
over-the-counter (‘‘OTC’’) transactions
in spot, forwards, and options and other
derivatives, together with exchangetraded futures and options on futures. In
its filing with the Commission, the
Exchange made the following
representations regarding the worldwide
gold market.15
1. The OTC Market
The OTC market trades on a 24-hour
continuous basis and accounts for the
substantial portion of global gold
trading. Liquidity in the OTC market
can vary from time to time during the
course of the 24-hour trading day.
Fluctuations in liquidity are reflected in
adjustments to dealing spreads—the
differential between a dealer’s buy and
sell prices. The period of greatest
liquidity in the gold market is typically
11 COMEX is a division of the New York
Mercantile Exchange, Inc. (‘‘NYMEX’’) where gold
futures contracts are traded.
12 The amount of gold associated with each basket
(and individual Gold Share) is expected to decrease
over time as the Trust incurs and pays maintenance
fees and other expenses.
13 Barclays Capital, Inc., the Initial Purchaser, will
purchase 150,000 Shares of the Trust to compose
the initial Baskets. See Amendment No. 5, supra
note 7.
14 The Trust is not an investment company as
defined in section 3(a) of the Investment Company
Act of 1940 (the ‘‘1940 Act’’).
15 For more information on the gold market and
gold supply and demand, see Notice, supra note 6.
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that time of day when trading in the
European time zone overlaps with
trading in the United States. This occurs
when the OTC market trading in
London, New York, and other centers
coincides with futures and options
trading on the COMEX.16 This period
lasts for approximately four (4) hours
each New York business day morning.
The OTC market has no formal
structure and no open-outcry meeting
place. The main centers of the OTC
market are London, New York, and
Zurich. Bullion dealers have offices
around the world, and most of the
world’s major bullion dealers are either
members or associate members of the
London Bullion Market Association
(‘‘LBMA’’), a trade association of
participants in the London Bullion
market.
The Exchange states that there are no
authoritative published figures for
overall world-wide volume in gold
trading. There are certain published
sources that do suggest the significant
size of the overall market. The LBMA
publishes statistics compiled from the
five (5) members offering clearing
services.17 The Exchange notes that the
monthly average daily volume figures
published by the LBMA for 2003 range
from a high of 19 million to a low of
13.6 million troy ounces per day.
Through September 2004, the monthly
average daily volume has ranged from a
high of 17 million to a low of 12.4
million. The Exchange also notes that
the COMEX publishes price and volume
statistics for transactions in contracts for
the future delivery of gold. COMEX
figures for 2003 indicate that the average
daily volume for gold futures and
options contracts was 4.89 million
(48,943 contracts) and 1.7 million
(17,241 contracts) troy ounces per day,
respectively. Through October 2004, the
average daily volume for gold futures
16 The open outcry trading hours of the COMEX
gold futures contract is from 8:20 a.m. to 1:30 p.m.
New York time Monday through Friday. NYMEX
ACCESS(), an electronic trading system, is open
for trading on COMEX gold futures contracts from
2 p.m. Monday afternoon until 8 a.m. Friday
morning New York time; and from 7 p.m. Sunday
night until Monday morning at 8 a.m. New York
time. See Amendment No. 4, supra note 5, at note
4.
17 Information regarding clearing volume
estimates by the LBMA can be found at https://
www.lbma.org.uk/clearing_table.htm. The three
measures published by LBMA are: Volume, the
amount of metal transferred on average each day
measured in millions of troy ounces; value,
measured in U.S. dollars, using the monthly average
London PM fixing price; and the number of
transfers, which is the average number recorded
each day. The statistics exclude allocated and
unallocated balance transfers where the sole
purpose is for overnight credit and physical
movements arranged by clearing members in
locations other than London.
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Federal Register / Vol. 70, No. 16 / Wednesday, January 26, 2005 / Notices
and options was 6.08 million (60,817
contracts) and 2.01 million (20,173
contracts), respectively.18
2. Futures Exchanges
The Exchange states that the most
significant gold futures exchanges are
the COMEX division of the NYMEX and
the Tokyo Commodity Exchange
(‘‘TOCOM’’).19 Trading on these
exchanges is based on fixed delivery
dates and transaction sizes for the
futures and options contracts traded.
The daily settlement price for COMEX
gold futures contracts is publicly
available on the NYMEX Web site at
https://www.nymex.com.20 The Exchange
on its Web site at https://www.amex.com
will include a hyperlink to the NYMEX
Web site for the purpose of disclosing
gold futures contract pricing. In
addition, the Exchange represents that
COMEX gold futures prices, options on
futures quotes, and last sale information
are widely disseminated through a
variety of market data vendors
worldwide, including Bloomberg and
Reuters. The Exchange further
represents that complete real-time data
for COMEX gold futures and options is
available by subscription from Reuters
and Bloomberg. The NYMEX also
provides delayed futures and options
information on current and past trading
sessions and market news free of charge
on its Web site at https://
www.nymex.com. The contract
18 Information regarding average daily volume
estimates by the COMEX can be found at https://
www.nymex.com/jsp/
markets.md_annual_volume6.jsp#2. The statistics
are based on gold futures contracts, each of which
relates to 100 troy ounces of gold.
19 The Exchange notes that there are other gold
exchange markets, such as the Istanbul Gold
Exchange, the Shanghai Gold Exchange, and the
Hong Kong Chinese Gold & Silver Exchange
Society.
20 The COMEX daily settlement price for each
gold futures contract is established by a
subcommittee of COMEX members shortly after the
close of regular trading on the COMEX. NYMEX
Rule 3.43 sets forth the composition of the
subcommittee requiring that it consist of three (3)
members that represent the gold market.
Specifically, the Rule calls for the subcommittee to
include a floor broker, a floor trader, and one who
represents the trade. Rule 3.02 provides restrictions
on Committee members and others who possess
material, non-public information. A Committee
Member is prohibited from disclosing for any
purpose other than the performance of official
duties relating to the Committee, material, nonpublic information obtained as a result of such
person’s participation on the Committee. In
addition, no person may trade for his own account
or for or on behalf of any other account, in any
commodity interest on the basis of any material,
non-public information that such person knows was
obtained from such Committee member in violation
of Rule 3.02. Telephone conversation between
Jeffrey Burns, Associate General Counsel, Amex,
and Florence Harmon, Senior Special Counsel,
Division of Market Regulation, Commission, on
December 3, 2004.
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19:33 Jan 25, 2005
Jkt 205001
specifications for COMEX gold futures
contracts are also available from the
NYMEX at its Web site at https://
www.nymex.com, as well as other
financial informational sources.
3. Gold Market Regulation
There is no direct regulation of the
global OTC market in gold. However,
indirect regulation of some of the
overseas participants does occur in
some capacity. In the United Kingdom,
responsibility for the regulation of
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
Market Act of 2000 (‘‘FSM Act’’). Under
the FSM 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 NonInvestment Products, which was
established by market participants in
conjunction with the Bank of England,
and is a voluntary code of conduct
among market participants.
The Exchange states that participants
in the United States OTC market for
gold are generally regulated by their
institutional supervisors, which regulate
their activities in the other markets in
which they operate. For example,
participating banks are regulated by the
banking authorities. In the United
States, the Commodity Futures Trading
Commission (‘‘CFTC’’), an independent
government agency with the mandate to
regulate commodity futures and options
markets in the United States, regulates
market participants and has established
rules designed to prevent market
manipulation, abusive trade practices,
and fraud.
The Exchange states that 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 price
movements of futures markets by
comparing them with cash and other
derivative markets’ prices.
B. Trust Management and Structure
The Exchange proposes to list and
trade Gold Shares, which represent
units of fractional undivided beneficial
interest in and ownership of the Trust.
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3751
The purpose of the Trust is to hold gold
bullion.21 The investment objective of
the Trust is for the Gold Shares to reflect
the performance of the price of gold,
less the Trust’s expenses.
The Trust is an investment trust and
is not managed like a corporation or an
active investment vehicle. The Trust has
no board of directors or officers or
persons acting in a similar capacity. The
Exchange states that the Trust is not a
registered investment company under
the 1940 Act and is not required to
register under such Act. The Sponsor
(Barclays), Trustee (BNY), and
Custodian (The Bank of Nova Scotia) are
not affiliated with one another or with
the Exchange.
C. Trust Expenses and Management
Fees
Generally, the assets of the Trust (e.g.,
gold bullion) will be sold to pay Trust
expenses and management fees. These
expenses and fees will reduce the value
of an investor’s Gold Share as gold
bullion is sold to pay such costs.
Ordinary operating expenses of the
Trust include (1) fees paid to the
Sponsor, (2) fees paid to the Trustee, (3)
fees paid to the Custodian, and (4)
various Trust administration fees,
including printing and mailing costs,
legal and audit fees, registration fees,
and Amex listing fees. The Trust’s
estimated ordinary operating expenses
are accrued daily and reflected in the
net asset value (‘‘NAV’’) of the Trust.
D. Description and Characteristics of the
Gold Shares
1. Liquidity
The Exchange represents that a
minimum of 150,000 Gold Shares will
be outstanding at the start of trading.22
The minimum number of shares
required to be outstanding at the start of
trading is comparable to requirements
that have been applied to previously
listed series of trust issues receipts,
Portfolio Depository Receipts and Index
Fund Shares.
While the Gold Shares will trade on
the Amex until 4:15 p.m. New York
time, liquidity in the OTC market for
gold generally decreases after 1:30 p.m.
New York time when daily trading at
21 The Commission has previously approved the
listing of products for which the underlying was a
commodity or otherwise was not a security trading
on a regulated market. See, e.g., Securities Exchange
Act Release Nos. 19133 (October 14, 1982)
(approving the listing of standardized options on
foreign currencies); 36505 (November 22, 1995)
(approving the listing of dollar-denominated
delivery foreign currency options on the Japanese
Yen); and 36165 (August 29, 1995) (approving
listing standards for, among other things, currency
and currency index warrants).
22 See Amendment No. 5, supra note 7.
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26JAN1
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Federal Register / Vol. 70, No. 16 / Wednesday, January 26, 2005 / Notices
COMEX and other world gold trading
centers ends. Trading spreads and the
resulting premium or discount on the
Gold Shares may widen as a result of
reduced liquidity in the OTC gold
market. The Exchange does not believe
that the Gold Shares will trade at a
material discount or premium to the
value of the underlying gold held by the
Trust because of arbitrage opportunities.
2. Creation and Redemption of Trust
Shares
Gold Shares will be issued only in
baskets of 50,000 shares or multiples
thereof (such aggregation referred to as
the ‘‘Basket Aggregation’’ or ‘‘Basket’’).
The Trust will issue and redeem the
Gold Shares on a continuous basis, by
or through participants that have
entered into participant agreements
(each, an ‘‘Authorized Participant’’) 23
with the Sponsor, Barclays, and the
Trustee, BNY, at the NAV per share next
determined after an order to purchase or
redeem Gold Shares in a Basket
Aggregation is received in proper form.
Authorized Participants are the only
persons that may place orders to create
and redeem Baskets. Authorized
Participants purchasing Baskets will be
able to separate a Basket into individual
Gold Shares for resale.
Basket Aggregations will be issued in
exchange for a corresponding amount of
gold, measured in fine ounces (the
‘‘Basket Gold Amount’’). Similarly, the
Trust will redeem Basket Aggregations
of Gold Shares based on the Basket Gold
Amount. The Basket Gold Amount will
be determined at or about 4 p.m. each
business day by the Trustee, BNY.24
Initially, creation of a Basket will
require 5,000 ounces of gold. This
Basket Gold Amount will change from
day to day and decrease over the life of
the Trust due to the payment or accrual
of fees and other expenses payable by
the Trust. On each day that the Amex
is open for regular trading, the BNY will
adjust the quantity of gold constituting
the Basket Gold Amount as appropriate
to reflect sales of gold, any loss of gold
that may occur, and accrued expenses.25
The BNY will determine the Basket
Gold Amount for a given business day
by multiplying the NAV, as described
below, for each Gold Share by the
number of Gold Shares in each Basket
(50,000) and dividing the resulting
product by that day’s COMEX
settlement price for the spot month gold
futures contract. Authorized
Participants that submitted an order
prior to 4 p.m. to purchase a Basket
must transfer the Basket Gold Amount
to the Trust in exchange for a Basket.
Gold Shares are not individually
redeemable, and Authorized
Participants that wish to redeem a
Basket (i.e., 50,000 Gold Shares) will
receive the Basket Gold Amount in
exchange for each Basket surrendered.
Upon the surrender of the Gold Shares
and payment of the applicable Trustee’s
fee and any expenses, taxes or charges,
the BNY will deliver to the redeeming
Authorized Participant the amount of
gold corresponding to the redeemed
Baskets. Unless otherwise requested by
the Authorized Participants, gold will
then be delivered to the redeeming
Authorized Participants in the form of
physical bars only.26 Thus, although
Authorized Participants place orders to
purchase or redeem Gold Shares
throughout the trading day, the actual
Basket Gold Amount is determined at 4
p.m. or shortly thereafter.
The Bank of Nova Scotia (‘‘BNS’’) will
be the custodian for the Trust and
responsible for safekeeping the gold.27
Gold deposited with BNS must either (a)
meet the requirements to be delivered in
settlement of a COMEX gold futures
contract pursuant to the rules adopted
by the COMEX or (b) meet the
specifications for weight, dimensions,
fineness (or purity), identifying marks
and appearance of gold bars as set forth
in ‘‘The Good Delivery Rules for Gold
23 An ‘‘Authorized Participant’’ is a person, who
at the time of submitting to the trustee an order to
create or redeem one or more Baskets, (i) is a
registered broker-dealer, (ii) is a Depository Trust
Company (‘‘DTC’’) Participant or an Indirect
Participant, and (iii) has in effect a valid Authorized
Participant Agreement.
24 At the same time, the BNY will also determine
an ‘‘Indicative Basket Gold Amount’’ that
Authorized Participants can use as an indicative
amount of gold to be deposited for issuance of the
Gold Shares on the next business day. The Trustee
will disseminate daily the Indicative Basket Gold
Amount on the Trust Web site. Because the
creation/redemption process is based entirely on
the physical delivery of gold (and does not
contemplate a cash component), the actual number
of fine ounces required for the Indicative Basket
Gold Amount will not change intraday, even though
the value of the Indicative Basket Gold Amount
may change based on the market price of gold.
25 The Trust’s expense ratio, in the absence of any
extraordinary expenses and liabilities, is
established at 0.40% of the net assets of the Trust.
As a result, the amount of gold by which the Basket
Gold Amount will decrease each day will be
predictable (i.e. 1/365th of the net asset value of the
Trust multiplied by 0.40%).
26 If the amount of gold corresponding to the
Basket Gold Amount results in an amount that is
less than a full gold bar denomination, the
Authorized Participant has the ability to take and/
or deliver fractional gold bar amounts. Telephone
conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Florence Harmon,
Senior Special Counsel, Division of Market
Regulation, Commission, on December 3, 2004.
27 If the total value of the Trust’s gold held by the
custodian exceeds $2 billion, then the custodian
will be under no obligation to accept additional
gold deliveries. In such a case, the Trustee will
retain an additional custodian.
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and Silver Bars’’ published by the
LBMA.
Shortly after 4 p.m. each business
day, the BNY will determine the NAV
for the Trust. The BNY will calculate
the NAV by multiplying the fine ounces
of gold held by the Trust (after gold has
been sold for that day to pay that day’s
fees and expenses) by the daily
settlement value of the COMEX spot
month gold futures contract.28 At any
point in time, the spot month contract
is the futures contract then closest to
maturity. If a COMEX settlement price
for a spot month gold futures contract is
not announced, the Trustee will use the
most recently announced spot month
COMEX settlement price, unless the
Trustee (BNY), in consultation with the
Sponsor (Barclays), determines that
such price is inappropriate. Once the
value of the gold is determined, the
BNY will then subtract all accrued fees
(other than the fees to be computed by
reference to the value of the Trust or its
assets), expenses and other liabilities of
the Trust from the total value of gold
and all other assets of the Trust. This
adjusted NAV is then used to compute
all fees (including the Trustee and
Sponsor fees) that are calculated from
the value of Trust assets. To determine
the NAV, the BNY will subtract from the
adjusted NAV the amount of accrued
fees from the value of Trust assets. The
BNY will calculate the NAV per share
by dividing the NAV by the number of
Gold Shares outstanding.
28 As previously stated, the COMEX daily
settlement price for each gold futures contract is
established by a subcommittee of COMEX members
shortly after the close of trading in New York. The
daily settlement price for each contract (delivery
month) is derived from the daily settlement price
for the most active futures contract month that is
not necessarily the spot month. This settlement
price is the average of the highest and lowest priced
trades reported during the last one (1) minute of
trading during regular trading hours. For all other
gold futures contract months (which may include
the spot month), the settlement prices are
determined by COMEX based upon differentials
reflected in spread trades between adjacent months,
such differentials being directly or indirectly
related to the most active month. These differentials
are the average of the highest and lowest spread
trades (trades based upon the differential between
the prices for two contract months) reported during
the last fifteen (15) minutes of trading during
regular trading hours. In the case that there were no
such spread trades, the average of the bids and
offers for spread transactions during that last fifteen
(15) minute period are used. In the case where there
are no bids and offers during that time, the
contracts are settled at prices consistent with the
differentials for other contract months that were
settled by the first or second method. If the third
method is used, the subcommittee of the COMEX
members establishing those settlement prices
provides a record of the differentials from other
contract months that formed the basis for those
settlements.
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3. Availability of Information Regarding
Gold Shares
The Web site for the Trust at https://
www.ishares.com, which will be
publicly accessible at no charge, will
contain the following information about
Gold Shares: (a) The prior business
day’s NAV, Basket Gold Amount, and
reported closing price, and the present
day’s Indicative Basket Gold Amount;
(b) the mid-point of the bid-ask price 29
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 (4) previous
calendar quarters; (e) the Prospectus;
and (f) other applicable quantitative
information, such as expense ratios,
trading volumes, and the total return of
the Gold Shares.30 The Exchange will
provide a hyperlink on its Web site at
https://www.amex.com to the Trust’s
Web site at https://www.ishares.com.
The Exchange will also make
available on its Web site daily trading
volume, closing prices, and the NAV
from the previous day of the Gold
Shares. Amex will also disseminate
during regular Amex trading hours from
9:30 a.m. to 4:15 p.m. New York time,
through the facilities of the CTA, the
last sale price for Gold Shares on a realtime basis.31 Amex will disseminate
each day the prior day’s NAV and
shares outstanding through the facilities
of the CTA. In addition, Amex will
disseminate the Indicative Trust Value
on a per Gold Share basis every 15
seconds through the Consolidated Tape
during regular Amex trading hours of
9:30 a.m. to 4:15 p.m. New York time.32
29 The bid-ask price of Shares is determined using
the highest bid and lowest offer as of the time of
calculation of the NAV.
30 Telephone conversation between Jeffrey Burns,
Associate General Counsel, Amex, and Florence
Harmon, Senior Special Counsel, Division of
Market Regulation, Commission, on January 18,
2005 (as to examples of ‘‘other quantitative
information’’).
31 Telephone conversation between Jeffrey Burns,
Associate General Counsel, Amex, and Florence
Harmon, Senior Special Counsel, Division of
Market Regulation, Commission, on January 18,
2005 (as to real-time dissemination of last sale
price).
32 The Indicative Trust Value will be calculated
based on the amount of gold required for creations
and redemptions on that day (e.g., Indicative Basket
Gold Amount) and a price of gold derived from the
most recently reported trade price in the active gold
futures contract. The prices reported for the active
contract month will be adjusted based on the prior
day’s spread differential between settlement values
for that contract and the spot month contract. In the
event that the spot month contract is also the active
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Shortly after 4 p.m. each business day,
the BNY, Amex, and Barclays (Sponsor)
will disseminate the NAV for the Gold
Shares, the Basket Gold Amount (for
orders placed during the day), and the
Indicative Basket Gold Amount (for use
by Authorized Participants
contemplating placing orders the
following business day). The Basket
Gold Amount, the Indicative Basket
Gold Amount, and the NAV are
communicated by the BNY to all
Authorized Participants via facsimile or
electronic mail message and will be
available on the Trust’s Web site at
https://www.ishares.com.
4. Information About Underlying Gold
Holdings
There is a considerable amount of
gold price and gold market information
available on public Web sites and
through professional and subscription
services. In most instances, real-time
information is only available for a fee,
and information available free of charge
is subject to delay (typically 20
minutes). The Exchange states that
investors may obtain on a 24-hour basis
gold pricing information based on the
spot price for a troy ounce of gold from
various financial information service
providers, such as Reuters and
Bloomberg. Reuters and Bloomberg
provide at no charge on their Web sites
delayed information regarding the spot
price of gold and last sale prices of gold
futures, as well as information about
news and developments in the gold
market. Reuters and Bloomberg also
offer a professional service to
subscribers for a fee that provides
information on gold prices directly from
market participants. In addition, an
organization named EBS provides an
electronic trading platform to
institutions such as bullion banks and
dealers for the trading of spot gold, as
well as a feed of live streaming prices
to Reuters and Moneyline Telerate
subscribers.
As previously stated, the Exchange
states that complete real-time data for
gold futures and options prices traded
on the COMEX is available by
subscription from Reuters and
contract, the last sale price for the active contract
will not be adjusted.
The Indicative Trust Value will not reflect
changes to the price of gold between the close of
trading at the COMEX, typically 1:30 p.m. New
York time, and the open of trading on the NYMEX
ACCESS market at 2 p.m. New York time. While the
market for the gold futures is open for trading, the
Indicative Trust Value can be expected to closely
approximate the value per share of the Indicative
Basket Gold Amount. The Indicative Trust Value on
a per Gold Share basis disseminated during Amex
trading hours should not be viewed as a real time
update of the NAV, which is calculated only once
a day.
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3753
Bloomberg. The closing price and
settlement prices of the COMEX gold
futures contracts are publicly available
from the NYMEX at https://
www.nymex.com, automated quotation
systems, published or other public
sources, or on-line information services
such as Bloomberg or Reuters. The
NYMEX also provides delayed futures
and options information on current and
past trading sessions and market news
free of charge on its Web site.
E. Criteria for Initial Share Issuance and
Continued Listing
The Trust will be subject to the
criteria in Rules 1201A and 1202A for
initial and continued listing of Gold
Shares. The initial listing standards
provide for a minimum number of
shares to be outstanding at the time of
commencement of trading on the
Exchange. The continued listing criteria
provides for the delisting or removal
from listing of the Gold Shares under
any of the following circumstances:
• Following the initial twelve month
period from the date of commencement
of trading of the Gold Shares: (i) If the
Trust has more than 60 days remaining
until termination and there are fewer
than 50 record and/or beneficial holders
of the Gold Shares for 30 or more
consecutive trading days; (ii) if the Trust
has fewer than 50,000 Gold Shares
issued and outstanding; or (iii) if the
market value of all Gold Shares is less
than $1,000,000.
• If the value of the underlying gold
is no longer calculated or available on
at least a 15-second delayed basis from
a source unaffiliated with the sponsor,
trust, custodian or the Exchange, or the
Exchange stops providing a hyperlink
on its Web site to any such unaffiliated
gold value.
• The Indicative Trust Value is no
longer made available on at least a 15second delayed basis.
• If such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
F. Original and Annual Listing Fees
The Amex original listing fee
applicable to the listing of the Gold
Trust is $5,000. In addition, the annual
listing fee applicable under Section 141
of the Amex Company Guide will be
based upon the year-end aggregate
number of shares in all series of the
Gold Trust outstanding at the end of
each calendar year and range from
$15,000 to $30,000 per year.
G. Exchange Trading Rules and Policies
Under Amex Rules 1200A et seq.,
Commodity-Based Trust Shares are
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generally subject to the Amex trading
rules applicable to equity securities,
including, among others, rules
governing priority, parity and
precedence of orders, specialist
responsibilities, account opening, and
customer suitability (Amex Rule 411).
Initial equity margin requirements of
50% will apply to transactions in Gold
Shares. Gold Shares will trade on the
Amex until 4:15 p.m. New York time
each business day and will trade in a
minimum price variation of $0.01
pursuant to Amex Rule 127. Trading
rules pertaining to odd-lot trading in
Amex equities (Amex Rule 205) will
also apply.
Amex Rule 154, Commentary .04(c)
provides that stop and stop limit orders
to buy or sell a security (other than an
option, which is covered by Rule 950(f)
and Commentary thereto) the price of
which is derivatively priced based upon
another security or index of securities,
may with the prior approval of a Floor
Official, be elected by a quotation, as set
forth in Commentary .04(c)(i–v). The
Exchange has designated Gold Shares as
eligible for this treatment.33
Gold Shares will be deemed ‘‘Eligible
Securities,’’ as defined in Amex Rule
230, for purposes of the Intermarket
Trading System Plan and therefore will
be subject to the trade through
provisions of Amex Rule 236, which
require that Amex members avoid
initiating trade-throughs for ITS
securities.
Specialist transactions of Gold Shares
made in connection with the creation
and redemption of Gold Shares will not
be subject to the prohibitions of Amex
Rule 190.34 Unless exemptive or noaction relief is available, Gold Shares
will be subject to the short sale
requirements of Rule 10a–1 and
Regulation SHO under the Act.35 If
33 See Securities Exchange Act Release No. 29063
(April 10, 1991), 56 FR 15652 (April 17, 1991) at
note 9, regarding the Exchange’s designation of
equity derivative securities as eligible for such
treatment under Amex Rule 154, Commentary
.04(c).
34 See Commentary .05 to Amex Rule 190.
35 The Gold Trust has requested exemptive relief
in connection with the trading of Gold Shares from
the operation of certain short sale requirements of
Rule 10a–1 and may seek no-action relief from Rule
200(g) of Regulation SHO under the Act. See 17
CFR 240.10a–1; 17 CFR 242.200(g). The requested
relief is currently pending with the Commission
staff in the Division of Market Regulation. If
granted, Gold Shares would be exempt from Rule
10a–1, permitting sales without regard to the ‘‘tick’’
requirements of Rule 10a–1. Rule 10a–1(a)(1)(i)
provides that a short sale of an exchange-traded
security may not be effected (i) below the last
regular-way sale price (an ‘‘uptick’’) or (ii) at such
price unless such price is above the next preceding
different price at which a sale was reported (a
‘‘zero-plus tick’’). No-action relief from the marking
requirements of Rule 200(g) of Regulation SHO
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exemptive or no-action relief is
provided, the Exchange will issue a
notice detailing the terms of the
exemption or relief.
The Exchange represents that the
Gold Shares will generally be subject to
the Exchange’s stabilization rule, Amex
Rule 170, except that specialists may
buy on ‘‘plus ticks’’ and sell on ‘‘minus
ticks,’’ in order to bring the Gold Shares
into parity with the underlying gold
and/or futures price. Proposed
Commentary .01 to proposed Amex Rule
1203A sets forth this limited exception
to Amex Rule 170.
Amex states that the adoption of
Amex Rule 1203A relating to certain
specialist prohibitions will address
potential conflicts of interest in
connection with acting as a specialist in
the Gold Shares. Specifically, Amex
Rule 1203A provides that the
prohibitions in Amex Rule 175(c) apply
to a specialist in the Gold Shares so that
the specialist or affiliated person may
not act or function as a market maker in
the underlying gold, related gold futures
contract or option, or any other related
gold derivative. An affiliated person of
the specialist consistent with Amex
Rule 193 (Affiliated Persons of
Specialists) may be afforded an
exemption to act in a market making
capacity, other than as a specialist in the
Gold Shares on another market center,
in the underlying gold, related gold
futures, options on futures, or any other
related gold derivative. In particular,
proposed Rule 1203A provides that an
approved person of an equity specialist
that has established and obtained
Exchange approval for procedures
restricting the flow of material, nonpublic market information between
itself and the specialist member
organization, and any member, officer,
or employee associated therewith, may
act in a market making capacity, other
than as a specialist in the Gold Shares
on another market center, in the
underlying commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives.
H. Surveillance
Amex represents that its surveillance
procedures applicable to trading of Gold
Shares are adequate to deter
manipulation, will be similar to those
applicable to other trust issued receipts
and exchange-traded fund shares
(‘‘ETFs’’), and will incorporate and rely
upon existing Amex surveillance
procedures governing options and
would permit broker-dealers, subject to certain
conditions, to mark short sales in the Gold Shares
‘‘short,’’ rather than ‘‘short exempt.’’
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equities. The Exchange currently has in
place an Information Sharing Agreement
with the NYMEX for the purpose of
providing information in connection
with trading in or related to COMEX
gold futures contracts.
Also, the Exchange states that
adoption of Rule 1204A will facilitate
surveillance of the specialist handling
Gold Shares. Amex Rule 1204A requires
that the specialist handling the Gold
Shares to provide the Exchange with
information relating to its trading in
physical gold, gold futures contracts,
options on gold futures, or any other
gold derivative. Amex Rule 1204A also
prohibits the specialist in the Gold
Shares from using any material
nonpublic information received from
any person associated with a member or
employee of such person regarding
trading by such person or employee in
physical gold, gold futures contracts,
options on gold futures, or any other
gold derivatives (including the Gold
Shares).
As a general matter, the Exchange has
regulatory jurisdiction over its members,
member organizations, and approved
persons of a member organization. The
Exchange also has regulatory
jurisdiction over any person or entity
controlling a member organization, as
well as a subsidiary or affiliate of a
member organization that is in the
securities business. A subsidiary or
affiliate of a member organization that
does business only in commodities
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.
I. Information Circular
The Amex will distribute an
information circular (‘‘Information
Circular’’) to its members in connection
with the trading of Gold Shares. The
Information Circular will discuss the
special characteristics and risks of
trading this type of security.
Specifically, the Information Circular,
among other things, will discuss what
the Gold Shares are, how a basket is
created and redeemed, the requirement
that members and member firms deliver
a prospectus to investors purchasing the
Gold Shares prior to or concurrently
with the confirmation of a transaction,
applicable Amex rules, dissemination
information regarding the per share
Indicative Trust Value, trading
information, and applicable suitability
rules. The Information Circular will also
explain that the Gold Trust is subject to
various fees and expenses described in
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the Registration Statement and that the
number of ounces of gold required to
create a basket or to be delivered upon
a redemption of a basket will gradually
decrease over time because the Gold
Shares comprising a basket will
represent a decreasing amount of gold
due to the sale of the Gold Trust’s gold
to pay Trust expenses. The Information
Circular will also reference the fact that
there is no regulated source of last sale
information regarding physical gold and
that the Commission has no jurisdiction
over the trading of gold as a physical
commodity.
The Information Circular will also
notify members and member
organizations about the procedures for
purchases and redemptions of Gold
Shares in baskets and that Gold Shares
are not individually redeemable but are
redeemable only in basket-size
aggregations or multiples thereof. The
Information Circular will advise
members of their suitability obligations
with respect to recommended
transactions to customers in the Gold
Shares and inform them of Amex rules
regarding trading halts applicable to
Gold Shares. The Information Circular
will also discuss any relief, if granted,
by the Commission or the staff from any
rules under the Act.
The Information Circular will disclose
that the NAV for Gold Shares will be
disseminated shortly after 4 p.m. each
trading day based on the COMEX daily
settlement value, which is disseminated
shortly after 1:30 p.m. New York time
each trading day.
J. Suitability
As stated, the Information Circular
will inform members and member
organizations of the characteristics of
the Gold Trust and of applicable
Exchange rules, as well as of the
requirements of Amex Rule 411 (Duty to
Know and Approve Customers).
The Exchange notes that pursuant to
Rule 411, members and member
organizations are required in connection
with recommending transactions in the
Gold Shares to have a reasonable basis
to believe that a customer is suitable for
the particular investment given
reasonable inquiry concerning the
customer’s investment objectives,
financial situation, needs, and any other
information known by such member.
K. Trading Halts
Amex Rule 117 sets forth the trading
halt parameters, i.e., ‘‘circuit breakers,’’
applicable to the Gold Shares during
periods of extraordinary volatility. In
addition to the parameters set forth in
Rule 117, the Exchange will halt trading
in Gold Shares if trading in the
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19:33 Jan 25, 2005
Jkt 205001
underlying COMEX gold futures
contract is halted or suspended. Third,
with respect to a halt in trading that is
not specified above, the Exchange may
also consider other relevant factors and
the existence of unusual conditions or
circumstances that may be detrimental
to the maintenance of a fair and orderly
market.
III. Discussion
After careful consideration, the
Commission finds that the proposed
rule change, as amended, is consistent
with the Act 36 and the rules and
regulations thereunder applicable to a
national securities exchange.37
A. Surveillance
Information sharing agreements with
markets trading securities underlying a
derivative product are an important part
of a self-regulatory organization’s ability
to monitor for trading abuses in
derivative products. Although an
information sharing agreement with the
OTC gold market is not possible, the
Commission believes that the unique
liquidity and depth of the gold market,
together with Amex’s information
sharing agreement with NYMEX (of
which COMEX is a division) and
Exchange Rules 1203A and 1204A,
create the basis for Amex to monitor for
fraudulent and manipulative practices
in the trading of the Gold Shares.38
The OTC market for gold is extremely
deep and liquid. The LBMA estimates
that the monthly average daily volume
figures published by the LBMA for 2003
range from a high of 19 million to a low
of 13.6 million troy ounces per day.39 In
15 U.S.C. 78f(b).
approving this proposal, the Commission has
considered its impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
38 The Commission notes that it recently reached
a similar conclusion with respect to a proposal by
the New York Stock Exchange to list and trade trust
shares that, as in the Amex proposal, correspond to
a fixed amount of gold. See Securities Exchange Act
Release No. 50603 (October 28, 2004), 69 FR 64614
(November 5, 2004). In that recent order, the
Commission noted that it had previously approved
the listing and trading of foreign currency options,
for which there is no self-regulatory organization or
Commission surveillance of the underlying markets,
on the basis that the magnitude of the underlying
currency market militated against manipulations
through inter-market trading activity. See id., at
64619 (Securities Exchange Act Release Nos. 19133
(October 14, 1982) (approving the listing of
standardized options on foreign currencies ); 36505
(November 22, 1995) (approving the listing of
dollar-denominated delivery foreign currency
options on the Japanese Yen); and 36165 (August
29, 1995) (approving listing standards for, among
other things, currency and currency index
warrants).
39 There are no authoritative published figures for
overall worldwide volume in gold trading. The
LBMA publishes statistics compiled from the six
members offering clearing services. Information
regarding clearing volume estimates by the LBMA
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36 36
37 In
Frm 00086
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3755
addition, COMEX figures for 2003
indicate that the average daily volume
for gold futures contracts was 4.9
million ounces per day.40
Finally, Amex Rule 1204A will
require that the specialist handling the
Gold Shares provide the Exchange with
information relating to its trading in
physical gold, gold futures contracts,
options on gold futures, or any other
gold derivative. The Commission
believes these reporting and recordkeeping requirements will assist the
Exchange in identifying situations
potentially susceptible to manipulation.
Amex Rule 1204A will also prohibit the
specialist in the Gold Shares from using
any material nonpublic information
received from any person associated
with a member or employee of such
person regarding trading by such person
or employee in physical gold, gold
futures contracts, options on gold
futures, or any other gold derivatives
(including the Gold Shares). In addition,
Amex Rule 1203A will prohibit the
specialist in the Gold Shares from being
affiliated with a market maker in
physical gold, gold futures, or options
on gold futures unless adequate
information barriers are in place and
approved by the Exchange.
B. Dissemination of Information About
the Gold Shares
The Commission finds that sufficient
venues for obtaining reliable gold price
information exist so that investors in the
Gold Shares can adequately monitor the
underlying spot market in gold relative
to the NAV of their Gold Shares. As
discussed more fully above, the
Commission notes that there is a
considerable amount of gold price and
gold market information available 24
hours per day on public Web sites and
through professional and subscription
services. In addition, the Trustee will
disseminate each day on the Trust Web
site, an estimated amount representing
the Basket Gold Amount. The Exchange
will also disseminate through the CTA
the Indicative Trust Value on a per
share basis every 15 seconds during
regular Amex trading hours of 9:30 a.m.
to 4:15 p.m. New York time (except
between 1:30 p.m. and 2 p.m., the time
period from the close of regular trading
of the COMEX gold futures contract and
the start of trading of COMEX gold
futures contracts on NYMEX ACCESS).
can be found at https://www.lbma.org.uk/
clearing_table.htm.
40 Information regarding average daily volume
estimates by the COMEX (a division of NYMEX) can
be found at https://www.nymex.com/jsp/markets/
md_annual_volume6.jsp#2. The statistics are based
on gold futures contracts, each of which relates to
100 ounces of gold.
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The last sale price for Gold Shares will
also be disseminated on a real-time
basis over the Consolidated Tape.
The Commission also notes that the
Trust’s Web site at https://
www.ishares.com is and will be publicly
accessible at no charge and will contain
the NAV of the Gold Shares and the
Basket Gold Amount as of the prior
business day, the Bid-Ask Price, and a
calculation of the premium or discount
of the Bid-Ask Price in relation to the
closing NAV. Additionally, the Trust’s
Web site, to which the Amex will link,
will also provide 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, the
Prospectus, and other applicable
quantitative information. The
Commission believes that dissemination
of this information will facilitate
transparency with respect to the Gold
Shares and diminish the risk of
manipulation or unfair informational
advantage.
C. Listing and Trading
Further, the Commission finds that
the Exchange’s proposed rules and
procedures for the listing and trading of
the proposed Gold Shares are consistent
with the Act. For example, Gold Shares
will be subject to Amex rules governing
trading halts, responsibilities of the
specialist, and customer suitability
requirements. In addition, the Gold
Shares will be subject to Amex Rules
1201A and 1202A for initial and
continued listing of Gold Shares.
The Commission believes that listing
and delisting criteria for the Gold Shares
should help to maintain a minimum
level of liquidity and therefore
minimize the potential for manipulation
of the Gold Shares. Finally, the
Commission believes that the
Exchange’s Information Circular
adequately will inform members and
member organizations about the terms,
characteristics, and risks in trading the
Gold Shares.
IV. Amendment No. 5
The Amex has requested that the
Commission grant accelerated approval
to Amendment No. 5 to the proposed
rule change.41 The Commission believes
that the amendments proposed in
Amendment No. 5 regarding the
requirement for separate rule filings
under Section 19(b)(2) of the Act for
Commodity-Based Trust Shares, certain
fees and expenses, and other minor
changes to the proposal, provide clarity
and additional detail, but do not change
the substance of the proposal. Because
the amendment clarifies and makes
other minor changes to the proposal, the
Commission therefore finds good cause,
consistent with Section 19(b)(2) of the
Act,42 to approve Amendment No. 5 to
the proposed rule change prior to the
thirtieth day after the date of
publication of notice of filing thereof in
the Federal Register.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 5 is
consistent with the Act. Comments may
be submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Amex–2004–38 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–Amex–2004–38. 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 (https://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
Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such
filing also will be available on Amex’s
Web site (https://www.amex.com) and for
inspection and copying at the Amex’s
Office of the Secretary. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
41 See Amendments Nos. 1 and 2, supra notes 4
and 5.
VerDate jul<14>2003
19:33 Jan 25, 2005
Jkt 205001
PO 00000
42 15
U.S.C. 78s(b)(2).
Frm 00087
Fmt 4703
Sfmt 4703
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Amex–
2004–38 and should be submitted on or
before February 16, 2005.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,43 that the
proposed rule change (SR–Amex–2004–
38), as amended, is hereby approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.44
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–283 Filed 1–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51049; File No. SR–BSE–
2004–52]
Self-Regulatory Organizations; Boston
Stock Exchange, Inc.; Order Granting
Approval of Proposed Rule Change
and Amendment No. 1 Thereto
Relating to Market Maker Quote
Obligations Under the Rules of the
Boston Options Exchange Facility
January 18, 2005.
On November 24, 2004, the Boston
Stock Exchange, Inc. (‘‘BSE’’ or
‘‘Exchange’’) submitted to the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder 2, a proposed rule change to
adopt a rule under the rules of the
Boston Options Exchange Facility
(‘‘BOX’’) to provide BOX Market Makers
protection from the unreasonable risk
associated with communication failures
and systemic errors. On December 3,
2004, the BSE submitted Amendment
No. 1 to the proposed rule change. The
proposed rule change, as modified by
Amendment No. 1, was published for
comment in the Federal Register on
December 14, 2004.3 The Commission
received no comments on 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
43 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 50814
(December 7, 2004), 69 FR 74547 (December 14,
2004).
44 17
E:\FR\FM\26JAN1.SGM
26JAN1
]]>Agencies
[Federal Register Volume 70, Number 16 (Wednesday, January 26, 2005)]
[Notices]
[Pages 3749-3756]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-283]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51058; File No. SR-Amex-2004-38]
Self-Regulatory Organizations; Order Granting Approval of
Proposed Rule Change and Amendment Nos. 2, 3 and 4 and Notice of Filing
and Order Granting Accelerated Approval to Amendment No. 5 by the
American Stock Exchange LLC Relating to the Listing and Trading of the
iShares[reg] COMEX Gold Trust
January 19, 2005.
I. Introduction
On May 24, 2004, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') 1 and Rule 19b-4
thereunder,2 a proposed rule change to list and trade under
new Amex Rules 1200A et seq. iShares[reg] COMEX Gold Trust Shares
(``Gold Shares''). On November 9, 2004, Amex amended its proposal;
however, the Exchange withdrew this amendment on November 17, 2004. On
November 10, 2004 the Exchange submitted a second
amendment.3 On November 16, 2004, the Exchange submitted a
third amendment.4 On December 1, 2004, the Exchange
submitted a fourth amendment.5 The proposed rule change, as
amended, was published for comment in the Federal Register on December
9, 2004.6 The Commission received no comment letters
regarding the proposed rule change. On January 7, 2005, the Exchange
submitted a fifth amendment.7 This notice and order
[[Page 3750]]
approves the Exchange's rule change, and Amendments 2, 3 and 4 thereto,
solicits comment from interested persons on Amendment No. 5, and
approves Amendment No. 5 on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Amendment No. 2, dated November 10, 2004 (``Amendment
No. 2''). In Amendment No. 2, the Exchange revised the proposed rule
text and corresponding description. Amendment No. 2 replaced Amex's
original filing in its entirety.
\4\ See Amendment No. 3, dated November 16, 2004 (``Amendment
No. 3''). In Amendment No. 3, the Exchange proposed clarifying
changes to certain aspects of Amendment No. 2 and modified the
proposed rule text.
\5\ See Amendment No. 4, dated December 1, 2004 (``Amendment No.
4''). In Amendment No. 4, the Exchange provided additional
description of the creation and redemption process for the Gold
Trust shares and made clarifying changes to the proposed rule text.
Amendment No. 4 replaced Amex's amended proposal in its entirety.
\6\ See Securities Exchange Act Release No. 50792 (December 3,
2004), 69 FR 71446 (``Notice'').
\7\ See Amendment No. 5, dated January 7, 2005 (``Amendment No.
5''). In Amendment No. 5, the Exchange proposed changes to
Commentary .01 to Rule 1202A for the purpose of clarifying that the
Exchange will submit separate rule filings under section 19(b)(2) of
the Act in connection with the listing and trading of each series of
Commodity-Based Trust Shares. Further, in Amendment No. 5 the
Exchange represented that (1) as provided in the Registration
Statement to the Trust, the trustee will charge a transaction fee in
connection with the redemption and/or creation of Baskets; (2)
Barclays Capital, Inc., the Initial Purchaser, will purchase 150,000
Shares of the Trust to compose the initial Baskets; and (3) the
Exchange's surveillance procedures are adequate to properly monitor
the trading of the Shares.
---------------------------------------------------------------------------
II. Description of Proposal
The Amex proposes to add new Exchange Rules 1200A et seq. for the
purpose of permitting the listing and trading of Trust Issued Receipts
8 based on commodity interests (``Commodity-Based Trust
Shares''), and to amend Sections 140 and 141 of the Amex Company Guide
regarding original and annual listing fees applicable to such shares.
Amex Rule 1201A will permit the Exchange to list and trade Commodity-
Based Trust Shares. Under the rule, for each series of Commodity-Based
Trust Shares, the Exchange will submit for Commission review and
approval a filing pursuant to Section 19(b) of the Act.9
Proposed Amex Rule 1202A sets forth initial and continued listing and
trading criteria for Commodity-Based Trust Shares.10
---------------------------------------------------------------------------
\8\ A Trust Issued Receipt or ``TIR'' is defined in Exchange
Rule 1200(b) as a security (a) that is issued by a trust that holds
specified securities deposited with the trust; (b) that, when
aggregated in some specified minimum number, may be surrendered to
the trust by the beneficial owner to receive the securities; and (c)
that pays beneficial owners dividends and other distributions on the
deposited securities, if any are declared and paid to the trustee by
an issuer of the deposited securities. Under Amex Rule 1201, the
Exchange may approve for listing and trading TIRs based on one or
more securities. The Exchange defines a ``security'' or
``securities'' to include stocks, bonds, options, and other
interests or instruments commonly known as securities. See Article
I, section 3(j) of the Amex Constitution.
\9\ 15 U.S.C. 78s(b). Because of the structure of the Gold
Trust, representing an interest in underlying gold, the Exchange's
existing listing and trading rules that permit the listing and
trading of TIRs, pursuant to Rule 19b-4(e) under the Act, 17 CFR
240.19b-4(e), cannot be used to list this product.
\10\ Proposed Rule 1202A for Commodity-Based Trust Shares tracks
but is not identical to current Rule 1202 relating to TIRs. The
initial listing standards set forth in Rule 1202(a) provide that the
Exchange establish a minimum number of TIRs required to be
outstanding at the time of the commencement of trading on the
Exchange. As set forth in the section ``Criteria for Initial and
Continued Listing,'' the Exchange represents that the minimum number
of Gold Shares outstanding at the time of trading will be 150,000.
See Amendment No. 5, supra note 7.
---------------------------------------------------------------------------
The Amex initially proposes to list iShares COMEX 11
Gold Trust (the ``Gold Trust'' or ``Trust'') shares that represent
beneficial ownership interests in the net assets of a trust that holds
gold bullion. As explained further herein, Gold Shares will be issued
in baskets. Initially, each basket of 50,000 shares will correspond to
5,000 troy ounces of gold. Thus, each Gold Share will correspond to
one-tenth of a troy ounce of gold.12 The Gold Shares will
conform to the initial and continued listing criteria under proposed
Rule 1202A. The Gold Trust will be formed under a depositary trust
agreement among Bank of New York (``BNY''), the Trustee; Barclays
Global Investors, N.A. (``Barclays''), the Sponsor; all depositors;
13 and the holders of Gold Shares.14
---------------------------------------------------------------------------
\11\ COMEX is a division of the New York Mercantile Exchange,
Inc. (``NYMEX'') where gold futures contracts are traded.
\12\ The amount of gold associated with each basket (and
individual Gold Share) is expected to decrease over time as the
Trust incurs and pays maintenance fees and other expenses.
\13\ Barclays Capital, Inc., the Initial Purchaser, will
purchase 150,000 Shares of the Trust to compose the initial Baskets.
See Amendment No. 5, supra note 7.
\14\ The Trust is not an investment company as defined in
section 3(a) of the Investment Company Act of 1940 (the ``1940
Act'').
---------------------------------------------------------------------------
In effect, purchasing Gold Shares will provide investors a new
mechanism to participate in the gold market. The Trustee will not
actively manage the gold held by the Trust. Information about the
liquidity, depth, and pricing mechanisms of the international gold
market, management and structure of the Trust, and description of the
Gold Shares follows below.
A. Description of the Gold Market
The global trade in gold consists of over-the-counter (``OTC'')
transactions in spot, forwards, and options and other derivatives,
together with exchange-traded futures and options on futures. In its
filing with the Commission, the Exchange made the following
representations regarding the worldwide gold market.\15\
---------------------------------------------------------------------------
\15\ For more information on the gold market and gold supply and
demand, see Notice, supra note 6.
---------------------------------------------------------------------------
1. The OTC Market
The OTC market trades on a 24-hour continuous basis and accounts
for the substantial portion of global gold trading. Liquidity in the
OTC market can vary from time to time during the course of the 24-hour
trading day. Fluctuations in liquidity are reflected in adjustments to
dealing spreads--the differential between a dealer's buy and sell
prices. The period of greatest liquidity in the gold market is
typically that time of day when trading in the European time zone
overlaps with trading in the United States. This occurs when the OTC
market trading in London, New York, and other centers coincides with
futures and options trading on the COMEX.\16\ This period lasts for
approximately four (4) hours each New York business day morning.
---------------------------------------------------------------------------
\16\ The open outcry trading hours of the COMEX gold futures
contract is from 8:20 a.m. to 1:30 p.m. New York time Monday through
Friday. NYMEX ACCESS([reg]), an electronic trading system, is open
for trading on COMEX gold futures contracts from 2 p.m. Monday
afternoon until 8 a.m. Friday morning New York time; and from 7 p.m.
Sunday night until Monday morning at 8 a.m. New York time. See
Amendment No. 4, supra note 5, at note 4.
---------------------------------------------------------------------------
The OTC market has no formal structure and no open-outcry meeting
place. The main centers of the OTC market are London, New York, and
Zurich. Bullion dealers have offices around the world, and most of the
world's major bullion dealers are either members or associate members
of the London Bullion Market Association (``LBMA''), a trade
association of participants in the London Bullion market.
The Exchange states that there are no authoritative published
figures for overall world-wide volume in gold trading. There are
certain published sources that do suggest the significant size of the
overall market. The LBMA publishes statistics compiled from the five
(5) members offering clearing services.\17\ The Exchange notes that the
monthly average daily volume figures published by the LBMA for 2003
range from a high of 19 million to a low of 13.6 million troy ounces
per day. Through September 2004, the monthly average daily volume has
ranged from a high of 17 million to a low of 12.4 million. The Exchange
also notes that the COMEX publishes price and volume statistics for
transactions in contracts for the future delivery of gold. COMEX
figures for 2003 indicate that the average daily volume for gold
futures and options contracts was 4.89 million (48,943 contracts) and
1.7 million (17,241 contracts) troy ounces per day, respectively.
Through October 2004, the average daily volume for gold futures
[[Page 3751]]
and options was 6.08 million (60,817 contracts) and 2.01 million
(20,173 contracts), respectively.\18\
---------------------------------------------------------------------------
\17\ Information regarding clearing volume estimates by the LBMA
can be found at https://www.lbma.org.uk/clearing_table.htm. The
three measures published by LBMA are: Volume, the amount of metal
transferred on average each day measured in millions of troy ounces;
value, measured in U.S. dollars, using the monthly average London PM
fixing price; and the number of transfers, which is the average
number recorded each day. The statistics exclude allocated and
unallocated balance transfers where the sole purpose is for
overnight credit and physical movements arranged by clearing members
in locations other than London.
\18\ Information regarding average daily volume estimates by the
COMEX can be found at https://www.nymex.com/jsp/markets.md_annual_
volume6.jsp#2. The statistics are based on gold futures contracts,
each of which relates to 100 troy ounces of gold.
---------------------------------------------------------------------------
2. Futures Exchanges
The Exchange states that the most significant gold futures
exchanges are the COMEX division of the NYMEX and the Tokyo Commodity
Exchange (``TOCOM'').\19\ Trading on these exchanges is based on fixed
delivery dates and transaction sizes for the futures and options
contracts traded.
---------------------------------------------------------------------------
\19\ The Exchange notes that there are other gold exchange
markets, such as the Istanbul Gold Exchange, the Shanghai Gold
Exchange, and the Hong Kong Chinese Gold & Silver Exchange Society.
---------------------------------------------------------------------------
The daily settlement price for COMEX gold futures contracts is
publicly available on the NYMEX Web site at https://www.nymex.com.\20\
The Exchange on its Web site at https://www.amex.com will include a
hyperlink to the NYMEX Web site for the purpose of disclosing gold
futures contract pricing. In addition, the Exchange represents that
COMEX gold futures prices, options on futures quotes, and last sale
information are widely disseminated through a variety of market data
vendors worldwide, including Bloomberg and Reuters. The Exchange
further represents that complete real-time data for COMEX gold futures
and options is available by subscription from Reuters and Bloomberg.
The NYMEX also provides delayed futures and options information on
current and past trading sessions and market news free of charge on its
Web site at https://www.nymex.com. The contract specifications for COMEX
gold futures contracts are also available from the NYMEX at its Web
site at https://www.nymex.com, as well as other financial informational
sources.
---------------------------------------------------------------------------
\20\ The COMEX daily settlement price for each gold futures
contract is established by a subcommittee of COMEX members shortly
after the close of regular trading on the COMEX. NYMEX Rule 3.43
sets forth the composition of the subcommittee requiring that it
consist of three (3) members that represent the gold market.
Specifically, the Rule calls for the subcommittee to include a floor
broker, a floor trader, and one who represents the trade. Rule 3.02
provides restrictions on Committee members and others who possess
material, non-public information. A Committee Member is prohibited
from disclosing for any purpose other than the performance of
official duties relating to the Committee, material, non-public
information obtained as a result of such person's participation on
the Committee. In addition, no person may trade for his own account
or for or on behalf of any other account, in any commodity interest
on the basis of any material, non-public information that such
person knows was obtained from such Committee member in violation of
Rule 3.02. Telephone conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Florence Harmon, Senior Special Counsel,
Division of Market Regulation, Commission, on December 3, 2004.
---------------------------------------------------------------------------
3. Gold Market Regulation
There is no direct regulation of the global OTC market in gold.
However, indirect regulation of some of the overseas participants does
occur in some capacity. In the United Kingdom, responsibility for the
regulation of 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 Market Act of 2000 (``FSM Act''). Under the FSM 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, and is a voluntary code of conduct among market
participants.
The Exchange states that participants in the United States OTC
market for gold are generally regulated by their institutional
supervisors, which regulate their activities in the other markets in
which they operate. For example, participating banks are regulated by
the banking authorities. In the United States, the Commodity Futures
Trading Commission (``CFTC''), an independent government agency with
the mandate to regulate commodity futures and options markets in the
United States, regulates market participants and has established rules
designed to prevent market manipulation, abusive trade practices, and
fraud.
The Exchange states that 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 price movements of futures markets by comparing them with cash
and other derivative markets' prices.
B. Trust Management and Structure
The Exchange proposes to list and trade Gold Shares, which
represent units of fractional undivided beneficial interest in and
ownership of the Trust. The purpose of the Trust is to hold gold
bullion.\21\ The investment objective of the Trust is for the Gold
Shares to reflect the performance of the price of gold, less the
Trust's expenses.
---------------------------------------------------------------------------
\21\ The Commission has previously approved the listing of
products for which the underlying was a commodity or otherwise was
not a security trading on a regulated market. See, e.g., Securities
Exchange Act Release Nos. 19133 (October 14, 1982) (approving the
listing of standardized options on foreign currencies); 36505
(November 22, 1995) (approving the listing of dollar-denominated
delivery foreign currency options on the Japanese Yen); and 36165
(August 29, 1995) (approving listing standards for, among other
things, currency and currency index warrants).
---------------------------------------------------------------------------
The Trust is an investment trust and is not managed like a
corporation or an active investment vehicle. The Trust has no board of
directors or officers or persons acting in a similar capacity. The
Exchange states that the Trust is not a registered investment company
under the 1940 Act and is not required to register under such Act. The
Sponsor (Barclays), Trustee (BNY), and Custodian (The Bank of Nova
Scotia) are not affiliated with one another or with the Exchange.
C. Trust Expenses and Management Fees
Generally, the assets of the Trust (e.g., gold bullion) will be
sold to pay Trust expenses and management fees. These expenses and fees
will reduce the value of an investor's Gold Share as gold bullion is
sold to pay such costs. Ordinary operating expenses of the Trust
include (1) fees paid to the Sponsor, (2) fees paid to the Trustee, (3)
fees paid to the Custodian, and (4) various Trust administration fees,
including printing and mailing costs, legal and audit fees,
registration fees, and Amex listing fees. The Trust's estimated
ordinary operating expenses are accrued daily and reflected in the net
asset value (``NAV'') of the Trust.
D. Description and Characteristics of the Gold Shares
1. Liquidity
The Exchange represents that a minimum of 150,000 Gold Shares will
be outstanding at the start of trading.\22\ The minimum number of
shares required to be outstanding at the start of trading is comparable
to requirements that have been applied to previously listed series of
trust issues receipts, Portfolio Depository Receipts and Index Fund
Shares.
---------------------------------------------------------------------------
\22\ See Amendment No. 5, supra note 7.
---------------------------------------------------------------------------
While the Gold Shares will trade on the Amex until 4:15 p.m. New
York time, liquidity in the OTC market for gold generally decreases
after 1:30 p.m. New York time when daily trading at
[[Page 3752]]
COMEX and other world gold trading centers ends. Trading spreads and
the resulting premium or discount on the Gold Shares may widen as a
result of reduced liquidity in the OTC gold market. The Exchange does
not believe that the Gold Shares will trade at a material discount or
premium to the value of the underlying gold held by the Trust because
of arbitrage opportunities.
2. Creation and Redemption of Trust Shares
Gold Shares will be issued only in baskets of 50,000 shares or
multiples thereof (such aggregation referred to as the ``Basket
Aggregation'' or ``Basket''). The Trust will issue and redeem the Gold
Shares on a continuous basis, by or through participants that have
entered into participant agreements (each, an ``Authorized
Participant'') \23\ with the Sponsor, Barclays, and the Trustee, BNY,
at the NAV per share next determined after an order to purchase or
redeem Gold Shares in a Basket Aggregation is received in proper form.
Authorized Participants are the only persons that may place orders to
create and redeem Baskets. Authorized Participants purchasing Baskets
will be able to separate a Basket into individual Gold Shares for
resale.
---------------------------------------------------------------------------
\23\ An ``Authorized Participant'' is a person, who at the time
of submitting to the trustee an order to create or redeem one or
more Baskets, (i) is a registered broker-dealer, (ii) is a
Depository Trust Company (``DTC'') Participant or an Indirect
Participant, and (iii) has in effect a valid Authorized Participant
Agreement.
---------------------------------------------------------------------------
Basket Aggregations will be issued in exchange for a corresponding
amount of gold, measured in fine ounces (the ``Basket Gold Amount'').
Similarly, the Trust will redeem Basket Aggregations of Gold Shares
based on the Basket Gold Amount. The Basket Gold Amount will be
determined at or about 4 p.m. each business day by the Trustee,
BNY.\24\ Initially, creation of a Basket will require 5,000 ounces of
gold. This Basket Gold Amount will change from day to day and decrease
over the life of the Trust due to the payment or accrual of fees and
other expenses payable by the Trust. On each day that the Amex is open
for regular trading, the BNY will adjust the quantity of gold
constituting the Basket Gold Amount as appropriate to reflect sales of
gold, any loss of gold that may occur, and accrued expenses.\25\ The
BNY will determine the Basket Gold Amount for a given business day by
multiplying the NAV, as described below, for each Gold Share by the
number of Gold Shares in each Basket (50,000) and dividing the
resulting product by that day's COMEX settlement price for the spot
month gold futures contract. Authorized Participants that submitted an
order prior to 4 p.m. to purchase a Basket must transfer the Basket
Gold Amount to the Trust in exchange for a Basket.
---------------------------------------------------------------------------
\24\ At the same time, the BNY will also determine an
``Indicative Basket Gold Amount'' that Authorized Participants can
use as an indicative amount of gold to be deposited for issuance of
the Gold Shares on the next business day. The Trustee will
disseminate daily the Indicative Basket Gold Amount on the Trust Web
site. Because the creation/redemption process is based entirely on
the physical delivery of gold (and does not contemplate a cash
component), the actual number of fine ounces required for the
Indicative Basket Gold Amount will not change intraday, even though
the value of the Indicative Basket Gold Amount may change based on
the market price of gold.
\25\ The Trust's expense ratio, in the absence of any
extraordinary expenses and liabilities, is established at 0.40% of
the net assets of the Trust. As a result, the amount of gold by
which the Basket Gold Amount will decrease each day will be
predictable (i.e. 1/365th of the net asset value of the Trust
multiplied by 0.40%).
---------------------------------------------------------------------------
Gold Shares are not individually redeemable, and Authorized
Participants that wish to redeem a Basket (i.e., 50,000 Gold Shares)
will receive the Basket Gold Amount in exchange for each Basket
surrendered. Upon the surrender of the Gold Shares and payment of the
applicable Trustee's fee and any expenses, taxes or charges, the BNY
will deliver to the redeeming Authorized Participant the amount of gold
corresponding to the redeemed Baskets. Unless otherwise requested by
the Authorized Participants, gold will then be delivered to the
redeeming Authorized Participants in the form of physical bars
only.\26\ Thus, although Authorized Participants place orders to
purchase or redeem Gold Shares throughout the trading day, the actual
Basket Gold Amount is determined at 4 p.m. or shortly thereafter.
---------------------------------------------------------------------------
\26\ If the amount of gold corresponding to the Basket Gold
Amount results in an amount that is less than a full gold bar
denomination, the Authorized Participant has the ability to take
and/or deliver fractional gold bar amounts. Telephone conversation
between Jeffrey Burns, Associate General Counsel, Amex, and Florence
Harmon, Senior Special Counsel, Division of Market Regulation,
Commission, on December 3, 2004.
---------------------------------------------------------------------------
The Bank of Nova Scotia (``BNS'') will be the custodian for the
Trust and responsible for safekeeping the gold.\27\ Gold deposited with
BNS must either (a) meet the requirements to be delivered in settlement
of a COMEX gold futures contract pursuant to the rules adopted by the
COMEX or (b) meet the specifications for weight, dimensions, fineness
(or purity), identifying marks and appearance of gold bars as set forth
in ``The Good Delivery Rules for Gold and Silver Bars'' published by
the LBMA.
---------------------------------------------------------------------------
\27\ If the total value of the Trust's gold held by the
custodian exceeds $2 billion, then the custodian will be under no
obligation to accept additional gold deliveries. In such a case, the
Trustee will retain an additional custodian.
---------------------------------------------------------------------------
Shortly after 4 p.m. each business day, the BNY will determine the
NAV for the Trust. The BNY will calculate the NAV by multiplying the
fine ounces of gold held by the Trust (after gold has been sold for
that day to pay that day's fees and expenses) by the daily settlement
value of the COMEX spot month gold futures contract.\28\ At any point
in time, the spot month contract is the futures contract then closest
to maturity. If a COMEX settlement price for a spot month gold futures
contract is not announced, the Trustee will use the most recently
announced spot month COMEX settlement price, unless the Trustee (BNY),
in consultation with the Sponsor (Barclays), determines that such price
is inappropriate. Once the value of the gold is determined, the BNY
will then subtract all accrued fees (other than the fees to be computed
by reference to the value of the Trust or its assets), expenses and
other liabilities of the Trust from the total value of gold and all
other assets of the Trust. This adjusted NAV is then used to compute
all fees (including the Trustee and Sponsor fees) that are calculated
from the value of Trust assets. To determine the NAV, the BNY will
subtract from the adjusted NAV the amount of accrued fees from the
value of Trust assets. The BNY will calculate the NAV per share by
dividing the NAV by the number of Gold Shares outstanding.
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\28\ As previously stated, the COMEX daily settlement price for
each gold futures contract is established by a subcommittee of COMEX
members shortly after the close of trading in New York. The daily
settlement price for each contract (delivery month) is derived from
the daily settlement price for the most active futures contract
month that is not necessarily the spot month. This settlement price
is the average of the highest and lowest priced trades reported
during the last one (1) minute of trading during regular trading
hours. For all other gold futures contract months (which may include
the spot month), the settlement prices are determined by COMEX based
upon differentials reflected in spread trades between adjacent
months, such differentials being directly or indirectly related to
the most active month. These differentials are the average of the
highest and lowest spread trades (trades based upon the differential
between the prices for two contract months) reported during the last
fifteen (15) minutes of trading during regular trading hours. In the
case that there were no such spread trades, the average of the bids
and offers for spread transactions during that last fifteen (15)
minute period are used. In the case where there are no bids and
offers during that time, the contracts are settled at prices
consistent with the differentials for other contract months that
were settled by the first or second method. If the third method is
used, the subcommittee of the COMEX members establishing those
settlement prices provides a record of the differentials from other
contract months that formed the basis for those settlements.
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[[Page 3753]]
3. Availability of Information Regarding Gold Shares
The Web site for the Trust at https://www.ishares.com, which will be
publicly accessible at no charge, will contain the following
information about Gold Shares: (a) The prior business day's NAV, Basket
Gold Amount, and reported closing price, and the present day's
Indicative Basket Gold Amount; (b) the mid-point of the bid-ask price
\29\ 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 (4) previous
calendar quarters; (e) the Prospectus; and (f) other applicable
quantitative information, such as expense ratios, trading volumes, and
the total return of the Gold Shares.\30\ The Exchange will provide a
hyperlink on its Web site at https://www.amex.com to the Trust's Web
site at https://www.ishares.com.
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\29\ The bid-ask price of Shares is determined using the highest
bid and lowest offer as of the time of calculation of the NAV.
\30\ Telephone conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Florence Harmon, Senior Special Counsel,
Division of Market Regulation, Commission, on January 18, 2005 (as
to examples of ``other quantitative information'').
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The Exchange will also make available on its Web site daily trading
volume, closing prices, and the NAV from the previous day of the Gold
Shares. Amex will also disseminate during regular Amex trading hours
from 9:30 a.m. to 4:15 p.m. New York time, through the facilities of
the CTA, the last sale price for Gold Shares on a real-time basis.\31\
Amex will disseminate each day the prior day's NAV and shares
outstanding through the facilities of the CTA. In addition, Amex will
disseminate the Indicative Trust Value on a per Gold Share basis every
15 seconds through the Consolidated Tape during regular Amex trading
hours of 9:30 a.m. to 4:15 p.m. New York time.\32\ Shortly after 4 p.m.
each business day, the BNY, Amex, and Barclays (Sponsor) will
disseminate the NAV for the Gold Shares, the Basket Gold Amount (for
orders placed during the day), and the Indicative Basket Gold Amount
(for use by Authorized Participants contemplating placing orders the
following business day). The Basket Gold Amount, the Indicative Basket
Gold Amount, and the NAV are communicated by the BNY to all Authorized
Participants via facsimile or electronic mail message and will be
available on the Trust's Web site at https://www.ishares.com.
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\31\ Telephone conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Florence Harmon, Senior Special Counsel,
Division of Market Regulation, Commission, on January 18, 2005 (as
to real-time dissemination of last sale price).
\32\ The Indicative Trust Value will be calculated based on the
amount of gold required for creations and redemptions on that day
(e.g., Indicative Basket Gold Amount) and a price of gold derived
from the most recently reported trade price in the active gold
futures contract. The prices reported for the active contract month
will be adjusted based on the prior day's spread differential
between settlement values for that contract and the spot month
contract. In the event that the spot month contract is also the
active contract, the last sale price for the active contract will
not be adjusted.
The Indicative Trust Value will not reflect changes to the price
of gold between the close of trading at the COMEX, typically 1:30
p.m. New York time, and the open of trading on the NYMEX ACCESS
market at 2 p.m. New York time. While the market for the gold
futures is open for trading, the Indicative Trust Value can be
expected to closely approximate the value per share of the
Indicative Basket Gold Amount. The Indicative Trust Value on a per
Gold Share basis disseminated during Amex trading hours should not
be viewed as a real time update of the NAV, which is calculated only
once a day.
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4. Information About Underlying Gold Holdings
There is a considerable amount of gold price and gold market
information available on public Web sites and through professional and
subscription services. In most instances, real-time information is only
available for a fee, and information available free of charge is
subject to delay (typically 20 minutes). The Exchange states that
investors may obtain on a 24-hour basis gold pricing information based
on the spot price for a troy ounce of gold from various financial
information service providers, such as Reuters and Bloomberg. Reuters
and Bloomberg provide at no charge on their Web sites delayed
information regarding the spot price of gold and last sale prices of
gold futures, as well as information about news and developments in the
gold market. Reuters and Bloomberg also offer a professional service to
subscribers for a fee that provides information on gold prices directly
from market participants. In addition, an organization named EBS
provides an electronic trading platform to institutions such as bullion
banks and dealers for the trading of spot gold, as well as a feed of
live streaming prices to Reuters and Moneyline Telerate subscribers.
As previously stated, the Exchange states that complete real-time
data for gold futures and options prices traded on the COMEX is
available by subscription from Reuters and Bloomberg. The closing price
and settlement prices of the COMEX gold futures contracts are publicly
available from the NYMEX at https://www.nymex.com, automated quotation
systems, published or other public sources, or on-line information
services such as Bloomberg or Reuters. The NYMEX also provides delayed
futures and options information on current and past trading sessions
and market news free of charge on its Web site.
E. Criteria for Initial Share Issuance and Continued Listing
The Trust will be subject to the criteria in Rules 1201A and 1202A
for initial and continued listing of Gold Shares. The initial listing
standards provide for a minimum number of shares to be outstanding at
the time of commencement of trading on the Exchange. The continued
listing criteria provides for the delisting or removal from listing of
the Gold Shares under any of the following circumstances:
Following the initial twelve month period from the date of
commencement of trading of the Gold Shares: (i) If the Trust has more
than 60 days remaining until termination and there are fewer than 50
record and/or beneficial holders of the Gold Shares for 30 or more
consecutive trading days; (ii) if the Trust has fewer than 50,000 Gold
Shares issued and outstanding; or (iii) if the market value of all Gold
Shares is less than $1,000,000.
If the value of the underlying gold is no longer
calculated or available on at least a 15-second delayed basis from a
source unaffiliated with the sponsor, trust, custodian or the Exchange,
or the Exchange stops providing a hyperlink on its Web site to any such
unaffiliated gold value.
The Indicative Trust Value is no longer made available on
at least a 15-second delayed basis.
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
F. Original and Annual Listing Fees
The Amex original listing fee applicable to the listing of the Gold
Trust is $5,000. In addition, the annual listing fee applicable under
Section 141 of the Amex Company Guide will be based upon the year-end
aggregate number of shares in all series of the Gold Trust outstanding
at the end of each calendar year and range from $15,000 to $30,000 per
year.
G. Exchange Trading Rules and Policies
Under Amex Rules 1200A et seq., Commodity-Based Trust Shares are
[[Page 3754]]
generally subject to the Amex trading rules applicable to equity
securities, including, among others, rules governing priority, parity
and precedence of orders, specialist responsibilities, account opening,
and customer suitability (Amex Rule 411).
Initial equity margin requirements of 50% will apply to
transactions in Gold Shares. Gold Shares will trade on the Amex until
4:15 p.m. New York time each business day and will trade in a minimum
price variation of $0.01 pursuant to Amex Rule 127. Trading rules
pertaining to odd-lot trading in Amex equities (Amex Rule 205) will
also apply.
Amex Rule 154, Commentary .04(c) provides that stop and stop limit
orders to buy or sell a security (other than an option, which is
covered by Rule 950(f) and Commentary thereto) the price of which is
derivatively priced based upon another security or index of securities,
may with the prior approval of a Floor Official, be elected by a
quotation, as set forth in Commentary .04(c)(i-v). The Exchange has
designated Gold Shares as eligible for this treatment.\33\
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\33\ See Securities Exchange Act Release No. 29063 (April 10,
1991), 56 FR 15652 (April 17, 1991) at note 9, regarding the
Exchange's designation of equity derivative securities as eligible
for such treatment under Amex Rule 154, Commentary .04(c).
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Gold Shares will be deemed ``Eligible Securities,'' as defined in
Amex Rule 230, for purposes of the Intermarket Trading System Plan and
therefore will be subject to the trade through provisions of Amex Rule
236, which require that Amex members avoid initiating trade-throughs
for ITS securities.
Specialist transactions of Gold Shares made in connection with the
creation and redemption of Gold Shares will not be subject to the
prohibitions of Amex Rule 190.\34\ Unless exemptive or no-action relief
is available, Gold Shares will be subject to the short sale
requirements of Rule 10a-1 and Regulation SHO under the Act.\35\ If
exemptive or no-action relief is provided, the Exchange will issue a
notice detailing the terms of the exemption or relief.
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\34\ See Commentary .05 to Amex Rule 190.
\35\ The Gold Trust has requested exemptive relief in connection
with the trading of Gold Shares from the operation of certain short
sale requirements of Rule 10a-1 and may seek no-action relief from
Rule 200(g) of Regulation SHO under the Act. See 17 CFR 240.10a-1;
17 CFR 242.200(g). The requested relief is currently pending with
the Commission staff in the Division of Market Regulation. If
granted, Gold Shares would be exempt from Rule 10a-1, permitting
sales without regard to the ``tick'' requirements of Rule 10a-1.
Rule 10a-1(a)(1)(i) provides that a short sale of an exchange-traded
security may not be effected (i) below the last regular-way sale
price (an ``uptick'') or (ii) at such price unless such price is
above the next preceding different price at which a sale was
reported (a ``zero-plus tick''). No-action relief from the marking
requirements of Rule 200(g) of Regulation SHO would permit broker-
dealers, subject to certain conditions, to mark short sales in the
Gold Shares ``short,'' rather than ``short exempt.''
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The Exchange represents that the Gold Shares will generally be
subject to the Exchange's stabilization rule, Amex Rule 170, except
that specialists may buy on ``plus ticks'' and sell on ``minus ticks,''
in order to bring the Gold Shares into parity with the underlying gold
and/or futures price. Proposed Commentary .01 to proposed Amex Rule
1203A sets forth this limited exception to Amex Rule 170.
Amex states that the adoption of Amex Rule 1203A relating to
certain specialist prohibitions will address potential conflicts of
interest in connection with acting as a specialist in the Gold Shares.
Specifically, Amex Rule 1203A provides that the prohibitions in Amex
Rule 175(c) apply to a specialist in the Gold Shares so that the
specialist or affiliated person may not act or function as a market
maker in the underlying gold, related gold futures contract or option,
or any other related gold derivative. An affiliated person of the
specialist consistent with Amex Rule 193 (Affiliated Persons of
Specialists) may be afforded an exemption to act in a market making
capacity, other than as a specialist in the Gold Shares on another
market center, in the underlying gold, related gold futures, options on
futures, or any other related gold derivative. In particular, proposed
Rule 1203A provides that an approved person of an equity specialist
that has established and obtained Exchange approval for procedures
restricting the flow of material, non-public market information between
itself and the specialist member organization, and any member, officer,
or employee associated therewith, may act in a market making capacity,
other than as a specialist in the Gold Shares on another market center,
in the underlying commodity, related commodity futures or options on
commodity futures, or any other related commodity derivatives.
H. Surveillance
Amex represents that its surveillance procedures applicable to
trading of Gold Shares are adequate to deter manipulation, will be
similar to those applicable to other trust issued receipts and
exchange-traded fund shares (``ETFs''), and will incorporate and rely
upon existing Amex surveillance procedures governing options and
equities. The Exchange currently has in place an Information Sharing
Agreement with the NYMEX for the purpose of providing information in
connection with trading in or related to COMEX gold futures contracts.
Also, the Exchange states that adoption of Rule 1204A will
facilitate surveillance of the specialist handling Gold Shares. Amex
Rule 1204A requires that the specialist handling the Gold Shares to
provide the Exchange with information relating to its trading in
physical gold, gold futures contracts, options on gold futures, or any
other gold derivative. Amex Rule 1204A also prohibits the specialist in
the Gold Shares from using any material nonpublic information received
from any person associated with a member or employee of such person
regarding trading by such person or employee in physical gold, gold
futures contracts, options on gold futures, or any other gold
derivatives (including the Gold Shares).
As a general matter, the Exchange has regulatory jurisdiction over
its members, member organizations, and approved persons of a member
organization. The Exchange also has regulatory jurisdiction over any
person or entity controlling a member organization, as well as a
subsidiary or affiliate of a member organization that is in the
securities business. A subsidiary or affiliate of a member organization
that does business only in commodities 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.
I. Information Circular
The Amex will distribute an information circular (``Information
Circular'') to its members in connection with the trading of Gold
Shares. The Information Circular will discuss the special
characteristics and risks of trading this type of security.
Specifically, the Information Circular, among other things, will
discuss what the Gold Shares are, how a basket is created and redeemed,
the requirement that members and member firms deliver a prospectus to
investors purchasing the Gold Shares prior to or concurrently with the
confirmation of a transaction, applicable Amex rules, dissemination
information regarding the per share Indicative Trust Value, trading
information, and applicable suitability rules. The Information Circular
will also explain that the Gold Trust is subject to various fees and
expenses described in
[[Page 3755]]
the Registration Statement and that the number of ounces of gold
required to create a basket or to be delivered upon a redemption of a
basket will gradually decrease over time because the Gold Shares
comprising a basket will represent a decreasing amount of gold due to
the sale of the Gold Trust's gold to pay Trust expenses. The
Information Circular will also reference the fact that there is no
regulated source of last sale information regarding physical gold and
that the Commission has no jurisdiction over the trading of gold as a
physical commodity.
The Information Circular will also notify members and member
organizations about the procedures for purchases and redemptions of
Gold Shares in baskets and that Gold Shares are not individually
redeemable but are redeemable only in basket-size aggregations or
multiples thereof. The Information Circular will advise members of
their suitability obligations with respect to recommended transactions
to customers in the Gold Shares and inform them of Amex rules regarding
trading halts applicable to Gold Shares. The Information Circular will
also discuss any relief, if granted, by the Commission or the staff
from any rules under the Act.
The Information Circular will disclose that the NAV for Gold Shares
will be disseminated shortly after 4 p.m. each trading day based on the
COMEX daily settlement value, which is disseminated shortly after 1:30
p.m. New York time each trading day.
J. Suitability
As stated, the Information Circular will inform members and member
organizations of the characteristics of the Gold Trust and of
applicable Exchange rules, as well as of the requirements of Amex Rule
411 (Duty to Know and Approve Customers).
The Exchange notes that pursuant to Rule 411, members and member
organizations are required in connection with recommending transactions
in the Gold Shares to have a reasonable basis to believe that a
customer is suitable for the particular investment given reasonable
inquiry concerning the customer's investment objectives, financial
situation, needs, and any other information known by such member.
K. Trading Halts
Amex Rule 117 sets forth the trading halt parameters, i.e.,
``circuit breakers,'' applicable to the Gold Shares during periods of
extraordinary volatility. In addition to the parameters set forth in
Rule 117, the Exchange will halt trading in Gold Shares if trading in
the underlying COMEX gold futures contract is halted or suspended.
Third, with respect to a halt in trading that is not specified above,
the Exchange may also consider other relevant factors and the existence
of unusual conditions or circumstances that may be detrimental to the
maintenance of a fair and orderly market.
III. Discussion
After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the Act \36\ and the rules
and regulations thereunder applicable to a national securities
exchange.\37\
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\36\ 36 15 U.S.C. 78f(b).
\37\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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A. Surveillance
Information sharing agreements with markets trading securities
underlying a derivative product are an important part of a self-
regulatory organization's ability to monitor for trading abuses in
derivative products. Although an information sharing agreement with the
OTC gold market is not possible, the Commission believes that the
unique liquidity and depth of the gold market, together with Amex's
information sharing agreement with NYMEX (of which COMEX is a division)
and Exchange Rules 1203A and 1204A, create the basis for Amex to
monitor for fraudulent and manipulative practices in the trading of the
Gold Shares.\38\
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\38\ The Commission notes that it recently reached a similar
conclusion with respect to a proposal by the New York Stock Exchange
to list and trade trust shares that, as in the Amex proposal,
correspond to a fixed amount of gold. See Securities Exchange Act
Release No. 50603 (October 28, 2004), 69 FR 64614 (November 5,
2004). In that recent order, the Commission noted that it had
previously approved the listing and trading of foreign currency
options, for which there is no self-regulatory organization or
Commission surveillance of the underlying markets, on the basis that
the magnitude of the underlying currency market militated against
manipulations through inter-market trading activity. See id., at
64619 (Securities Exchange Act Release Nos. 19133 (October 14, 1982)
(approving the listing of standardized options on foreign currencies
); 36505 (November 22, 1995) (approving the listing of dollar-
denominated delivery foreign currency options on the Japanese Yen);
and 36165 (August 29, 1995) (approving listing standards for, among
other things, currency and currency index warrants).
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The OTC market for gold is extremely deep and liquid. The LBMA
estimates that the monthly average daily volume figures published by
the LBMA for 2003 range from a high of 19 million to a low of 13.6
million troy ounces per day.\39\ In addition, COMEX figures for 2003
indicate that the average daily volume for gold futures contracts was
4.9 million ounces per day.\40\
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\39\ There are no authoritative published figures for overall
worldwide volume in gold trading. The LBMA publishes statistics
compiled from the six members offering clearing services.
Information regarding clearing volume estimates by the LBMA can be
found at https://www.lbma.org.uk/clearing_table.htm.
\40\ Information regarding average daily volume estimates by the
COMEX (a division of NYMEX) can be found at https://www.nymex.com/
jsp/markets/md_annual_volume6.jsp#2. The statistics are based on
gold futures contracts, each of which relates to 100 ounces of gold.
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Finally, Amex Rule 1204A will require that the specialist handling
the Gold Shares provide the Exchange with information relating to its
trading in physical gold, gold futures contracts, options on gold
futures, or any other gold derivative. The Commission believes these
reporting and record-keeping requirements will assist the Exchange in
identifying situations potentially susceptible to manipulation. Amex
Rule 1204A will also prohibit the specialist in the Gold Shares from
using any material nonpublic information received from any person
associated with a member or employee of such person regarding trading
by such person or employee in physical gold, gold futures contracts,
options on gold futures, or any other gold derivatives (including the
Gold Shares). In addition, Amex Rule 1203A will prohibit the specialist
in the Gold Shares from being affiliated with a market maker in
physical gold, gold futures, or options on gold futures unless adequate
information barriers are in place and approved by the Exchange.
B. Dissemination of Information About the Gold Shares
The Commission finds that sufficient venues for obtaining reliable
gold price information exist so that investors in the Gold Shares can
adequately monitor the underlying spot market in gold relative to the
NAV of their Gold Shares. As discussed more fully above, the Commission
notes that there is a considerable amount of gold price and gold market
information available 24 hours per day on public Web sites and through
professional and subscription services. In addition, the Trustee will
disseminate each day on the Trust Web site, an estimated amount
representing the Basket Gold Amount. The Exchange will also disseminate
through the CTA the Indicative Trust Value on a per share basis every
15 seconds during regular Amex trading hours of 9:30 a.m. to 4:15 p.m.
New York time (except between 1:30 p.m. and 2 p.m., the time period
from the close of regular trading of the COMEX gold futures contract
and the start of trading of COMEX gold futures contracts on NYMEX
ACCESS).
[[Page 3756]]
The last sale price for Gold Shares will also be disseminated on a
real-time basis over the Consolidated Tape.
The Commission also notes that the Trust's Web site at https://
www.ishares.com is and will be publicly accessible at no charge and
will contain the NAV of the Gold Shares and the Basket Gold Amount as
of the prior business day, the Bid-Ask Price, and a calculation of the
premium or discount of the Bid-Ask Price in relation to the closing
NAV. Additionally, the Trust's Web site, to which the Amex will link,
will also provide 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, the Prospectus, and other applicable quantitative
information. The Commission believes that dissemination of this
information will facilitate transparency with respect to the Gold
Shares and diminish the risk of manipulation or unfair informational
advantage.
C. Listing and Trading
Further, the Commission finds that the Exchange's proposed rules
and procedures for the listing and trading of the proposed Gold Shares
are consistent with the Act. For example, Gold Shares will be subject
to Amex rules governing trading halts, responsibilities of the
specialist, and customer suitability requirements. In addition, the
Gold Shares will be subject to Amex Rules 1201A and 1202A for initial
and continued listing of Gold Shares.
The Commission believes that listing and delisting criteria for the
Gold Shares should help to maintain a minimum level of liquidity and
therefore minimize the potential for manipulation of the Gold Shares.
Finally, the Commission believes that the Exchange's Information
Circular adequately will inform members and member organizations about
the terms, characteristics, and risks in trading the Gold Shares.
IV. Amendment No. 5
The Amex has requested that the Commission grant accelerated
approval to Amendment No. 5 to the proposed rule change.\41\ The
Commission believes that the amendments proposed in Amendment No. 5
regarding the requirement for separate rule filings under Section
19(b)(2) of the Act for Commodity-Based Trust Shares, certain fees and
expenses, and other minor changes to the proposal, provide clarity and
additional detail, but do not change the substance of the proposal.
Because the amendment clarifies and makes other minor changes to the
proposal, the Commission therefore finds good cause, consistent with
Section 19(b)(2) of the Act,\42\ to approve Amendment No. 5 to the
proposed rule change prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register.
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\41\ See Amendments Nos. 1 and 2, supra notes 4 and 5.
\42\ 15 U.S.C. 78s(b)(2).
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Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 5
is consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2004-38 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-Amex-2004-38. 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 (https://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 Section, 450 Fifth
Street, NW., Washington, DC 20549. Copies of such filing also will be
available on Amex's Web site (https://www.amex.com) and for inspection
and copying at the Amex's Office of the Secretary. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-Amex-2004-38 and should be
submitted on or before February 16, 2005.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\43\ that the proposed rule change (SR-Amex-2004-38), as amended,
is hereby approved.
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\43\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\44\
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\44\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-283 Filed 1-25-05; 8:45 am]
BILLING CODE 8010-01-P
