Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change and Amendments No. 1 and 2 Thereto Relating to the Listing and Trading of the DB Commodity Index Tracking Fund, 74850-74859 [E5-7419]
Download as PDF
74850
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
concentration is applicable only to the
performance assessment and not to the
determination of waste classification.
Because the rate of erosion at the site is
relatively high, a second intruder scenario is
evaluated in which most of the cover is
eroded over the analysis time period. Some
cover is expected to remain. The intruder
constructs a home in the area over the tank.
Because the direct exposure pathway is the
only major contributing pathway for this
scenario, the actual waste distribution can be
used in the performance assessment.
Alternatively, the average concentration of
waste over the stabilizing materials can be
used in the performance assessment because
there would be less shielding for this
calculation and the doses would likely be
conservative.
The doses to a public receptor who is
offsite when institutional controls are in
place and at the edge of a buffer zone near
the closed tanks after institutional controls
end is evaluated with an all-pathways
performance assessment. The performance
assessment represents expected degradation
of the system over time. The modeling of the
source term represents the waste as two
zones, one zone of higher hydraulic
conductivity and reducing conditions that
persist for 500 years and one zone of lower
hydraulic conductivity and reducing
conditions that persist for the entire analysis
period (10,000 years). The first zone
represents waste between the tank surface
and the added grout which may be exposed
to increased moisture flow/oxidation because
of shrinkage effects or degradation of the
grout itself over time from various attack
mechanisms. The second zone represents
waste that was immobilized in the center of
the reducing grout by the pour sequence of
the tank closure operations. The
concentrations of radionuclides in both zones
should be represented in the performance
assessment by the expected distribution of
contamination within the zones, or
distributions that can be demonstrated to be
conservative with respect to release and
exposure modeling. The potential pathways
of water to the waste may depend on the
discrete features of the system (e.g., cooling
coils, shrinkage effects, fractures).
III. Further Information
Documents related to NRC’s reviews
of waste determinations are available
electronically at the NRC’s Electronic
Reading Room at https://www.nrc.gov/
reading-rm/adams.html. From this site,
you can access the NRC’s Agencywide
Document Access and Management
System (ADAMS), which provides text
and image files of NRC’s public
documents. Recent documents related to
reviews of NRC waste determinations
can be found under Dockets Numbers
PROJ0734, PROJ0735, PROJ0736, and
POOM–32. If you do not have access to
ADAMS or if there are problems in
accessing the documents located in
ADAMS, contact the NRC Public
Document Room (PDR) Reference staff
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
at 1–800–397–4209, 301–415–4737 or
by e-mail to pdr@nrc.gov.
Documents may also be viewed
electronically on the public computers
located at the NRC’s Public Document
Room (PDR), O 1 F21, One White Flint
North, 11555 Rockville Pike, Rockville,
MD 20852. The PDR reproduction
contractor will copy documents for a
fee.
Dated at Rockville, MD this 5th day of
December, 2005.
For the Nuclear Regulatory Commission.
Scott Flanders,
Deputy Director, Environmental and
Performance Assessment Directorate,
Division of Waste Management and
Environmental Protection, Office of Nuclear
Materials Safety and Safeguards.
[FR Doc. E5–7450 Filed 12–15–05; 8:45 am]
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: The Office of the Secretary at
(202) 551–5400.
Dated: December 13, 2005.
Jonathan G. Katz,
Secretary.
[FR Doc. 05–24186 Filed 12–14–05; 11:09
am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52940; File No. SR–Amex–
2005–059]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing of a Proposed Rule Change
and Amendments No. 1 and 2 Thereto
Relating to the Listing and Trading of
the DB Commodity Index Tracking
Fund
Sunshine Act Meeting
December 12, 2005.
BILLING CODE 7590–01–P
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold the following
meeting during the week of December
19, 2005:
A Closed Meeting will be held on
Tuesday, December 20, 2005 at 2 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters may also be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c), (3), (5), (7), (8), (9)(B),
and (10) and 17 CFR 200.402(a), (3), (5),
(7), (8), 9(ii) and (10) permit
consideration of the scheduled matters
at the Closed Meeting.
Commissioner Campos, as duty
officer, voted to consider the items
listed for the closed meeting in closed
session.
The subject matter of the Closed
Meeting scheduled for Tuesday,
December, 20, 2005 will be:
Formal orders of investigations;
Institution and settlement of injunctive
actions;
Institution and settlement of
administrative proceedings of an
enforcement nature; and
Post-argument discussion.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on May 27, 2005, the American Stock
Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Amex. On
September 15, 2005, the Amex filed
Amendment No. 1 to the proposed rule
change.3 On November 15, 2005, the
Amex filed Amendment No. 2 to the
proposed rule change.4 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add new
Commentary .07 to Amex Rule 1202 to
permit the listing and trading of shares
of trust issued receipts (‘‘TIRs’’) that
invest in shares or securities (the
‘‘Investment Shares’’) of a trust,
partnership, commodity pool or other
similar entity that holds investments
comprising, or otherwise based on, any
combination of securities, futures
contracts, swaps, forward contracts,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Partial Amendment dated September 15,
2005 (‘‘Amendment No. 1’’). In Amendment No. 1,
the Amex made clarifying changes to the purpose
section.
4 See Partial Amendment dated November 15,
2005 (‘‘Amendment No. 2’’).
2 17
E:\FR\FM\16DEN1.SGM
16DEN1
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
traded on the Exchange subject to
application of the following criteria:
(1) Initial Listing—The Exchange will
establish a minimum number of receipts
required to be outstanding at the time of
commencement of trading on the
Exchange.
(2) Continued Listing—The Exchange
will remove from listing Trust Issued
Receipts based on an Investment Share
under any of the following
circumstances:
(i) if following the initial twelve month
Trading of Trust Issued Receipts
period following the commencement of
Rules 1200–1201. No Change.
trading of the shares, (A) the Issuer has
Rule 1202(a) through (e). No Change.
more than 60 days remaining until
termination and there are fewer than 50
Commentary
record and/or beneficial holders of
.01 through .06 No Change
Trust Issued Receipts for 30 or more
.07 (a) The provisions of this
consecutive trading days; (B) if the
Commentary apply only to Trust Issued
Issuer has fewer than 50,000 securities
Receipts where the trust holds
or shares issued and outstanding; or (C)
‘‘Investment Shares’’ as defined below.
if the market value of all securities or
Rules that reference Trust Issued
shares issued and outstanding is less
Receipts shall also apply to Trust Issued than $1,000,000;
Receipts investing in Investment Shares.
(ii) if the value of an underlying index
(b) Definitions. The following terms as or portfolio is no longer calculated or
used in this Commentary shall, unless
available on at least a 15-second
the context otherwise requires, have the delayed basis or the Exchange stops
meanings herein specified:
providing a hyperlink on its website to
(1) Investment Shares. The term
any such asset or investment value;
‘‘Investment Shares’’ means a security
(iii) if the Indicative Value is no
(a) that is issued by a trust, partnership, longer made available on at least a 15commodity pool or other similar entity
second delayed basis; or
that invests in any combination of
(iv) if such other event shall occur or
futures contracts, options on futures
condition exists which in the opinion of
contracts, forward contracts,
the Exchange makes further dealings on
commodities, swaps or high credit
the Exchange inadvisable.
quality short-term fixed income
Upon termination of the trust, the
securities or other securities; and (b)
Exchange requires that Trust Issued
issued and redeemed daily at net asset
Receipts issued in connection with such
value in amounts correlating to the
trust be removed from Exchange listing.
number of receipts created and
A trust may terminate in accordance
redeemed in a specified aggregate
with the provisions of the trust
minimum number.
prospectus, which may provide for
(2) Futures Contract. The term
termination if the value of the trust falls
‘‘futures contract’’ is commonly known
as a ‘‘contract of sale of a commodity for below a specified amount.
(3) Term—The stated term of the trust
future delivery’’ set forth in Section 2(a)
shall be as stated in the prospectus.
of the Commodity Exchange Act.
However, such entity may be terminated
(3) Forward Contract. A forward
under such earlier circumstances as
contract is a contract between two
may be specified in the trust prospectus.
parties to purchase and sell a specific
(4) Trustee—The following
quantity of a commodity at a specified
requirements apply:
price with delivery and settlement at a
(i) The trustee of a trust must be a
future date. Forwards are traded overthe-counter (‘‘OTC’’) and not listed on a trust company or banking institution
having substantial capital and surplus
futures exchange.
and the experience and facilities for
(c) Designation. The Exchange may
handling corporate trust business. In
list and trade Trust Issued Receipts
cases where, for any reason, an
investing in Investment Shares. Each
issue of a Trust Issued Receipt based on individual has been appointed as
trustee, a qualified trust company or
a particular Investment Share shall be
banking institution must be appointed
designated as a separate series and
co-trustee.
shall be identified by a unique symbol.
(ii) No change is to be made in the
(d) Initial and Continued Listing.
trustee of a listed issue without prior
Trust Issued Receipts based on
notice to and approval of the Exchange.
Investment Shares will be listed and
options on futures contracts,
commodities or portfolios of
investments. Also in this proposal, the
Exchange, pursuant to proposed
Commentary .07 to Amex Rule 1202,
seeks to list and trade the DB
Commodity Index Tracking Fund (the
‘‘Trust’’ or ‘‘Fund’’).
Below is the text of the proposed rule
change. Proposed new language is in
italics.
*
*
*
*
*
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
74851
(5) Voting—Voting rights shall be as
set forth in the applicable trust
prospectus.
(e) Rule 175(c) shall be deemed to
prohibit an equity specialist, his
member organization, or any other
member, limited partner, officer, or
approved person thereof from acting as
a market maker or functioning in any
capacity involving market-making
responsibilities in an underlying asset or
commodity, related futures or options
on futures, or any other related
derivatives. However, an approved
person of an equity specialist that has
established and obtained Exchange
approval of procedures restricting the
flow of material, non-public market
information between itself and the
specialist member organization
pursuant to Rule 193, and any member,
officer, or employee associated
therewith, may act in a market making
capacity, other than as a specialist in
the Trust Issued Receipts on another
market center, in the underlying asset or
commodity, related futures or options
on futures, or any other related
derivatives.
(f) In connection with the Trust Issued
Receipts listed under this Commentary,
Commentaries .01, .02 and .07 of Rule
170 shall not apply to the trading of
receipts for the purpose of bringing the
price of the receipt into parity with the
value of the underlying asset or
commodity on which the receipts are
based, with the net asset value of the
receipts or with a futures contract on the
underlying asset or commodity on
which the receipts are based. Such
transactions must be effected in a
manner that is consistent with the
maintenance of a fair and orderly
market and with the other requirements
of this rule and the supplementary
material herein.
(g)(1) The member organization acting
as specialist in Trust Issued Receipts is
obligated to conduct all trading in the
receipts in its specialist account, subject
only to the ability to have one or more
investment accounts, all of which must
be reported to the Exchange (See Rule
170). In addition, the member
organization acting as specialist in the
Trust Issued Receipts must file, with the
Exchange, in a manner prescribed by
the Exchange, and keep current a list
identifying all accounts for trading the
underlying physical asset or commodity,
related futures or options on futures, or
any other related derivatives, which the
member organization acting as
specialist may have or over which it
may exercise investment discretion. No
member organization acting as
specialist in the Trust Issued Receipts
shall trade in the underlying physical
E:\FR\FM\16DEN1.SGM
16DEN1
74852
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
asset or commodity, related futures or
options on futures, or any other related
derivatives, in an account in which a
member organization acting as
specialist, directly or indirectly, controls
trading activities, or has a direct interest
in the profits or losses thereof, which
has not been reported to the Exchange
as required by this Rule.
(2) In addition to the existing
obligations under Exchange rules
regarding the production of books and
records (See, e.g. Rule 31), the member
organization acting as a specialist in
Trust Issued Receipts shall make
available to the Exchange such books,
records or other information pertaining
to transactions by such entity or any
member, member organization, limited
partner, officer or approved person
thereof, registered or non-registered
employee affiliated with such entity for
its or their own accounts in the
underlying physical asset or commodity,
related futures or options on futures, or
any other related derivatives, as may be
requested by the Exchange.
(3) In connection with trading the
underlying physical asset or commodity,
related futures or options on futures or
any other related derivative (including
Trust Issued Receipts), the specialist
registered as such in Trust Issued
Receipts shall not use any material
nonpublic information received from
any person associated with a member,
member organization or employee of
such person regarding trading by such
person or employee in the physical asset
or commodity, futures or options on
futures, or any other related derivatives.
(h) Neither the Exchange nor any
agent of the Exchange shall have any
liability for damages, claims, losses or
expenses caused by any errors,
omissions, or delays in calculating or
disseminating any underlying asset or
commodity value, the current value of
the underlying asset or commodity if
required to be deposited to the trust in
connection with issuance of Trust
Issued Receipts; net asset value; or other
information relating to the purchase,
redemption or trading of Trust Issued
Receipts, resulting from any negligent
act or omission by the Exchange or any
agent of the Exchange, or any act,
condition or cause beyond the
reasonable control of the Exchange or
its agent, including, but not limited to,
an act of God; fire; flood; extraordinary
weather conditions; war; insurrection;
riot; strike; accident; action of
government; communications or power
failure; equipment or software
malfunction; or any error, omission or
delay in the reports of transactions in an
underlying asset or commodity.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
(i) The Exchange will file separate
proposals under Section 19(b) of the
Securities Exchange Act of 1934 before
listing and trading Trust Issued Receipts
based on separate Investment Shares.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Amex included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below, and the most
significant aspects of such statements
are set forth in Sections A, B, and C
below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add new
Commentary .07 to Amex Rule 1202 for
the purpose of permitting the listing and
trading of TIRs where the trust holds
shares (‘‘Investment Shares’’) that are
issued by a trust, partnership,
commodity pool, or other similar entity
that holds investments in any
combination of securities, futures
contracts, options on futures contracts,
swaps, forward contracts, commodities
or portfolios of investments.
Additionally, in this proposal, the Amex
initially proposes to list and trade the
shares (the ‘‘Shares’’) of a specific trust
that invests in the securities of a
commodity pool (the ‘‘Fund’’). The
Fund will invest substantially all of its
assets in the common units of beneficial
interests of DB Commodity Index
Tracking Master Fund (the ‘‘Master
Fund’’). The Master Fund is a trust
created under Delaware law that will
consist primarily of futures contracts on
the commodities comprising the
Deutsche Bank Liquid Commodity
IndexTM—Excess Return (the ‘‘DBLCI’’
or ‘‘Index’’). Both the Fund and the
Master Fund are commodity pools
operated by DB Commodity Services
LLC (the ‘‘Managing Owner’’). The
Managing Owner will be registered as a
commodity pool operator (the ‘‘CPO’’)
and commodity trading advisor (the
‘‘CTA’’) with the Commodity Futures
Trading Commission (‘‘CFTC’’) 5 and a
5 See
Part 4 of CFTC Regulation, 17 CFR 4.1 et
al.
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
member of the National Futures
Association (‘‘NFA’’).
The Managing Owner will serve as the
CPO and CTA of the Fund and the
Master Fund. In this particular case, the
Managing Owner of the Master Fund
will manage only the futures contracts
in order to track the performance of the
Index. The Master Fund may also
include U.S. Treasury securities for
margin purposes and other high credit
quality short-term fixed income
securities. However, the Exchange states
that the Master Fund is not ‘‘actively
managed,’’ which typically involves
effecting changes in the composition of
a portfolio on the basis of judgment
relating to economic, financial and
market considerations with a view to
obtaining positive results under all
market conditions, but instead, seeks to
track the performance of the Index.
Introduction
In September 1999, the Exchange
adopted rules for the listing and trading
of TIRs.6 TIRs are negotiable receipts
issued by trusts that represent investors’
discrete identifiable and undivided
beneficial ownership interest in the
securities deposited into the trust. Since
that time the Exchange has listed
seventeen (17) TIRs under the trade
name of HOLDRS, representing a wide
variety of industry sectors and the
market as a whole.
Under Amex Rule 1201, the Exchange
may list and trade TIRs based on one or
more securities. The securities that are
included in a series of a TIR are
required to be selected by the Exchange
or its agent, a wholly owned subsidiary
of the Exchange, or by such other person
as shall have a proprietary interest in
such TIRs. Pursuant to this Amex Rule
1201, the Exchange may designate the
Shares for trading.
In January 2005, the Exchange
adopted rules (Amex Rule 1200A et
seq.) for the listing and trading of
Commodity-Based Trust Shares.7
Commodity-Based Trust Shares are TIRs
based on an underlying commodity. The
Exchange listed and traded the iShares
COMEX Gold Trust under new Amex
Rule 1200A as the first Commodity
Based Trust Share. Recently, the
Exchange commenced the trading of
shares of the streetTRACKS Gold Trust
(GLD) pursuant to Amex Rule 1000B on
an unlisted trading privileges (‘‘UTP’’)
basis.8 This proposal seeks to expand
6 See Securities Exchange Act Release No. 41892
(September 21, 1999), 64 FR 52559 (September 29,
1999) (‘‘TIR Approval Order’’).
7 See Securities Exchange Act Release No. 51058
(January 19, 2005), 70 FR 3749 (January 26, 2005).
8 See Securities Exchange Act Release No. 51446
(March 29, 2005), 70 FR 17272 (April 5, 2005).
E:\FR\FM\16DEN1.SGM
16DEN1
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
the ability of the Exchange to list and
trade securities based on a portfolio of
underlying investments that may not be
‘‘securities.’’
Under proposed Commentary .07(c) to
Amex Rule 1202, the Exchange would
list and trade TIRs where the trust holds
‘‘Investment Shares.’’ For each separate
Investment Share, the Exchange would
submit a filing pursuant to Section 19(b)
of the Act.
The Shares will conform to the initial
and continued listing criteria under
proposed Commentary .07(d) to Amex
Rule 1202.9 The Fund will be formed as
a Delaware statutory trust pursuant to a
Certificate of Trust and a Declaration of
Trust and Trust Agreement among
Wilmington Trust Company, as trustee,
the Managing Owner and the holders of
the Shares.10
The Exchange notes that the
Commission has permitted the listing
and trading of products linked to the
performance of a commodity or
commodities.11
Index Description
DBLCI is intended to reflect the
performance of certain commodities.
The Index tracks the performance of
futures contracts on crude oil, heating
oil, aluminum, gold, corn and wheat,
and the notional amounts of each
commodity included in the Index are
approximately in proportion to
historical levels of the world’s
production and supplies of such
commodities. The sponsor of the Index
is Deutsche Bank AG London (‘‘DB
London’’).
9 Proposed Commentary .07(d) to Rule 1202 for
listing the Shares is substantially similar to current
Rule 1202A relating to Commodity-Based Trust
Shares.
10 The Exchange states that the Trust is not a
registered investment company under the
Investment Company Act of 1940 (‘‘1940 Act’’) and
is not required to register under the 1940 Act.
11 See Securities Exchange Act Release Nos.
51058 (January 19, 2005), 70 FR 3749 (January 26,
2005) (approving the listing and trading of the
iShares COMEX Gold Trust); 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (approving
the listing and trading of streetTRACKS Gold
Shares); 39402 (December 4, 1997), 62 FR 65459
(December 12, 1997) (approving the listing and
trading of commodity index preferred or debt
securities (ComPS) on various agricultural futures
contracts and commodities indexes); 36885
(February 26, 1996), 61 FR 8315 (March 4, 1996)
(approving the listing and trading of ComPS linked
to the value of single commodity); 35518 (March 21,
1995), 60 FR 15804 (March 27, 1995) (approving the
listing and trading of commodity indexed notes or
COINs); and 43427 (October 10, 2000), 65 FR 62783
(October 19, 2000) (approving the listing and
trading of inflation indexed securities). See also
Central Fund of Canada (Registration No. 033–
15180) (closed-end fund listed and traded on the
Amex that invests in gold) and Salmon Phibro Oil
Trust (Registration No. 033–33823) (trust units
listed and traded on the Amex that held the right
to a forward contract for the delivery of crude oil).
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
The Index value is calculated by DB
London during the trading day on the
basis of the most recently reported trade
price for the relevant futures contract
relating to each of the Index
commodities. Therefore, the market
value of each Index commodity during
the trading day will be equal to the
number of futures contracts of each
commodity represented in the Index
multiplied by the real-time futures
contract price (i.e., the most recently
reported trade price).12 The Index value
will be calculated and disseminated
every 15 seconds. The closing level of
the Index is calculated by DB London
on the basis of closing prices for the
applicable futures contracts relating to
each of the Index commodities, and
applying such prices to the relevant
notional amount. For each Index
commodity, the market value will be
equal to the number of futures contracts
represented in the Index multiplied by
the futures contract closing price. The
Index includes provisions for the
replacement of expiring futures
contracts. This replacement takes place
over a period of time in order to lessen
the impact on the market for such Index
commodity. Such replacements occur
monthly (other than in November)
during the first week of the month in the
case of futures contracts relating to
crude oil and heating oil and annually
in November in the case of futures
contracts relating to aluminum, gold,
corn and wheat.
The Index is adjusted annually in
November to rebalance its composition
to ensure that each of the Index
commodities are weighted in the same
proportion that such commodities were
weighted on December 1, 1988 (the
‘‘Base Date’’). The Index has been
calculated back to the Base Date. On the
Base Date, the closing level was 100.
The following table reflects the index
base weights (‘‘Index Base Weights’’) of
each Index commodity on the Base Date:
Index base
weight (%)
Index commodity
Crude Oil ..................................
Heating Oil ................................
Aluminum ..................................
Gold ..........................................
Corn ..........................................
Wheat .......................................
35.00
20.00
12.50
10.00
11.25
11.25
Closing Level on Base Date
100.00
The composition of the Index may be
adjusted in the event that the Index
Sponsor is not able to calculate the daily
12 Quote information and last sale information is
available from the applicable futures markets and
from data vendors.
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
74853
and/or closing price for the Index
commodities.
The Managing Owner represents that
it will seek to arrange to have the Index
calculated and disseminated on a daily
basis through a third party if DB London
ceases to calculate and disseminate the
Index. If, however, the Managing Owner
is unable to arrange the calculation and
dissemination of the Index (or a
Successor Index), the Exchange will
undertake to delist the Shares.13
Commodity Futures Contracts and
Related Options
Crude Oil. Crude oil is the world’s
most actively traded commodity. The
Light Sweet Crude Oil futures contract
traded on the New York Mercantile
Exchange (‘‘NYMEX’’) is the world’s
most liquid forum for crude oil trading,
as well as the world’s most liquid
futures contract on a physical
commodity.14 Due to the excellent
liquidity and price transparency of the
futures contract, it is used as a principal
international pricing benchmark.
Heating Oil. The heating oil futures
contract, listed and traded at the
NYMEX, trades in units of 42,000
gallons (1,000 barrels) and is based on
delivery in New York harbor, the
principal cash market center.15 The
heating oil futures contract is also used
to hedge diesel fuel and jet fuel, both of
which trade in the cash market at an
often stable premium to the heating oil
futures contract.
Gold. NYMEX is the world’s largest
physical commodity futures exchange
and the dominant market for the trading
of energy and precious metals.16
Aluminum. Aluminum is the most
heavily produced and consumed nonferrous metal in the world. Its low
13 If the Index is discontinued or suspended,
Managing Owner, in its sole discretion, may
substitute the Index with an index substantially
similar to the discontinued or suspended Index (the
‘‘Successor Index’’). The Successor Index may be
calculated and/or published by any other third
party. See also note 32 and accompanying text.
14 In 2004, ADTV on NYMEX for futures contracts
on light sweet crude oil were 212,382 (with each
contract representing 1,000 barrels); ADTV through
August 2005 was 241,673. Annual contracts traded
on NYMEX on light sweet crude oil in 2004 were
52.8 million; annual contracts traded through
August 2005 were 40.6 million.
15 In 2004, ADTV on NYMEX for futures contracts
on heating oil were 51,745 (with each contract
representing 1,000 barrels); ADTV through August
2005 was 52,413. Annual contracts traded on
NYMEX on heating oil in 2004 were 12.8 million;
annual contracts traded through August 2005 were
8.8 million.
16 In 2004, ADTV on NYMEX for futures contracts
on gold were 60,079 (with each contract
representing 100 troy ounces); ADTV through
August 2005 was 61,085. Annual contracts traded
on NYMEX on gold in 2004 were 14.9 million;
annual contracts traded through August 2005 were
10.2 million.
E:\FR\FM\16DEN1.SGM
16DEN1
74854
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
density and malleability has been
recognized and championed by the
industrial world. In 2001, world
primary refined production totaled over
24 million tonnes. The total turnover for
the London Metal Exchange (‘‘LME’’)
primary aluminum futures and options
in 2001 was over 25 million lots or 625
million tonnes. The LME has the most
liquid aluminum contracts in the
world.17
Corn. Corn futures are traded on the
Chicago Board of Trade (‘‘CBOT’’) with
a unit of trading of 5,000 bushels.18
Wheat. Wheat futures are traded on
the CBOT with a unit of trading of 5,000
bushels.19
Structure of the Fund
Fund. The Fund is a statutory trust
formed pursuant to the Delaware
Statutory Trust Act and will issue units
of beneficial interest or shares that
represent units of fractional undivided
beneficial interest in and ownership of
the Fund. Unless terminated earlier, the
Fund will expire on December 31, 2055.
The investment objective of the Fund is
to reflect the performance of the DBLCI
less the expenses of the operation of the
Fund and the Master Fund. The Fund
will pursue its investment objective by
investing substantially all of its assets in
the Master Fund. The Fund will hold no
investment assets other than Master
Fund Units.20 Each Share will correlate
with a Master Fund share issued by the
Master Fund and held by the Fund.
Master Fund. The Master Fund is a
statutory trust formed pursuant to the
Delaware Statutory Trust Act and will
issue units of beneficial interest or
shares that represent units of fractional
undivided beneficial interest in and
ownership of the Master Fund. Unless
terminated earlier, the Master Fund will
expire on December 31, 2055. The
investment objective of the Master Fund
17 In 2004, ADTV on LME for futures contracts on
aluminum were 116,004 (with each contract
representing 25 tonnes); ADTV through August
2005 was 113,743. Annual contracts traded on LME
on aluminum in 2004 were 29.2 million; annual
contracts traded through August 2005 were 18.9
million.
18 In 2004, ADTV on CBOT for futures contracts
on corn were 95,390 (with each contract
representing 5,000 bushels); ADTV through August
2005 was 120,237. Annual contracts traded on
CBOT on corn in 2004 were 24.038 million; annual
contracts traded through August 2005 were 20.19
million.
19 In 2004, ADTV on CBOT for futures contracts
on wheat were 31,568 (with each contract
representing 5,000 bushels); ADTV through August
2005 was 41,249. Annual contracts traded on CBOT
on wheat in 2004 were 7.95 million; annual
contracts traded through August 2005 were 6.92
million.
20 See Pre-Effective Amendment No. 4 to the
Fund’s Form S–1, Registration No. 333–125325,
dated October 26, 2005.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
is to reflect the performance of the
DBLCI less the expenses of the
operations of the Fund and the Master
Fund. The Master Fund will pursue its
investment objective by investing
primarily in a portfolio of futures
contracts on the commodities
comprising the DBLCI. In addition, the
Master Fund will also hold cash and
U.S. Treasury securities for deposit with
futures commission merchants
(‘‘FCMs’’) as margin and other high
credit quality short-term fixed income
securities.
Trustee. Wilmington Trust Company
is the trustee of the Fund and the Master
Fund. The trustee has delegated to the
Managing Owner the power and
authority to manage and operate the
day-to-day affairs of the Fund and the
Master Fund.
Managing Owner. The Managing
Owner is a Delaware limited liability
company that will be registered with the
CFTC as a CPO and CTA and is an
affiliate of Deutsche Bank AG, the
sponsor of the Fund and Master Fund.
The Managing Owner will serve as the
CPO and CTA of the Fund and the
Master Fund and will manage and
control all aspects of the business of the
Funds. As a registered CPO and CTA,
the Exchange states that the Managing
Owner is required to comply with
various regulatory requirements under
the Commodity Exchange Act and the
rules and regulations of the CFTC and
the NFA, including investor protection
requirements, anti-fraud prohibitions,
disclosure requirements, reporting and
recordkeeping requirements and is
subject to periodic inspections and
audits by the CFTC and NFA.
Clearing Broker. Deutsche Bank
Securities, Inc., the Clearing Broker, is
an affiliate of the Managing Owner and
is registered with the CFTC as an FCM.
The Clearing Broker will execute and
clear each of the Master Fund’s futures
contract transactions and will perform
certain administrative services for the
Master Fund.
Administrator. The Bank of New York
is the administrator for both the Fund
and the Master Fund (the
‘‘Administrator’’). The Administrator
will perform or supervise the
performance of services necessary for
the operation and administration of the
Fund and the Master Fund. These
services include, but are not limited to,
investment accounting, financial
reporting, broker and trader
reconciliation, net asset value (‘‘NAV’’)
calculation,21 risk transparency, and
21 NAV is the total assets of the Master Fund less
total liabilities of the Master Fund, determined on
the basis of generally accepted accounting
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
receiving and processing orders from
Authorized Participants (as defined
below), and coordinating the processing
of orders with the Managing Owner and
the Depository Trust Company (‘‘DTC’’).
Product Description
Issuances of the Shares will be made
only in baskets of 200,000 Shares or
multiples thereof (the ‘‘Basket
Aggregation’’ or ‘‘Basket’’). The Fund
will issue and redeem the Shares on a
continuous basis, by or through
participants that have entered into
participant agreements (each, an
‘‘Authorized Participant’’) 22 with the
Fund and its Managing Owner at the
NAV per Share determined shortly after
4 p.m. ET or the last to close futures
exchanges on which the Index
Commodities are traded, whichever is
later, on the business day on which an
order to purchase the Shares in one or
more Baskets is received in proper form.
Following issuance, the Shares will be
traded on the Exchange similar to other
equity securities.
The procedures for creating a Basket
are as follows. On any business day, an
Authorized Participant may place an
order with the Distributor, ALPS
Distributors, Inc. (the ‘‘Distributor’’), to
create one or more Baskets. Purchase
orders must be placed by 10 a.m. ET and
are irrevocable. By placing a purchase
order, and prior to delivery of such
Basket(s), an Authorized Participant’s
DTC account will be charged the nonrefundable $500 transaction fee due for
the purchase order, regardless of the
number of Baskets to be created in
connection with such order.
The total payment required to create
a Basket during the continuous offering
period is the cash amount equal to the
NAV per Share times 200,000 Shares
(the ‘‘Basket Amount’’) on the purchase
order date. Thus the Basket Amount
usually will be determined on each
business day by the Administrator
shortly after 4 p.m. ET. Baskets are
issued as of 12 noon ET, on the business
day immediately following the purchase
order date (T+1) at NAV per Share on
the purchase order date if the required
payment has been timely received.
Authorized Participants that have
placed a purchase order to create a
principles. NAV per Master Fund share is the NAV
of the Master Fund divided by the number of
outstanding Master Fund shares. This will be the
same for the Shares of the Fund because of a oneto-one correlation between the Shares and the
shares of the Master Fund.
22 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 DTC Participant,
and (iii) has in effect a valid Participant Agreement
with the Fund issuer.
E:\FR\FM\16DEN1.SGM
16DEN1
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
Basket must transfer the Basket Amount
to the Administrator (the ‘‘Cash Deposit
Amount’’) by 10 a.m. the next day.
Authorized Participants that wish to
redeem a Basket will receive cash in
exchange for each Basket surrendered in
an amount equal to the NAV per Basket
(the ‘‘Cash Redemption Amount’’)
through a similar procedure. The
Clearing Broker will be the custodian for
the Master Fund and responsible for
safekeeping the Master Fund’s assets.
Because orders to purchase Baskets
must be placed by 10 a.m. ET, but the
total payment required to create a
Basket will not be determined until
shortly after 4 p.m. ET, on the date the
purchase order is received, Authorized
Participants will not know the total
amount of the payment required to
create a Basket at the time they submit
an irrevocable purchase order. This is
similar to exchange-traded funds and
mutual funds. The Fund’s prospectus
discloses that NAV and the total amount
of the payment required to create a
Basket could rise or fall substantially
between the time an irrevocable
purchase order is submitted and the
time the amount of the purchase order
is determined.
On each business day, the
Administrator will make available
immediately prior to the opening of
trading on the Amex, an estimate of the
Cash Deposit Amount for the creation of
a Basket. The Amex will disseminate
every 15 seconds throughout the trading
day, via the facilities of the
Consolidated Tape Association, an
amount representing, on a per Share
basis, the current value (intra-day) of the
Basket Amount (the ‘‘Indicative Fund
Value’’). It is anticipated that the
deposit of the Cash Deposit Amount in
exchange for a Basket will be made
primarily by institutional investors,
arbitrageurs, and the Exchange
specialist. Baskets are then separable
upon issuance into identical Shares that
will be listed and traded on the Amex.23
The Shares are expected to be traded on
the Exchange by professionals, as well
as institutional and retail investors.
Shares may be acquired in two (2) ways:
(1) Through a deposit of the Cash
Deposit Amount with the Administrator
during normal business hours by
Authorized Participants, or (2) through
23 The Shares are separate and distinct from the
shares of the Master Fund. The Master Fund’s assets
will consist of long positions in the futures
contracts on the commodities comprising the
DBLCI. The Exchange expects that the number of
outstanding Shares will increase and decrease from
time to time as a result of creations and
redemptions of Baskets.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
a purchase on the Exchange by
investors.
Shortly after 4 p.m. ET each business
day, the Administrator will determine
the NAV for the Fund and Master Fund,
utilizing the current day’s settlement
value of the particular commodity
futures contracts in the Master Fund’s
portfolio and the value of the Master
Fund’s cash and high-credit quality,
short-term fixed income securities.
However, if a futures contract on a
trading day cannot be liquidated due to
the operation of daily limits or other
rules of an exchange upon which such
futures contract is traded, the settlement
price on the most recent trading day on
which the futures contract could have
been liquidated will be used in
determining the Fund’s and the Master
Fund’s NAV. Accordingly, for both U.S.
and non-U.S. futures contracts, the
Administrator will typically use that
day’s futures settlement price for
determining NAV.
The NAV for the Fund is total assets
of the Master Fund less total liabilities
of the Master Fund. The NAV is
calculated by including any unrealized
profit or loss on futures contracts and
any other credit or debit accruing to the
Master Fund but unpaid or not received
by the Master Fund. This preliminary
NAV is then used to compute all NAVbased fees (including the management
and administrative fees, accrued
through and including the date of
publication) that are calculated from the
value of Master Fund assets. The
Administrator will calculate the NAV
per Share by dividing the NAV by the
number of Shares outstanding. Then
once the final, published NAV is
determined, shortly after 4 p.m. ET each
business day, the Administrator also
will determine the Basket Amount for
orders placed by Authorized
Participants received by 10 a.m. ET that
day.
Shortly after 4 p.m. ET each business
day, the Administrator, Amex, and
Managing Owner will disseminate the
NAV for the Shares and the Basket
Amount (for orders placed during the
day). The NAV and the Basket Amount
are available at the same time and will
be disseminated accordingly. The
Basket Amount and the NAV are
communicated by the Administrator to
all Authorized Participants via facsimile
or electronic mail message and will be
publicly available on the DB London’s
(Index Sponsor) Web site at https://gmsecure.db.com/CommoditiesIndices.
The Amex will also publicly disclose
via its Web site at https://www.amex.com
the NAV and Basket Amount (for orders
placed that day). The Exchange also will
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
74855
disseminate the Basket Amount by
means of CTA/CQ High Speed Lines.
The Basket Amount necessary for the
creation of a Basket will change from
day to day. On each day that the Amex
is open for regular trading, the
Administrator will adjust the Cash
Deposit Amount as appropriate to
reflect the prior day Fund NAV and
newly accrued expenses.
The Exchange believes that the Shares
will not trade at a material discount or
premium to NAV due to potential
arbitrage opportunities in the event of
any discrepancy between the two. Due
to the fact that the Shares can be created
and redeemed daily only in Basket
Aggregations at NAV by Authorized
Participants, the Exchange submits that
arbitrage opportunities should provide a
mechanism to diminish the effect of any
premiums or discounts that may exist
from time to time.
The Shares will not be individually
redeemable but will only be redeemable
in Basket Aggregations. To redeem, an
Authorized Participant will be required
to accumulate enough Shares to
constitute a Basket Aggregation (i.e.,
200,000 Shares). An Authorized
Participant redeeming a Basket
Aggregation will receive the Cash
Redemption Amount. Upon the
surrender of the Shares and payment of
applicable redemption transaction fee,
taxes or charges, the Administrator will
deliver to the redeeming Authorized
Participant the Cash Redemption
Amount.
Shares will be registered in book entry
form through DTC. Trading in the
Shares on the Exchange will be effected
from 9:30 a.m. until 4:15 p.m. ET each
business day. The minimum trading
increment for such Shares will be $.01.
Dissemination of the Index and
Underlying Futures Contracts
Information
DB London as the sponsor of the
Index will publish the value of the
Index at least every fifteen (15) seconds
during Amex trading hours through
Bloomberg, Reuters, and other market
data vendors. In addition, the Index
value will be available on the DB
London Web site at https://
www.dbcfund.db.com on a twenty (20)
minute delayed basis. The closing level
will similarly be provided by DB
London. In addition, any adjustments or
changes to the Index will also be
provided by DB London and the
Exchange on their respective Web
sites.24
24 The Index Sponsor has in place procedures to
prevent the improper sharing of information
E:\FR\FM\16DEN1.SGM
Continued
16DEN1
74856
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
The closing prices and daily
settlement prices for the futures
contracts held by the Master Fund are
publicly available on the Web sites of
the futures exchanges trading the
particular contracts. The particular
futures exchange for each futures
contract with Web site information is as
follows: (i) aluminum—London Metal
Exchange (LME) at https://www.lme.com;
(ii) corn and wheat—Chicago Board of
Trade (CBOT) at https://www.cbot.com;
and (iii) crude oil, heating oil and
gold—New York Mercantile Exchange
(NYMEX) at https://www.nymex.com.
The Exchange on its Web site at
https://www.amex.com will include a
hyperlink to the Index Sponsor’s Web
site at https://gm-secure.db.com/
CommoditiesIndices, which will contain
hyperlinks to each of the futures
exchanges Web sites for the purpose of
disclosing futures contract pricing. In
addition, various data vendors and news
publications publish futures prices and
data. The Exchange represents that
futures quotes and last sale information
for the commodities underlying the
Index are widely disseminated through
a variety of market data vendors
worldwide, including Bloomberg and
Reuters. In addition, the Exchange
represents that complete real-time data
for such futures is available by
subscription from Reuters and
Bloomberg. The CBOT, LME, and
NYMEX also provide delayed futures
information on current and past trading
sessions and market news free of charge
on their respective Web sites. The
specific contract specifications for the
futures contracts are also available from
the futures exchanges on their Web sites
as well as other financial informational
sources.
Availability of Information Regarding
the Shares
The Web site for the Fund, which will
be publicly accessible at no charge, will
contain the following information: (a)
The prior business day’s NAV and the
reported closing price; (b) the mid-point
of the bid-ask price 25 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.
As described above, the NAV for the
Fund will be calculated and
disseminated daily. The Amex also
intends to disseminate, during Amex
trading hours, for the Fund on a daily
basis by means of Consolidated Tape
Association/Consolidated Quotation
High Speed Lines information with
respect to the Indicative Fund Value (as
discussed below), recent NAV, and
Shares outstanding. The Exchange will
also make available on its Web site daily
trading volume, closing prices, and the
NAV.
Dissemination of Indicative Fund Value
As noted above, the Administrator
calculates the NAV of the Fund once
each trading day. In addition, the
Administrator causes to be made
available on a daily basis the Cash
Deposit Amount to be deposited in
connection with the issuance of the
Shares in Basket Aggregations. In
addition, other investors can request
such information directly from the
Administrator.
In order to provide updated
information relating to the Fund for use
by investors, professionals and persons
wishing to create or redeem the Shares,
the Exchange will disseminate through
the facilities of CTA an updated
Indicative Fund Value. The Indicative
Fund Value will be disseminated on a
per Share basis every 15 seconds from
9:30 a.m. to 4:15 p.m. ET.26 The
Indicative Fund Value will be
calculated based on the cash required
for creations and redemptions (i.e., NAV
× 200,000) adjusted to reflect the price
changes of the Index commodities
through investments held by the Master
Fund, i.e., futures contracts.
The Indicative Fund Value will not
reflect price changes to the price of an
underlying commodity between the
close of trading of the futures contract
at the relevant futures exchange and the
close of trading on the Amex at 4:15
p.m. ET. The value of a Share may
accordingly be influenced by nonconcurrent trading hours between the
Amex and the various futures exchanges
on which the futures contracts based on
the Index commodities are traded.
While the Shares will trade on the
Amex from 9:30 a.m. to 4:15 p.m. ET,
the table below lists the trading hours
for each of the Index commodities
underlying the futures contracts.
Index commodity
Futures exchange
Trading hours (ET)
Aluminum .......................................................................
Gold ................................................................................
Crude Oil ........................................................................
Heating Oil .....................................................................
Corn ................................................................................
Wheat .............................................................................
LME ...............................................................................
COMEX .........................................................................
NYMEX ..........................................................................
NYMEX ..........................................................................
CBOT .............................................................................
CBOT .............................................................................
6:55 a.m.–12:00 p.m.
8:20 a.m.–1:30 p.m.
10:00 a.m.–2:30 p.m.
10:05 a.m.–2:30 p.m.
10:30 a.m.–2:15 p.m.
10:30 a.m.–2:15 p.m.
While the market for futures trading
for each of the Index commodities is
open, the Indicative Fund Value can be
expected to closely approximate the
value per Share of the Basket Amount.
However, during Amex trading hours
when the futures contracts have ceased
trading, spreads and resulting premiums
or discounts may widen, and therefore,
increase the difference between the
price of the Shares and the NAV of the
Shares. Indicative Fund Value on a per
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.
The Exchange believes that
dissemination of the Indicative Fund
Value based on the cash amount
required for a Basket Aggregation
provides additional information that is
not otherwise available to the public
and is useful to professionals and
investors in connection with the Shares
trading on the Exchange or the creation
or redemption of the Shares.
between different affiliates and departments.
Specifically, an information barrier exists between
the personnel within DB London that calculate and
reconstitute the Index and other personnel of the
Index Sponsor, including but not limited to the
Managing Owner, sales and trading, external or
internal fund managers, and bank personnel who
are involved in hedging the bank’s exposure to
instruments linked to the Index, in order to prevent
the improper sharing of information relating to the
recomposition of the Index.
25 The bid-ask price of Shares is determined using
the highest bid and lowest offer as of the time of
calculation of the NAV.
26 Telephone conversation between Jeffrey Burns,
Associate General Counsel, Amex, and Kate
Robbins, Attorney, Division of Market Regulation,
Commission, on November 28, 2005.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
E:\FR\FM\16DEN1.SGM
16DEN1
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
Termination Events
The Fund will be terminated if any of
the following circumstances occur: (1)
The Shares are delisted from the Amex
and are not listed for trading on another
national securities exchange within five
business days from the date the Shares
are delisted; (2) holders of at least 50%
of the outstanding Shares notify the
Managing Owner that they elect to
terminate the Trust; (3) the trustee
resigns and no successor trustee is
appointed within 60 days from the date
the trustee provides notice to the
Managing Owner of its intent to resign;
(4) the SEC finds that the Fund should
be registered as an investment company
under the Investment Company Act of
1940, and the trustee has actual
knowledge of the SEC finding; (5) the
aggregate market capitalization of the
Fund, based upon the closing price for
the Shares, was less than $10 million on
each of five (5) consecutive trading days
and the trustee receives, within six (6)
months from the last of those trading
days, notice that the sponsor has
decided to terminate the Fund; or (6) the
Fund fails to qualify for treatment, or
ceases to be treated, as a grantor trust for
U.S. federal income tax purposes and
the trustee receives notice that the
sponsor has determined that the
termination of the Fund is advisable.
If not terminated earlier by the
trustee, the Fund will terminate on
December 31, 2055. Upon termination of
the Fund, holders of the Shares will
surrender their Shares and receive from
the Administrator, in cash, their portion
of the value of the Fund.
Criteria for Initial and Continued Listing
The Fund will be subject to the
criteria in proposed Commentary .07(d)
of Amex Rule 1202 for initial and
continued listing of the Shares. The
proposed continued listing criteria
provides for the delisting or removal
from listing of the Shares under any of
the following circumstances:
• Following the initial twelve month
period from the date of commencement
of trading of the Shares: (i) If the Fund
has more than 60 days remaining until
termination and there are fewer than 50
record and/or beneficial holders of the
Shares for 30 or more consecutive
trading days; (ii) if the Fund has fewer
than 50,000 Shares issued and
outstanding; or (iii) if the market value
of all Shares is less than $1,000,000.
• If the value of the underlying index
or portfolio is no longer calculated or
available on at least a 15-second basis,
or the Exchange stops providing a
hyperlink on its Web site to any such
asset or investment value.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
• The Indicative Fund Value is no
longer made available on at least a 15second basis.
• If such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
It is anticipated that a minimum of
2,000,000 Shares will be required to be
outstanding at the start of trading. It is
anticipated that the initial price of a
Share will be approximately $25. The
Fund expects to accept subscriptions for
Shares in Basket Aggregations (i.e., $5
million) from Authorized Participants
during an initial offering period with a
finite term of approximately six (6)
months, subject to earlier termination.
After the initial offering period has
closed and trading commences, the
Fund will then issue Shares in the
normal Basket Aggregations of 200,000
Shares to Authorized Participants. Once
the initial offering period has closed and
trading commences, the Master Fund
will issue shares in Master Fund Baskets
(200,000 shares) to the Fund
continuously at NAV. The Master Fund
will be owned by the Fund and the
Managing Owner.27 Each Share issued
by the Fund will correlate with a Master
Fund share issued by the Master Fund
and held by the Fund. The Exchange
believes that the anticipated minimum
number of Shares outstanding at the
start of trading is sufficient to provide
adequate market liquidity and to further
the Fund’s objective to seek to provide
a simple and cost effective means of
accessing the commodity futures
markets.
The Exchange represents that it
prohibits the initial and/or continued
listing of any security that is not in
compliance with Rule 10A–3 under the
Securities Act of 1934.28
Original and Annual Listing Fees
The Amex original listing fee
applicable to the listing of the Fund 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 Fund
outstanding at the end of each calendar
year.
27 The Managing Owner will own 1% or less of
the Master Fund and will share pro rata in the
income and expenses of the Master Fund.
28 See Rule 10A–3(c)(7), 17 CFR 240.10A–3(c)(7)
(stating that a listed issuer is not subject to the
requirements of Rule 10A–3 if the issuer is
organized as a trust that does not have a board of
directors or other unincorporated association and
the activities of the issuer are limited to passively
owning or holding securities or other assets on
behalf of or for the benefit of the holders of the
listed securities).
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
74857
Purchase and Redemptions in Basket
Aggregations
In the Information Circular (described
below), members and member
organizations will be informed that
procedures for purchases and
redemptions of Shares in Basket
Aggregations are described in the
prospectus and that Shares are not
individually redeemable but are
redeemable only in Basket Aggregations
or multiples thereof.
Trading Rules
The Shares are equity securities
subject to Amex Rules governing the
trading of equity securities, including,
among others, rules governing priority,
parity and precedence of orders,
specialist responsibilities and account
opening and customer suitability (Amex
Rule 411). Initial equity margin
requirements of 50% will apply to
transactions in the Shares. Shares will
trade on the Amex until 4:15 p.m. ET
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 Amex Rule
950(f) and Commentary thereto) the
price of which is derivatively 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 the Shares as eligible for this
treatment.29
The 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 the Shares
made in connection with the creation
and redemption of Shares will not be
subject to the prohibitions of Amex Rule
190.30 Unless exemptive or no-action
relief is available, the Shares will be
subject to the short sale rule, Rule 10a–
29 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).
30 See Commentary .05 to Amex Rule 190.
E:\FR\FM\16DEN1.SGM
16DEN1
74858
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
1 under the Act.31 If exemptive or noaction relief is provided, the Exchange
will issue a notice detailing the terms of
the exemption or relief. The 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 Shares into parity
with the underlying commodity or
commodities and/or futures contract
price. Proposed Commentary .07(f) to
Amex Rule 1202 sets forth this limited
exception to Amex Rule 170.
The adoption of Commentary .07(e) to
Amex Rule 1202 relating to certain
specialist prohibitions will address
potential conflicts of interest in
connection with acting as a specialist in
the Shares. Specifically, Commentary
.07(e) provides that the prohibitions in
Amex Rule 175(c) apply to a specialist
in the Shares so that the specialist or
affiliated person may not act or function
as a market maker in an underlying
asset, related futures contract or option
or any other related derivative. An
affiliated person of the specialist
consistent with Amex Rule 193 may be
afforded an exemption to act in a market
making capacity, other than as a
specialist in the Shares on another
market center, in the underlying asset,
related futures or options or any other
related derivative. In particular,
proposed Commentary .07(e) 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
Shares on another market center, in the
underlying asset or commodity, related
futures or options on futures, or any
other related derivatives.
Adoption of Commentary .07(g) to
Amex Rule 1202 will also ensure that
specialists handling the Shares provide
the Exchange with all the necessary
information relating to their trading in
physical assets or commodities, related
futures contracts and options thereon or
any other derivative. 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
31 The Fund expects to seek relief, in the near
future, from the Commission in connection with the
trading of the Shares from the operation of certain
Exchange Act rules.
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
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
or futures contracts would not be
subject to Exchange jurisdiction, but the
Exchange could obtain information
regarding the activities of such
subsidiary or affiliate through
surveillance sharing agreements with
regulatory organizations of which such
subsidiary or affiliate is a member.
Trading Halts
Prior to the commencement of
trading, the Exchange will issue an
Information Circular (described below)
to members informing them of, among
other things, Exchange policies
regarding trading halts in the Shares.
First, the circular will advise that
trading will be halted in the event the
market volatility trading halt parameters
set forth in Amex Rule 117 have been
reached. Second, the circular will
advise that, in addition to the
parameters set forth in Amex Rule 117,
the Exchange will halt trading in the
Shares if trading in the underlying
related futures contract(s) 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. Additionally, the Exchange
represents that it will cease trading the
Shares if the conditions in Amex Rule
1202(d)(2)(ii) or (iii) exist (i.e., if there
is a halt or disruption in the
dissemination of the Indicative Fund
Value and/or underlying Index value).32
Suitability
The Information Circular (described
below) will inform members and
member organizations of the
characteristics of the Fund 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
Amex Rule 411, members and member
organizations are required in connection
with recommending transactions in the
Shares to have a reasonable basis to
believe that a customer is suitable for
32 In the event the Index value or Indicative Fund
Value is no longer calculated or disseminated, the
Exchange would immediately contact the
Commission to discuss measures that may be
appropriate under the circumstances. Telephone
conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Florence Harmon,
Senior Special Counsel, Division of Market
Regulation, Commission, on November 22, 2005.
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
the particular investment given
reasonable inquiry concerning the
customer’s investment objectives,
financial situation, needs, and any other
information known by such member.
Information Circular
The Amex will distribute an
Information Circular to its members in
connection with the trading of the
Shares. The Information Circular will
inform members and member
organizations, prior to commencement
of trading, of the prospectus delivery
requirements applicable to the Fund.
The Exchange notes that investors
purchasing Shares directly from the
Fund (by delivery of the Cash Deposit
Amount) will receive a prospectus.
Amex members purchasing Shares from
the Trust for resale to investors will
deliver a prospectus to such investors.
The Information Circular also will
discuss the special characteristics and
risks of trading this type of security.
Specifically, the Information Circular,
among other things, will discuss what
the Shares are, how a Basket is created
and redeemed, the requirement that
members and member firms deliver a
prospectus to investors purchasing the
Shares prior to or concurrently with the
confirmation of a transaction, applicable
Amex rules, dissemination of
information regarding the per Share
Indicative Fund Value, trading
information and applicable suitability
rules. The Information Circular will also
explain that the Fund is subject to
various fees and expenses described in
the registration statement.
The Information Circular will also
reference the fact that there is no
regulated source of last sale information
regarding physical commodities and
that the SEC has no jurisdiction over the
trading of physical commodities such as
aluminum, gold, crude oil, heating oil,
corn and wheat, or the futures contracts
on which the value of the Shares is
based.
The Information Circular will also
notify members and member
organizations about the procedures for
purchases and redemptions of Shares in
Baskets, and that Shares are not
individually redeemable but are
redeemable only in Basket-size
aggregations or multiples thereof. 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 Shares will be
calculated shortly after 4 p.m. ET each
trading day.
E:\FR\FM\16DEN1.SGM
16DEN1
Federal Register / Vol. 70, No. 241 / Friday, December 16, 2005 / Notices
Surveillance
The Exchange represents that its
surveillance procedures are adequate to
monitor Exchange trading of the Shares
and to detect violations of applicable
rules and regulations. Exchange
surveillance procedures applicable to
trading in the proposed Shares will be
similar to those applicable to TIRs,
Portfolio Depository Receipts and Index
Fund Shares currently trading on the
Exchange. The Exchange currently has
in place an Information Sharing
Agreement with the NYMEX and the
CBOT for the purpose of providing
information in connection with trading
in or related to futures contracts traded
on the NYMEX and CBOT, respectively.
The Exchange also notes that the CBOT
is a member of the Intermarket
Surveillance Group (‘‘ISG’’). As a result,
the Exchange asserts that market
surveillance information is available
from the CBOT, if necessary, due to
regulatory concerns that may arise in
connection with the CBOT futures. In
addition, the Exchange has negotiated a
Memorandum of Understanding with
the LME for the purpose of providing
information in connection with the
trading in or related to futures contracts
traded on the LME.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6 of the Act 33 in general and
furthers the objectives of section
6(b)(5) 34 in particular in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
34 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
VerDate Aug<31>2005
19:37 Dec 15, 2005
Jkt 208001
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, 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–2005–059 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–Amex–2005–059. 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
Room. Copies of the filing also will be
available for inspection and copying at
the principal office of the Amex. 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–2005–059 and
should be submitted on or before
January 3, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.36
Jonathan G. Katz,
Secretary.
[FR Doc. E5–7419 Filed 12–15–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52934; File No. SR–ISE–
2005–53]
Self-Regulatory Organizations;
International Securities Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change and Amendment No. 1 Thereto
Relating to Fee Changes
December 9, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
22, 2005, the International Securities
Exchange, Inc. (‘‘ISE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the ISE.3 On
November 29, 2005, ISE filed
Amendment No. 1 to the proposed rule
change.4 The ISE has designated this
36 17
CFR 200.30–30(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Commission notes that the proposed rule
filing submitted by ISE on November 22, 2005
contained a typo in the file number included in
Exhibit 1. This notice reflects the correct file
number.
4 Amendment No. 1 made a technical change to
the text of Exhibit 5 (ISE’s Schedule of Fees). The
1 15
The Exchange did not receive any
written comments on the proposed rule
change.
33 15
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Amex consents, the
Commission will:
(A) By order approve such proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
The Commission is considering
granting accelerated approval of the
proposed rule change at the end of a 15day comment period.35
74859
35 The Amex has requested accelerated approval
of this proposed rule change prior to the 30th day
after the date of publication of the notice of the
filing thereof, following the conclusion of a 15-day
comment period. Telephone conversation between
Jeffrey Burns, Associate General Counsel, Amex,
and Florence Harmon, Senior Special Counsel,
Division of Market Regulation, Commission, on
November 22, 2005.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
E:\FR\FM\16DEN1.SGM
Continued
16DEN1
Agencies
[Federal Register Volume 70, Number 241 (Friday, December 16, 2005)]
[Notices]
[Pages 74850-74859]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-7419]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52940; File No. SR-Amex-2005-059]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of a Proposed Rule Change and Amendments No. 1 and 2
Thereto Relating to the Listing and Trading of the DB Commodity Index
Tracking Fund
December 12, 2005.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on May 27, 2005, the American Stock Exchange LLC
(``Amex'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Amex. On September 15, 2005, the Amex filed Amendment No. 1 to
the proposed rule change.\3\ On November 15, 2005, the Amex filed
Amendment No. 2 to the proposed rule change.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Partial Amendment dated September 15, 2005 (``Amendment
No. 1''). In Amendment No. 1, the Amex made clarifying changes to
the purpose section.
\4\ See Partial Amendment dated November 15, 2005 (``Amendment
No. 2'').
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to add new Commentary .07 to Amex Rule 1202
to permit the listing and trading of shares of trust issued receipts
(``TIRs'') that invest in shares or securities (the ``Investment
Shares'') of a trust, partnership, commodity pool or other similar
entity that holds investments comprising, or otherwise based on, any
combination of securities, futures contracts, swaps, forward contracts,
[[Page 74851]]
options on futures contracts, commodities or portfolios of investments.
Also in this proposal, the Exchange, pursuant to proposed Commentary
.07 to Amex Rule 1202, seeks to list and trade the DB Commodity Index
Tracking Fund (the ``Trust'' or ``Fund'').
Below is the text of the proposed rule change. Proposed new
language is in italics.
* * * * *
Trading of Trust Issued Receipts
Rules 1200-1201. No Change.
Rule 1202(a) through (e). No Change.
Commentary
.01 through .06 No Change
.07 (a) The provisions of this Commentary apply only to Trust
Issued Receipts where the trust holds ``Investment Shares'' as defined
below. Rules that reference Trust Issued Receipts shall also apply to
Trust Issued Receipts investing in Investment Shares.
(b) Definitions. The following terms as used in this Commentary
shall, unless the context otherwise requires, have the meanings herein
specified:
(1) Investment Shares. The term ``Investment Shares'' means a
security (a) that is issued by a trust, partnership, commodity pool or
other similar entity that invests in any combination of futures
contracts, options on futures contracts, forward contracts,
commodities, swaps or high credit quality short-term fixed income
securities or other securities; and (b) issued and redeemed daily at
net asset value in amounts correlating to the number of receipts
created and redeemed in a specified aggregate minimum number.
(2) Futures Contract. The term ``futures contract'' is commonly
known as a ``contract of sale of a commodity for future delivery'' set
forth in Section 2(a) of the Commodity Exchange Act.
(3) Forward Contract. A forward contract is a contract between two
parties to purchase and sell a specific quantity of a commodity at a
specified price with delivery and settlement at a future date. Forwards
are traded over-the-counter (``OTC'') and not listed on a futures
exchange.
(c) Designation. The Exchange may list and trade Trust Issued
Receipts investing in Investment Shares. Each issue of a Trust Issued
Receipt based on a particular Investment Share shall be designated as a
separate series and shall be identified by a unique symbol.
(d) Initial and Continued Listing. Trust Issued Receipts based on
Investment Shares will be listed and traded on the Exchange subject to
application of the following criteria:
(1) Initial Listing--The Exchange will establish a minimum number
of receipts required to be outstanding at the time of commencement of
trading on the Exchange.
(2) Continued Listing--The Exchange will remove from listing Trust
Issued Receipts based on an Investment Share under any of the following
circumstances:
(i) if following the initial twelve month period following the
commencement of trading of the shares, (A) the Issuer has more than 60
days remaining until termination and there are fewer than 50 record
and/or beneficial holders of Trust Issued Receipts for 30 or more
consecutive trading days; (B) if the Issuer has fewer than 50,000
securities or shares issued and outstanding; or (C) if the market value
of all securities or shares issued and outstanding is less than
$1,000,000;
(ii) if the value of an underlying index or portfolio is no longer
calculated or available on at least a 15-second delayed basis or the
Exchange stops providing a hyperlink on its website to any such asset
or investment value;
(iii) if the Indicative Value is no longer made available on at
least a 15-second delayed basis; or
(iv) if such other event shall occur or condition exists which in
the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
Upon termination of the trust, the Exchange requires that Trust
Issued Receipts issued in connection with such trust be removed from
Exchange listing. A trust may terminate in accordance with the
provisions of the trust prospectus, which may provide for termination
if the value of the trust falls below a specified amount.
(3) Term--The stated term of the trust shall be as stated in the
prospectus. However, such entity may be terminated under such earlier
circumstances as may be specified in the trust prospectus.
(4) Trustee--The following requirements apply:
(i) The trustee of a trust must be a trust company or banking
institution having substantial capital and surplus and the experience
and facilities for handling corporate trust business. In cases where,
for any reason, an individual has been appointed as trustee, a
qualified trust company or banking institution must be appointed co-
trustee.
(ii) No change is to be made in the trustee of a listed issue
without prior notice to and approval of the Exchange.
(5) Voting--Voting rights shall be as set forth in the applicable
trust prospectus.
(e) Rule 175(c) shall be deemed to prohibit an equity specialist,
his member organization, or any other member, limited partner, officer,
or approved person thereof from acting as a market maker or functioning
in any capacity involving market-making responsibilities in an
underlying asset or commodity, related futures or options on futures,
or any other related derivatives. However, an approved person of an
equity specialist that has established and obtained Exchange approval
of procedures restricting the flow of material, non-public market
information between itself and the specialist member organization
pursuant to Rule 193, and any member, officer, or employee associated
therewith, may act in a market making capacity, other than as a
specialist in the Trust Issued Receipts on another market center, in
the underlying asset or commodity, related futures or options on
futures, or any other related derivatives.
(f) In connection with the Trust Issued Receipts listed under this
Commentary, Commentaries .01, .02 and .07 of Rule 170 shall not apply
to the trading of receipts for the purpose of bringing the price of the
receipt into parity with the value of the underlying asset or commodity
on which the receipts are based, with the net asset value of the
receipts or with a futures contract on the underlying asset or
commodity on which the receipts are based. Such transactions must be
effected in a manner that is consistent with the maintenance of a fair
and orderly market and with the other requirements of this rule and the
supplementary material herein.
(g)(1) The member organization acting as specialist in Trust Issued
Receipts is obligated to conduct all trading in the receipts in its
specialist account, subject only to the ability to have one or more
investment accounts, all of which must be reported to the Exchange (See
Rule 170). In addition, the member organization acting as specialist in
the Trust Issued Receipts must file, with the Exchange, in a manner
prescribed by the Exchange, and keep current a list identifying all
accounts for trading the underlying physical asset or commodity,
related futures or options on futures, or any other related
derivatives, which the member organization acting as specialist may
have or over which it may exercise investment discretion. No member
organization acting as specialist in the Trust Issued Receipts shall
trade in the underlying physical
[[Page 74852]]
asset or commodity, related futures or options on futures, or any other
related derivatives, in an account in which a member organization
acting as specialist, directly or indirectly, controls trading
activities, or has a direct interest in the profits or losses thereof,
which has not been reported to the Exchange as required by this Rule.
(2) In addition to the existing obligations under Exchange rules
regarding the production of books and records (See, e.g. Rule 31), the
member organization acting as a specialist in Trust Issued Receipts
shall make available to the Exchange such books, records or other
information pertaining to transactions by such entity or any member,
member organization, limited partner, officer or approved person
thereof, registered or non-registered employee affiliated with such
entity for its or their own accounts in the underlying physical asset
or commodity, related futures or options on futures, or any other
related derivatives, as may be requested by the Exchange.
(3) In connection with trading the underlying physical asset or
commodity, related futures or options on futures or any other related
derivative (including Trust Issued Receipts), the specialist registered
as such in Trust Issued Receipts shall not use any material nonpublic
information received from any person associated with a member, member
organization or employee of such person regarding trading by such
person or employee in the physical asset or commodity, futures or
options on futures, or any other related derivatives.
(h) Neither the Exchange nor any agent of the Exchange shall have
any liability for damages, claims, losses or expenses caused by any
errors, omissions, or delays in calculating or disseminating any
underlying asset or commodity value, the current value of the
underlying asset or commodity if required to be deposited to the trust
in connection with issuance of Trust Issued Receipts; net asset value;
or other information relating to the purchase, redemption or trading of
Trust Issued Receipts, resulting from any negligent act or omission by
the Exchange or any agent of the Exchange, or any act, condition or
cause beyond the reasonable control of the Exchange or its agent,
including, but not limited to, an act of God; fire; flood;
extraordinary weather conditions; war; insurrection; riot; strike;
accident; action of government; communications or power failure;
equipment or software malfunction; or any error, omission or delay in
the reports of transactions in an underlying asset or commodity.
(i) The Exchange will file separate proposals under Section 19(b)
of the Securities Exchange Act of 1934 before listing and trading Trust
Issued Receipts based on separate Investment Shares.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Amex included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below, and the most significant aspects of such statements are
set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add new Commentary .07 to Amex Rule 1202
for the purpose of permitting the listing and trading of TIRs where the
trust holds shares (``Investment Shares'') that are issued by a trust,
partnership, commodity pool, or other similar entity that holds
investments in any combination of securities, futures contracts,
options on futures contracts, swaps, forward contracts, commodities or
portfolios of investments. Additionally, in this proposal, the Amex
initially proposes to list and trade the shares (the ``Shares'') of a
specific trust that invests in the securities of a commodity pool (the
``Fund''). The Fund will invest substantially all of its assets in the
common units of beneficial interests of DB Commodity Index Tracking
Master Fund (the ``Master Fund''). The Master Fund is a trust created
under Delaware law that will consist primarily of futures contracts on
the commodities comprising the Deutsche Bank Liquid Commodity
IndexTM--Excess Return (the ``DBLCI'' or ``Index''). Both
the Fund and the Master Fund are commodity pools operated by DB
Commodity Services LLC (the ``Managing Owner''). The Managing Owner
will be registered as a commodity pool operator (the ``CPO'') and
commodity trading advisor (the ``CTA'') with the Commodity Futures
Trading Commission (``CFTC'') \5\ and a member of the National Futures
Association (``NFA'').
---------------------------------------------------------------------------
\5\ See Part 4 of CFTC Regulation, 17 CFR 4.1 et al.
---------------------------------------------------------------------------
The Managing Owner will serve as the CPO and CTA of the Fund and
the Master Fund. In this particular case, the Managing Owner of the
Master Fund will manage only the futures contracts in order to track
the performance of the Index. The Master Fund may also include U.S.
Treasury securities for margin purposes and other high credit quality
short-term fixed income securities. However, the Exchange states that
the Master Fund is not ``actively managed,'' which typically involves
effecting changes in the composition of a portfolio on the basis of
judgment relating to economic, financial and market considerations with
a view to obtaining positive results under all market conditions, but
instead, seeks to track the performance of the Index.
Introduction
In September 1999, the Exchange adopted rules for the listing and
trading of TIRs.\6\ TIRs are negotiable receipts issued by trusts that
represent investors' discrete identifiable and undivided beneficial
ownership interest in the securities deposited into the trust. Since
that time the Exchange has listed seventeen (17) TIRs under the trade
name of HOLDRS, representing a wide variety of industry sectors and the
market as a whole.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 41892 (September 21,
1999), 64 FR 52559 (September 29, 1999) (``TIR Approval Order'').
---------------------------------------------------------------------------
Under Amex Rule 1201, the Exchange may list and trade TIRs based on
one or more securities. The securities that are included in a series of
a TIR are required to be selected by the Exchange or its agent, a
wholly owned subsidiary of the Exchange, or by such other person as
shall have a proprietary interest in such TIRs. Pursuant to this Amex
Rule 1201, the Exchange may designate the Shares for trading.
In January 2005, the Exchange adopted rules (Amex Rule 1200A et
seq.) for the listing and trading of Commodity-Based Trust Shares.\7\
Commodity-Based Trust Shares are TIRs based on an underlying commodity.
The Exchange listed and traded the iShares[supreg] COMEX Gold Trust
under new Amex Rule 1200A as the first Commodity Based Trust Share.
Recently, the Exchange commenced the trading of shares of the
streetTRACKS[supreg] Gold Trust (GLD) pursuant to Amex Rule 1000B on an
unlisted trading privileges (``UTP'') basis.\8\ This proposal seeks to
expand
[[Page 74853]]
the ability of the Exchange to list and trade securities based on a
portfolio of underlying investments that may not be ``securities.''
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 51058 (January 19,
2005), 70 FR 3749 (January 26, 2005).
\8\ See Securities Exchange Act Release No. 51446 (March 29,
2005), 70 FR 17272 (April 5, 2005).
---------------------------------------------------------------------------
Under proposed Commentary .07(c) to Amex Rule 1202, the Exchange
would list and trade TIRs where the trust holds ``Investment Shares.''
For each separate Investment Share, the Exchange would submit a filing
pursuant to Section 19(b) of the Act.
The Shares will conform to the initial and continued listing
criteria under proposed Commentary .07(d) to Amex Rule 1202.\9\ The
Fund will be formed as a Delaware statutory trust pursuant to a
Certificate of Trust and a Declaration of Trust and Trust Agreement
among Wilmington Trust Company, as trustee, the Managing Owner and the
holders of the Shares.\10\
---------------------------------------------------------------------------
\9\ Proposed Commentary .07(d) to Rule 1202 for listing the
Shares is substantially similar to current Rule 1202A relating to
Commodity-Based Trust Shares.
\10\ The Exchange states that the Trust is not a registered
investment company under the Investment Company Act of 1940 (``1940
Act'') and is not required to register under the 1940 Act.
---------------------------------------------------------------------------
The Exchange notes that the Commission has permitted the listing
and trading of products linked to the performance of a commodity or
commodities.\11\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release Nos. 51058 (January 19,
2005), 70 FR 3749 (January 26, 2005) (approving the listing and
trading of the iShares[supreg] COMEX Gold Trust); 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (approving the listing and
trading of streetTRACKS[supreg] Gold Shares); 39402 (December 4,
1997), 62 FR 65459 (December 12, 1997) (approving the listing and
trading of commodity index preferred or debt securities (ComPS) on
various agricultural futures contracts and commodities indexes);
36885 (February 26, 1996), 61 FR 8315 (March 4, 1996) (approving the
listing and trading of ComPS linked to the value of single
commodity); 35518 (March 21, 1995), 60 FR 15804 (March 27, 1995)
(approving the listing and trading of commodity indexed notes or
COINs); and 43427 (October 10, 2000), 65 FR 62783 (October 19, 2000)
(approving the listing and trading of inflation indexed securities).
See also Central Fund of Canada (Registration No. 033-15180)
(closed-end fund listed and traded on the Amex that invests in gold)
and Salmon Phibro Oil Trust (Registration No. 033-33823) (trust
units listed and traded on the Amex that held the right to a forward
contract for the delivery of crude oil).
---------------------------------------------------------------------------
Index Description
DBLCI is intended to reflect the performance of certain
commodities. The Index tracks the performance of futures contracts on
crude oil, heating oil, aluminum, gold, corn and wheat, and the
notional amounts of each commodity included in the Index are
approximately in proportion to historical levels of the world's
production and supplies of such commodities. The sponsor of the Index
is Deutsche Bank AG London (``DB London'').
The Index value is calculated by DB London during the trading day
on the basis of the most recently reported trade price for the relevant
futures contract relating to each of the Index commodities. Therefore,
the market value of each Index commodity during the trading day will be
equal to the number of futures contracts of each commodity represented
in the Index multiplied by the real-time futures contract price (i.e.,
the most recently reported trade price).\12\ The Index value will be
calculated and disseminated every 15 seconds. The closing level of the
Index is calculated by DB London on the basis of closing prices for the
applicable futures contracts relating to each of the Index commodities,
and applying such prices to the relevant notional amount. For each
Index commodity, the market value will be equal to the number of
futures contracts represented in the Index multiplied by the futures
contract closing price. The Index includes provisions for the
replacement of expiring futures contracts. This replacement takes place
over a period of time in order to lessen the impact on the market for
such Index commodity. Such replacements occur monthly (other than in
November) during the first week of the month in the case of futures
contracts relating to crude oil and heating oil and annually in
November in the case of futures contracts relating to aluminum, gold,
corn and wheat.
---------------------------------------------------------------------------
\12\ Quote information and last sale information is available
from the applicable futures markets and from data vendors.
---------------------------------------------------------------------------
The Index is adjusted annually in November to rebalance its
composition to ensure that each of the Index commodities are weighted
in the same proportion that such commodities were weighted on December
1, 1988 (the ``Base Date''). The Index has been calculated back to the
Base Date. On the Base Date, the closing level was 100.
The following table reflects the index base weights (``Index Base
Weights'') of each Index commodity on the Base Date:
------------------------------------------------------------------------
Index base
Index commodity weight (%)
------------------------------------------------------------------------
Crude Oil.................................................. 35.00
Heating Oil................................................ 20.00
Aluminum................................................... 12.50
Gold....................................................... 10.00
Corn....................................................... 11.25
Wheat...................................................... 11.25
------------
Closing Level on Base Date............................... 100.00
------------------------------------------------------------------------
The composition of the Index may be adjusted in the event that the
Index Sponsor is not able to calculate the daily and/or closing price
for the Index commodities.
The Managing Owner represents that it will seek to arrange to have
the Index calculated and disseminated on a daily basis through a third
party if DB London ceases to calculate and disseminate the Index. If,
however, the Managing Owner is unable to arrange the calculation and
dissemination of the Index (or a Successor Index), the Exchange will
undertake to delist the Shares.\13\
---------------------------------------------------------------------------
\13\ If the Index is discontinued or suspended, Managing Owner,
in its sole discretion, may substitute the Index with an index
substantially similar to the discontinued or suspended Index (the
``Successor Index''). The Successor Index may be calculated and/or
published by any other third party. See also note 32 and
accompanying text.
---------------------------------------------------------------------------
Commodity Futures Contracts and Related Options
Crude Oil. Crude oil is the world's most actively traded commodity.
The Light Sweet Crude Oil futures contract traded on the New York
Mercantile Exchange (``NYMEX'') is the world's most liquid forum for
crude oil trading, as well as the world's most liquid futures contract
on a physical commodity.\14\ Due to the excellent liquidity and price
transparency of the futures contract, it is used as a principal
international pricing benchmark.
---------------------------------------------------------------------------
\14\ In 2004, ADTV on NYMEX for futures contracts on light sweet
crude oil were 212,382 (with each contract representing 1,000
barrels); ADTV through August 2005 was 241,673. Annual contracts
traded on NYMEX on light sweet crude oil in 2004 were 52.8 million;
annual contracts traded through August 2005 were 40.6 million.
---------------------------------------------------------------------------
Heating Oil. The heating oil futures contract, listed and traded at
the NYMEX, trades in units of 42,000 gallons (1,000 barrels) and is
based on delivery in New York harbor, the principal cash market
center.\15\ The heating oil futures contract is also used to hedge
diesel fuel and jet fuel, both of which trade in the cash market at an
often stable premium to the heating oil futures contract.
---------------------------------------------------------------------------
\15\ In 2004, ADTV on NYMEX for futures contracts on heating oil
were 51,745 (with each contract representing 1,000 barrels); ADTV
through August 2005 was 52,413. Annual contracts traded on NYMEX on
heating oil in 2004 were 12.8 million; annual contracts traded
through August 2005 were 8.8 million.
---------------------------------------------------------------------------
Gold. NYMEX is the world's largest physical commodity futures
exchange and the dominant market for the trading of energy and precious
metals.\16\
---------------------------------------------------------------------------
\16\ In 2004, ADTV on NYMEX for futures contracts on gold were
60,079 (with each contract representing 100 troy ounces); ADTV
through August 2005 was 61,085. Annual contracts traded on NYMEX on
gold in 2004 were 14.9 million; annual contracts traded through
August 2005 were 10.2 million.
---------------------------------------------------------------------------
Aluminum. Aluminum is the most heavily produced and consumed non-
ferrous metal in the world. Its low
[[Page 74854]]
density and malleability has been recognized and championed by the
industrial world. In 2001, world primary refined production totaled
over 24 million tonnes. The total turnover for the London Metal
Exchange (``LME'') primary aluminum futures and options in 2001 was
over 25 million lots or 625 million tonnes. The LME has the most liquid
aluminum contracts in the world.\17\
---------------------------------------------------------------------------
\17\ In 2004, ADTV on LME for futures contracts on aluminum were
116,004 (with each contract representing 25 tonnes); ADTV through
August 2005 was 113,743. Annual contracts traded on LME on aluminum
in 2004 were 29.2 million; annual contracts traded through August
2005 were 18.9 million.
---------------------------------------------------------------------------
Corn. Corn futures are traded on the Chicago Board of Trade
(``CBOT'') with a unit of trading of 5,000 bushels.\18\
---------------------------------------------------------------------------
\18\ In 2004, ADTV on CBOT for futures contracts on corn were
95,390 (with each contract representing 5,000 bushels); ADTV through
August 2005 was 120,237. Annual contracts traded on CBOT on corn in
2004 were 24.038 million; annual contracts traded through August
2005 were 20.19 million.
---------------------------------------------------------------------------
Wheat. Wheat futures are traded on the CBOT with a unit of trading
of 5,000 bushels.\19\
---------------------------------------------------------------------------
\19\ In 2004, ADTV on CBOT for futures contracts on wheat were
31,568 (with each contract representing 5,000 bushels); ADTV through
August 2005 was 41,249. Annual contracts traded on CBOT on wheat in
2004 were 7.95 million; annual contracts traded through August 2005
were 6.92 million.
---------------------------------------------------------------------------
Structure of the Fund
Fund. The Fund is a statutory trust formed pursuant to the Delaware
Statutory Trust Act and will issue units of beneficial interest or
shares that represent units of fractional undivided beneficial interest
in and ownership of the Fund. Unless terminated earlier, the Fund will
expire on December 31, 2055. The investment objective of the Fund is to
reflect the performance of the DBLCI less the expenses of the operation
of the Fund and the Master Fund. The Fund will pursue its investment
objective by investing substantially all of its assets in the Master
Fund. The Fund will hold no investment assets other than Master Fund
Units.\20\ Each Share will correlate with a Master Fund share issued by
the Master Fund and held by the Fund.
---------------------------------------------------------------------------
\20\ See Pre-Effective Amendment No. 4 to the Fund's Form S-1,
Registration No. 333-125325, dated October 26, 2005.
---------------------------------------------------------------------------
Master Fund. The Master Fund is a statutory trust formed pursuant
to the Delaware Statutory Trust Act and will issue units of beneficial
interest or shares that represent units of fractional undivided
beneficial interest in and ownership of the Master Fund. Unless
terminated earlier, the Master Fund will expire on December 31, 2055.
The investment objective of the Master Fund is to reflect the
performance of the DBLCI less the expenses of the operations of the
Fund and the Master Fund. The Master Fund will pursue its investment
objective by investing primarily in a portfolio of futures contracts on
the commodities comprising the DBLCI. In addition, the Master Fund will
also hold cash and U.S. Treasury securities for deposit with futures
commission merchants (``FCMs'') as margin and other high credit quality
short-term fixed income securities.
Trustee. Wilmington Trust Company is the trustee of the Fund and
the Master Fund. The trustee has delegated to the Managing Owner the
power and authority to manage and operate the day-to-day affairs of the
Fund and the Master Fund.
Managing Owner. The Managing Owner is a Delaware limited liability
company that will be registered with the CFTC as a CPO and CTA and is
an affiliate of Deutsche Bank AG, the sponsor of the Fund and Master
Fund. The Managing Owner will serve as the CPO and CTA of the Fund and
the Master Fund and will manage and control all aspects of the business
of the Funds. As a registered CPO and CTA, the Exchange states that the
Managing Owner is required to comply with various regulatory
requirements under the Commodity Exchange Act and the rules and
regulations of the CFTC and the NFA, including investor protection
requirements, anti-fraud prohibitions, disclosure requirements,
reporting and recordkeeping requirements and is subject to periodic
inspections and audits by the CFTC and NFA.
Clearing Broker. Deutsche Bank Securities, Inc., the Clearing
Broker, is an affiliate of the Managing Owner and is registered with
the CFTC as an FCM. The Clearing Broker will execute and clear each of
the Master Fund's futures contract transactions and will perform
certain administrative services for the Master Fund.
Administrator. The Bank of New York is the administrator for both
the Fund and the Master Fund (the ``Administrator''). The Administrator
will perform or supervise the performance of services necessary for the
operation and administration of the Fund and the Master Fund. These
services include, but are not limited to, investment accounting,
financial reporting, broker and trader reconciliation, net asset value
(``NAV'') calculation,\21\ risk transparency, and receiving and
processing orders from Authorized Participants (as defined below), and
coordinating the processing of orders with the Managing Owner and the
Depository Trust Company (``DTC'').
---------------------------------------------------------------------------
\21\ NAV is the total assets of the Master Fund less total
liabilities of the Master Fund, determined on the basis of generally
accepted accounting principles. NAV per Master Fund share is the NAV
of the Master Fund divided by the number of outstanding Master Fund
shares. This will be the same for the Shares of the Fund because of
a one-to-one correlation between the Shares and the shares of the
Master Fund.
---------------------------------------------------------------------------
Product Description
Issuances of the Shares will be made only in baskets of 200,000
Shares or multiples thereof (the ``Basket Aggregation'' or ``Basket'').
The Fund will issue and redeem the Shares on a continuous basis, by or
through participants that have entered into participant agreements
(each, an ``Authorized Participant'') \22\ with the Fund and its
Managing Owner at the NAV per Share determined shortly after 4 p.m. ET
or the last to close futures exchanges on which the Index Commodities
are traded, whichever is later, on the business day on which an order
to purchase the Shares in one or more Baskets is received in proper
form. Following issuance, the Shares will be traded on the Exchange
similar to other equity securities.
---------------------------------------------------------------------------
\22\ 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 DTC
Participant, and (iii) has in effect a valid Participant Agreement
with the Fund issuer.
---------------------------------------------------------------------------
The procedures for creating a Basket are as follows. On any
business day, an Authorized Participant may place an order with the
Distributor, ALPS Distributors, Inc. (the ``Distributor''), to create
one or more Baskets. Purchase orders must be placed by 10 a.m. ET and
are irrevocable. By placing a purchase order, and prior to delivery of
such Basket(s), an Authorized Participant's DTC account will be charged
the non-refundable $500 transaction fee due for the purchase order,
regardless of the number of Baskets to be created in connection with
such order.
The total payment required to create a Basket during the continuous
offering period is the cash amount equal to the NAV per Share times
200,000 Shares (the ``Basket Amount'') on the purchase order date. Thus
the Basket Amount usually will be determined on each business day by
the Administrator shortly after 4 p.m. ET. Baskets are issued as of 12
noon ET, on the business day immediately following the purchase order
date (T+1) at NAV per Share on the purchase order date if the required
payment has been timely received.
Authorized Participants that have placed a purchase order to create
a
[[Page 74855]]
Basket must transfer the Basket Amount to the Administrator (the ``Cash
Deposit Amount'') by 10 a.m. the next day. Authorized Participants that
wish to redeem a Basket will receive cash in exchange for each Basket
surrendered in an amount equal to the NAV per Basket (the ``Cash
Redemption Amount'') through a similar procedure. The Clearing Broker
will be the custodian for the Master Fund and responsible for
safekeeping the Master Fund's assets.
Because orders to purchase Baskets must be placed by 10 a.m. ET,
but the total payment required to create a Basket will not be
determined until shortly after 4 p.m. ET, on the date the purchase
order is received, Authorized Participants will not know the total
amount of the payment required to create a Basket at the time they
submit an irrevocable purchase order. This is similar to exchange-
traded funds and mutual funds. The Fund's prospectus discloses that NAV
and the total amount of the payment required to create a Basket could
rise or fall substantially between the time an irrevocable purchase
order is submitted and the time the amount of the purchase order is
determined.
On each business day, the Administrator will make available
immediately prior to the opening of trading on the Amex, an estimate of
the Cash Deposit Amount for the creation of a Basket. The Amex will
disseminate every 15 seconds throughout the trading day, via the
facilities of the Consolidated Tape Association, an amount
representing, on a per Share basis, the current value (intra-day) of
the Basket Amount (the ``Indicative Fund Value''). It is anticipated
that the deposit of the Cash Deposit Amount in exchange for a Basket
will be made primarily by institutional investors, arbitrageurs, and
the Exchange specialist. Baskets are then separable upon issuance into
identical Shares that will be listed and traded on the Amex.\23\ The
Shares are expected to be traded on the Exchange by professionals, as
well as institutional and retail investors. Shares may be acquired in
two (2) ways: (1) Through a deposit of the Cash Deposit Amount with the
Administrator during normal business hours by Authorized Participants,
or (2) through a purchase on the Exchange by investors.
---------------------------------------------------------------------------
\23\ The Shares are separate and distinct from the shares of the
Master Fund. The Master Fund's assets will consist of long positions
in the futures contracts on the commodities comprising the DBLCI.
The Exchange expects that the number of outstanding Shares will
increase and decrease from time to time as a result of creations and
redemptions of Baskets.
---------------------------------------------------------------------------
Shortly after 4 p.m. ET each business day, the Administrator will
determine the NAV for the Fund and Master Fund, utilizing the current
day's settlement value of the particular commodity futures contracts in
the Master Fund's portfolio and the value of the Master Fund's cash and
high-credit quality, short-term fixed income securities. However, if a
futures contract on a trading day cannot be liquidated due to the
operation of daily limits or other rules of an exchange upon which such
futures contract is traded, the settlement price on the most recent
trading day on which the futures contract could have been liquidated
will be used in determining the Fund's and the Master Fund's NAV.
Accordingly, for both U.S. and non-U.S. futures contracts, the
Administrator will typically use that day's futures settlement price
for determining NAV.
The NAV for the Fund is total assets of the Master Fund less total
liabilities of the Master Fund. The NAV is calculated by including any
unrealized profit or loss on futures contracts and any other credit or
debit accruing to the Master Fund but unpaid or not received by the
Master Fund. This preliminary NAV is then used to compute all NAV-based
fees (including the management and administrative fees, accrued through
and including the date of publication) that are calculated from the
value of Master Fund assets. The Administrator will calculate the NAV
per Share by dividing the NAV by the number of Shares outstanding. Then
once the final, published NAV is determined, shortly after 4 p.m. ET
each business day, the Administrator also will determine the Basket
Amount for orders placed by Authorized Participants received by 10 a.m.
ET that day.
Shortly after 4 p.m. ET each business day, the Administrator, Amex,
and Managing Owner will disseminate the NAV for the Shares and the
Basket Amount (for orders placed during the day). The NAV and the
Basket Amount are available at the same time and will be disseminated
accordingly. The Basket Amount and the NAV are communicated by the
Administrator to all Authorized Participants via facsimile or
electronic mail message and will be publicly available on the DB
London's (Index Sponsor) Web site at https://gm-secure.db.com/CommoditiesIndices. The Amex will also publicly disclose via its Web
site at https://www.amex.com the NAV and Basket Amount (for orders
placed that day). The Exchange also will disseminate the Basket Amount
by means of CTA/CQ High Speed Lines.
The Basket Amount necessary for the creation of a Basket will
change from day to day. On each day that the Amex is open for regular
trading, the Administrator will adjust the Cash Deposit Amount as
appropriate to reflect the prior day Fund NAV and newly accrued
expenses.
The Exchange believes that the Shares will not trade at a material
discount or premium to NAV due to potential arbitrage opportunities in
the event of any discrepancy between the two. Due to the fact that the
Shares can be created and redeemed daily only in Basket Aggregations at
NAV by Authorized Participants, the Exchange submits that arbitrage
opportunities should provide a mechanism to diminish the effect of any
premiums or discounts that may exist from time to time.
The Shares will not be individually redeemable but will only be
redeemable in Basket Aggregations. To redeem, an Authorized Participant
will be required to accumulate enough Shares to constitute a Basket
Aggregation (i.e., 200,000 Shares). An Authorized Participant redeeming
a Basket Aggregation will receive the Cash Redemption Amount. Upon the
surrender of the Shares and payment of applicable redemption
transaction fee, taxes or charges, the Administrator will deliver to
the redeeming Authorized Participant the Cash Redemption Amount.
Shares will be registered in book entry form through DTC. Trading
in the Shares on the Exchange will be effected from 9:30 a.m. until
4:15 p.m. ET each business day. The minimum trading increment for such
Shares will be $.01.
Dissemination of the Index and Underlying Futures Contracts Information
DB London as the sponsor of the Index will publish the value of the
Index at least every fifteen (15) seconds during Amex trading hours
through Bloomberg, Reuters, and other market data vendors. In addition,
the Index value will be available on the DB London Web site at https://www.dbcfund.db.com on a twenty (20) minute delayed basis. The closing
level will similarly be provided by DB London. In addition, any
adjustments or changes to the Index will also be provided by DB London
and the Exchange on their respective Web sites.\24\
---------------------------------------------------------------------------
\24\ The Index Sponsor has in place procedures to prevent the
improper sharing of information between different affiliates and
departments. Specifically, an information barrier exists between the
personnel within DB London that calculate and reconstitute the Index
and other personnel of the Index Sponsor, including but not limited
to the Managing Owner, sales and trading, external or internal fund
managers, and bank personnel who are involved in hedging the bank's
exposure to instruments linked to the Index, in order to prevent the
improper sharing of information relating to the recomposition of the
Index.
---------------------------------------------------------------------------
[[Page 74856]]
The closing prices and daily settlement prices for the futures
contracts held by the Master Fund are publicly available on the Web
sites of the futures exchanges trading the particular contracts. The
particular futures exchange for each futures contract with Web site
information is as follows: (i) aluminum--London Metal Exchange (LME) at
https://www.lme.com; (ii) corn and wheat--Chicago Board of Trade (CBOT)
at https://www.cbot.com; and (iii) crude oil, heating oil and gold--New
York Mercantile Exchange (NYMEX) at https://www.nymex.com. The Exchange
on its Web site at https://www.amex.com will include a hyperlink to the
Index Sponsor's Web site at https://gm-secure.db.com/CommoditiesIndices, which will contain hyperlinks to each of the
futures exchanges Web sites for the purpose of disclosing futures
contract pricing. In addition, various data vendors and news
publications publish futures prices and data. The Exchange represents
that futures quotes and last sale information for the commodities
underlying the Index are widely disseminated through a variety of
market data vendors worldwide, including Bloomberg and Reuters. In
addition, the Exchange represents that complete real-time data for such
futures is available by subscription from Reuters and Bloomberg. The
CBOT, LME, and NYMEX also provide delayed futures information on
current and past trading sessions and market news free of charge on
their respective Web sites. The specific contract specifications for
the futures contracts are also available from the futures exchanges on
their Web sites as well as other financial informational sources.
Availability of Information Regarding the Shares
The Web site for the Fund, which will be publicly accessible at no
charge, will contain the following information: (a) The prior business
day's NAV and the reported closing price; (b) the mid-point of the bid-
ask price \25\ 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.
---------------------------------------------------------------------------
\25\ The bid-ask price of Shares is determined using the highest
bid and lowest offer as of the time of calculation of the NAV.
---------------------------------------------------------------------------
As described above, the NAV for the Fund will be calculated and
disseminated daily. The Amex also intends to disseminate, during Amex
trading hours, for the Fund on a daily basis by means of Consolidated
Tape Association/Consolidated Quotation High Speed Lines information
with respect to the Indicative Fund Value (as discussed below), recent
NAV, and Shares outstanding. The Exchange will also make available on
its Web site daily trading volume, closing prices, and the NAV.
Dissemination of Indicative Fund Value
As noted above, the Administrator calculates the NAV of the Fund
once each trading day. In addition, the Administrator causes to be made
available on a daily basis the Cash Deposit Amount to be deposited in
connection with the issuance of the Shares in Basket Aggregations. In
addition, other investors can request such information directly from
the Administrator.
In order to provide updated information relating to the Fund for
use by investors, professionals and persons wishing to create or redeem
the Shares, the Exchange will disseminate through the facilities of CTA
an updated Indicative Fund Value. The Indicative Fund Value will be
disseminated on a per Share basis every 15 seconds from 9:30 a.m. to
4:15 p.m. ET.\26\ The Indicative Fund Value will be calculated based on
the cash required for creations and redemptions (i.e., NAV x 200,000)
adjusted to reflect the price changes of the Index commodities through
investments held by the Master Fund, i.e., futures contracts.
---------------------------------------------------------------------------
\26\ Telephone conversation between Jeffrey Burns, Associate
General Counsel, Amex, and Kate Robbins, Attorney, Division of
Market Regulation, Commission, on November 28, 2005.
---------------------------------------------------------------------------
The Indicative Fund Value will not reflect price changes to the
price of an underlying commodity between the close of trading of the
futures contract at the relevant futures exchange and the close of
trading on the Amex at 4:15 p.m. ET. The value of a Share may
accordingly be influenced by non-concurrent trading hours between the
Amex and the various futures exchanges on which the futures contracts
based on the Index commodities are traded. While the Shares will trade
on the Amex from 9:30 a.m. to 4:15 p.m. ET, the table below lists the
trading hours for each of the Index commodities underlying the futures
contracts.
----------------------------------------------------------------------------------------------------------------
Index commodity Futures exchange Trading hours (ET)
----------------------------------------------------------------------------------------------------------------
Aluminum.............................. LME...................... 6:55 a.m.-12:00 p.m.
Gold.................................. COMEX.................... 8:20 a.m.-1:30 p.m.
Crude Oil............................. NYMEX.................... 10:00 a.m.-2:30 p.m.
Heating Oil........................... NYMEX.................... 10:05 a.m.-2:30 p.m.
Corn.................................. CBOT..................... 10:30 a.m.-2:15 p.m.
Wheat................................. CBOT..................... 10:30 a.m.-2:15 p.m.
----------------------------------------------------------------------------------------------------------------
While the market for futures trading for each of the Index
commodities is open, the Indicative Fund Value can be expected to
closely approximate the value per Share of the Basket Amount. However,
during Amex trading hours when the futures contracts have ceased
trading, spreads and resulting premiums or discounts may widen, and
therefore, increase the difference between the price of the Shares and
the NAV of the Shares. Indicative Fund Value on a per 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.
The Exchange believes that dissemination of the Indicative Fund
Value based on the cash amount required for a Basket Aggregation
provides additional information that is not otherwise available to the
public and is useful to professionals and investors in connection with
the Shares trading on the Exchange or the creation or redemption of the
Shares.
[[Page 74857]]
Termination Events
The Fund will be terminated if any of the following circumstances
occur: (1) The Shares are delisted from the Amex and are not listed for
trading on another national securities exchange within five business
days from the date the Shares are delisted; (2) holders of at least 50%
of the outstanding Shares notify the Managing Owner that they elect to
terminate the Trust; (3) the trustee resigns and no successor trustee
is appointed within 60 days from the date the trustee provides notice
to the Managing Owner of its intent to resign; (4) the SEC finds that
the Fund should be registered as an investment company under the
Investment Company Act of 1940, and the trustee has actual knowledge of
the SEC finding; (5) the aggregate market capitalization of the Fund,
based upon the closing price for the Shares, was less than $10 million
on each of five (5) consecutive trading days and the trustee receives,
within six (6) months from the last of those trading days, notice that
the sponsor has decided to terminate the Fund; or (6) the Fund fails to
qualify for treatment, or ceases to be treated, as a grantor trust for
U.S. federal income tax purposes and the trustee receives notice that
the sponsor has determined that the termination of the Fund is
advisable.
If not terminated earlier by the trustee, the Fund will terminate
on December 31, 2055. Upon termination of the Fund, holders of the
Shares will surrender their Shares and receive from the Administrator,
in cash, their portion of the value of the Fund.
Criteria for Initial and Continued Listing
The Fund will be subject to the criteria in proposed Commentary
.07(d) of Amex Rule 1202 for initial and continued listing of the
Shares. The proposed continued listing criteria provides for the
delisting or removal from listing of the Shares under any of the
following circumstances:
Following the initial twelve month period from the date of
commencement of trading of the Shares: (i) If the Fund has more than 60
days remaining until termination and there are fewer than 50 record
and/or beneficial holders of the Shares for 30 or more consecutive
trading days; (ii) if the Fund has fewer than 50,000 Shares issued and
outstanding; or (iii) if the market value of all Shares is less than
$1,000,000.
If the value of the underlying index or portfolio is no
longer calculated or available on at least a 15-second basis, or the
Exchange stops providing a hyperlink on its Web site to any such asset
or investment value.
The Indicative Fund Value is no longer made available on
at least a 15-second basis.
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
It is anticipated that a minimum of 2,000,000 Shares will be
required to be outstanding at the start of trading. It is anticipated
that the initial price of a Share will be approximately $25. The Fund
expects to accept subscriptions for Shares in Basket Aggregations
(i.e., $5 million) from Authorized Participants during an initial
offering period with a finite term of approximately six (6) months,
subject to earlier termination. After the initial offering period has
closed and trading commences, the Fund will then issue Shares in the
normal Basket Aggregations of 200,000 Shares to Authorized
Participants. Once the initial offering period has closed and trading
commences, the Master Fund will issue shares in Master Fund Baskets
(200,000 shares) to the Fund continuously at NAV. The Master Fund will
be owned by the Fund and the Managing Owner.\27\ Each Share issued by
the Fund will correlate with a Master Fund share issued by the Master
Fund and held by the Fund. The Exchange believes that the anticipated
minimum number of Shares outstanding at the start of trading is
sufficient to provide adequate market liquidity and to further the
Fund's objective to seek to provide a simple and cost effective means
of accessing the commodity futures markets.
---------------------------------------------------------------------------
\27\ The Managing Owner will own 1% or less of the Master Fund
and will share pro rata in the income and expenses of the Master
Fund.
---------------------------------------------------------------------------
The Exchange represents that it prohibits the initial and/or
continued listing of any security that is not in compliance with Rule
10A-3 under the Securities Act of 1934.\28\
---------------------------------------------------------------------------
\28\ See Rule 10A-3(c)(7), 17 CFR 240.10A-3(c)(7) (stating that
a listed issuer is not subject to the requirements of Rule 10A-3 if
the issuer is organized as a trust that does not have a board of
directors or other unincorporated association and the activities of
the issuer are limited to passively owning or holding securities or
other assets on behalf of or for the benefit of the holders of the
listed securities).
---------------------------------------------------------------------------
Original and Annual Listing Fees
The Amex original listing fee applicable to the listing of the Fund
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 Fund outstanding at the end of
each calendar year.
Purchase and Redemptions in Basket Aggregations
In the Information Circular (described below), members and member
organizations will be informed that procedures for purchases and
redemptions of Shares in Basket Aggregations are described in the
prospectus and that Shares are not individually redeemable but are
redeemable only in Basket Aggregations or multiples thereof.
Trading Rules
The Shares are equity securities subject to Amex Rules governing
the trading of equity securities, including, among others, rules
governing priority, parity and precedence of orders, specialist
responsibilities and account opening and customer suitability (Amex
Rule 411). Initial equity margin requirements of 50% will apply to
transactions in the Shares. Shares will trade on the Amex until 4:15
p.m. ET 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 Amex Rule 950(f) and Commentary thereto) the price of which
is derivatively 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 the
Shares as eligible for this treatment.\29\
---------------------------------------------------------------------------
\29\ 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).
---------------------------------------------------------------------------
The 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 the Shares made in connection with the
creation and redemption of Shares will not be subject to the
prohibitions of Amex Rule 190.\30\ Unless exemptive or no-action relief
is available, the Shares will be subject to the short sale rule, Rule
10a-
[[Page 74858]]
1 under the Act.\31\ If exemptive or no-action relief is provided, the
Exchange will issue a notice detailing the terms of the exemption or
relief. The 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
Shares into parity with the underlying commodity or commodities and/or
futures contract price. Proposed Commentary .07(f) to Amex Rule 1202
sets forth this limited exception to Amex Rule 170.
---------------------------------------------------------------------------
\30\ See Commentary .05 to Amex Rule 190.
\31\ The Fund expects to seek relief, in the near future, from
the Commission in connection with the trading of the Shares from the
operation of certain Exchange Act rules.
---------------------------------------------------------------------------
The adoption of Commentary .07(e) to Amex Rule 1202 relating to
certain specialist prohibitions will address potential conflicts of
interest in connection with acting as a specialist in the Shares.
Specifically, Commentary .07(e) provides that the prohibitions in Amex
Rule 175(c) apply to a specialist in the Shares so that the specialist
or affiliated person may not act or function as a market maker in an
underlying asset, related futures contract or option or any other
related derivative. An affiliated person of the specialist consistent
with Amex Rule 193 may be afforded an exemption to act in a market
making capacity, other than as a specialist in the Shares on another
market center, in the underlying asset, related futures or options or
any other related derivative. In particular, proposed Commentary .07(e)
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 Shares on another market center, in
the underlying asset or commodity, related futures or options on
futures, or any other related derivatives.
Adoption of Commentary .07(g) to Amex Rule 1202 will also ensure
that specialists handling the Shares provide the Exchange with all the
necessary information relating to their trading in physical assets or
commodities, related futures contracts and options thereon or any other
derivative. 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 or futures contracts would not be subject to Exchange
jurisdiction, but the Exchange could obtain information regarding the
activities of such subsidiary or affiliate through surveillance sharing
agreements with regulatory organizations of which such subsidiary or
affiliate is a member.
Trading Halts
Prior to the commencement of trading, the Exchange will issue an
Information Circular (described below) to members informing them of,
among other things, Exchange policies regarding trading halts in the
Shares. First, the circular will advise that trading will be halted in
the event the market volatility trading halt parameters set forth in
Amex Rule 117 have been reached. Second, the circular will advise that,
in addition to the parameters set forth in Amex Rule 117, the Exchange
will halt trading in the Shares if trading in the underlying related
futures contract(s) 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. Additionally, the Exchange represents that it will
cease trading the Shares if the conditions in Amex Rule 1202(d)(2)(ii)
or (iii) exist (i.e., if there is a halt or disruption in the
dissemination of the Indicative Fund Value and/or underlying Index
value).\32\
---------------------------------------------------------------------------
\32\ In the event the Index value or Indicative Fund Value is no
longer calculated or disseminated, the Exchange would immediately
contact the Commission to discuss measures that may be appropriate
under the circumstances. Telephone conversation between Jeffrey
Burns, Associate General Counsel, Amex, and Florence Harmon, Senior
Special Counsel, Division of Market Regulation, Commission, on
November 22, 2005.
---------------------------------------------------------------------------
Suitability
The Information Circular (described below) will inform members and
member organizations of the characteristics of the Fund and of
applicab