Securities: Suspension of trading— , 3570-3578 [E6-700]

Agencies

[Federal Register: January 23, 2006 (Volume 71, Number 14)]
[Notices]               
[Page 3570-3578]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ja06-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53130; File No. SR-Amex-2005-072]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Listing and Trading of Shares of the iShares[supreg] 
Silver Trust

January 17, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 30, 2005, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Amex. On September 
15, 2005, the Exchange submitted Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 to the proposed rule change clarifies the 
valuation procedure that would be used by the Bank of New York to 
determine the daily value of the silver contained in the 
iShares[supreg] Silver Trust.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade under Amex Rules 1200A et 
seq.,

[[Page 3571]]

the iShares[reg] Silver Trust shares (the ``Silver Shares'' or 
``Shares'').\4\
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    \4\ iShares[supreg] is a registered trademark of Barclays Global 
Investors, N.A.
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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, as 
amended, and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The Exchange has prepared summaries, set 
forth in sections A, B, and C below, of the most significant aspects of 
such statements.

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

1. Purpose
    The Exchange proposes to list and trade the iShares Silver Trust 
(the ``Silver Trust'' or ``Trust'') shares that represent beneficial 
ownership interests in the net assets of the Trust consisting primarily 
of silver bullion (``silver''). The Exchange states that the Trust will 
not be actively managed, and therefore, a holder of Silver Shares will 
not be hedged to protect against the price volatility of the underlying 
silver.
    Under Amex Rule 1201A, the Exchange may approve for listing and 
trading Commodity-Based Trust Shares on an underlying commodity.\5\ 
Accordingly, the Amex proposes to list for trading Silver Shares under 
Exchange Rule 1200A et. seq.\6\
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    \5\ Amex Rule 1200A(b)(2) defines ``commodity'' as set forth in 
Section 1(a)(4) of the Commodity Exchange Act (``CEA'').
    \6\ See applicable Amex Rules 1200A, 1201A, 1202A, 1203A, 1204A, 
and 1205A.
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    Introduction. In January 2005, the Exchange adopted rules for the 
listing and trading of ``Commodity-Based Trust Shares.'' \7\ Commodity-
Based Trust Shares (the ``Commodity Shares'') are securities issued by 
a trust that represent investors'' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
trust. Commodity Shares are a form of trust issued receipt (``TIR'') 
\8\ that instead of holding one or more discrete securities will hold 
one or more physical commodities. The Exchange has listed the iShares 
COMEX Gold Trust \9\ and trades pursuant to unlisted trading privileges 
(``UTP''), the streetTRACKS Gold Trust,\10\ as Commodity-Based Trust 
Shares pursuant to Exchange Rules 1200A et seq.
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    \7\ See Securities Exchange Act Release No. 51058 (January 19, 
2005), 70 FR 3749 (January 26, 2005) (approving the listing and 
trading of the iShares COMEX Gold Trust).
    \8\ A Trust Issued Receipt or ``TIR'' is defined in Exchange 
Rule 1200(b) as a security (a) that is issued by a trust that holds 
specified securities deposited with the trust; (b) that, when 
aggregated in some specified minimum number, may be surrendered to 
the trust by the beneficial owner to receive the securities; and (c) 
that pays beneficial owners dividends and other distributions on the 
deposited securities, if any are declared and paid to the trustee by 
an issuer of the deposited securities. Under Amex Rule 1201, the 
Exchange may approve for listing and trading TIRs based on one or 
more securities. The Exchange defines a ``security'' or 
``securities'' to include stocks, bonds, options, and other 
interests or instruments commonly known as securities. See Article 
I, Section 3(j) of the Amex Constitution.
    \9\ See supra note 7.
    \10\ See Securities Exchange Act Release No. 51446 (March 29, 
2005), 70 FR 17272 (April 5, 2005) (approving the UTP trading of the 
streetTRACKS Gold Shares).
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    The Exchange may list and trade the Silver Shares pursuant to Amex 
Rules 1200A et seq. subject to Commission review and approval. The 
Silver Shares will conform to the initial and continued listing 
criteria under Amex Rule 1202A.\11\ The Silver Trust will be formed 
under a depositary trust agreement, among Bank of New York, as Trustee; 
Barclays Global Investors International, Inc. (``Barclays'' or 
``Sponsor''), the Sponsor; all depositors, if any; and the holders of 
Silver Shares.\12\
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    \11\ The initial listing standards set forth in Amex Rule 
1202A(a) provide that the Exchange establish a minimum number of 
TIRs required to be outstanding at the time of the commencement of 
trading on the Exchange. As set forth in the section ``Criteria for 
Initial and Continued Listing,'' the Exchange expects the minimum 
number of Silver Shares required to be outstanding at the time of 
trading to be 150,000. This section, infra, specifically details the 
initial and continued listing standards for the Silver Trust.
    \12\ The trust is not an investment company as defined in 
Section 3(a) of the Investment Company Act of 1940 (the ``1940 
Act'').
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    The Exchange notes that the Commission has permitted the listing 
and trading of products linked to the performance of an underlying 
commodity or commodities.\13\
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    \13\ 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); 43427 (October 10, 2000), 65 FR 62783 
(October 19, 2000) (approving the listing and trading of inflation 
indexed securities); 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); and 35518 (March 21, 
1995), 60 FR 15804 (March 27, 1995) (approving the listing and 
trading of commodity indexed notes or COINS). See also Central Fund 
of Canada (Registration No. 033-15180) (closed-end fund listed and 
traded on the Amex that invests in silver) 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).
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    Description of the Silver Market. The silver market is a global 
marketplace consisting of both over-the-counter (``OTC'') transactions 
and exchange-traded products. The OTC market generally consists of 
transactions in spot, forwards, options and other derivatives, while 
exchange-traded transactions consist of futures and options. Set forth 
below, the Exchange has provided a description of each of the OTC and 
exchange-traded markets for silver as well as a summary of their 
respective regulatory structures.
    The OTC Market. The OTC market trades on a 24-hour continuous basis 
and accounts for the substantial portion of global silver trading. 
Specifically, the London OTC market is the largest silver clearing 
market. Liquidity in the OTC market can vary from time to time during 
the course of the 24-hour trading day. Fluctuations in liquidity are 
reflected in adjustments to dealing spreads--the differential between a 
dealer's buy and sell prices. The Exchange believes the period of 
greatest liquidity in the silver market is typically that time of day 
when trading in the European time zone overlaps with trading in the 
United States. This occurs when the OTC market trading in New York, 
London, Zurich and other centers coincides with futures and options 
trading on the Commodity Exchange, Inc. (``COMEX'').\14\ This period 
lasts for approximately five (5) hours \15\ each New York business day, 
from 8:25 a.m.-1:25 p.m. Eastern Time (``ET'').\16\
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    \14\ COMEX is a division of the New York Mercantile Exchange, 
Inc. (``NYMEX'') where silver futures contracts and related options 
are traded.
    \15\ Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006.
    \16\ The Exchange submits that Silver Shares may be used as a 
price discovery mechanism for silver from 1:25 p.m. to 4:15 p.m. ET. 
The open outcry trading hours of the COMEX silver futures contract 
is from 8:25 a.m. to 1:25 p.m. ET Monday through Friday. NYMEX 
ACCESS(r), an electronic trading system, is open for price discovery 
on COMEX silver futures contracts from 2 p.m. Monday afternoon until 
8 a.m. Friday morning ET; and from 7 p.m. Sunday night until Monday 
morning at 8 a.m. ET.
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    Market makers, as well as others in the OTC market, trade with each 
other and with their clients on a principal-to-principal basis. All 
risks and issues of credit are between the parties directly involved in 
the transaction. Market makers include the market-making

[[Page 3572]]

members of the London Bullion Market Association (``LBMA''), the trade 
association that acts as the coordinator for activities conducted on 
behalf of its members and other participants in the London bullion 
market.\17\ The current market-making members of the LBMA are: Bank of 
Nova Scotia-ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC 
Bank USA (London branch), Goldman Sachs International, JPMorganChase 
Bank, Royal Bank of Canada Ltd., Societe Generale, and UBS AG. 
JPMorganChase Bank NA (London branch) is an affiliate of the custodian 
for the Trust. Barclays Bank Plc is an affiliate of the Sponsor and the 
Initial Purchaser, Barclays Capital, Inc. The OTC market provides a 
relatively flexible market in terms of quotes, price, size, 
destinations for delivery, and other factors. Bullion dealers customize 
transactions to meet clients' requirements. The OTC market has no 
formal structure and no open-outcry meeting place. The main centers of 
the OTC market are London (the largest market), New York, and Zurich. 
Bullion dealers have offices around the world, and most of the world's 
major bullion dealers are either members or associate members of the 
LBMA.
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    \17\ Further information about the LBMA may be found at http://www.lbma.org.uk.
 There are currently nine (9) market-making members 

of the LBMA, five of which offer clearing services, and 51 full 
members.
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    The Exchange indicates that there are no authoritative published 
figures for overall worldwide volume in silver trading. There are 
published sources that do suggest the significant size of the overall 
market. The LBMA publishes statistics compiled from the five (5) 
members offering clearing services.\18\ The Exchange notes that the 
monthly average daily volume figures published by the LBMA for 2004 
range from, a high of 143.4 million to a low of 75.5 million troy 
ounces per day. Through May 2005, the monthly average daily volume has 
ranged from a high of 152.1 million to a low of 76.9 million. The COMEX 
also publishes price and volume statistics for exchange-traded 
transactions in contracts for the future delivery of silver (and 
related options).\19\
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    \18\ Information regarding clearing volume estimates by the LBMA 
can be found at http://www.lbma.org.uk/clearing_table.htm. The 

three measures published by the LBMA are: volume, the amount of 
metal transferred on average each day measured in millions of troy 
ounces; value, measured in U.S. dollars, using the monthly average 
London PM fixing price; and the number of transfers, which is the 
average number recorded each day. The statistics exclude allocated 
and unallocated balance transfers where the sole purpose is for 
overnight credit and physical movements arranged by clearing members 
in locations other than London.
    \19\ Information regarding price and average daily volume on the 
COMEX can be found at http://www.nymex.com/jsp/markets.md_annual_volume.jsp
.

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    The London Bullion Market and the London ``Fix'' Process. Although 
the market for physical silver is distributed globally, most OTC market 
trades are cleared through London. In addition to coordinating market 
activities, the Exchange notes that the LBMA acts as the principal 
point of contact between the market and its regulators. A primary 
function of the LBMA is its involvement in the promotion of refining 
standards by maintenance of the ``London Good Delivery Lists,'' which 
are the lists of LBMA accredited melters and assayers of silver. The 
LBMA also coordinates market clearing and vaulting, promotes good 
trading practices, and develops standard documentation for such 
clearing and warehousing activities. The LBMA also publishes ``The Good 
Delivery Rules for Gold and Silver Bars,'' the specifications for gold 
and silver bars acceptable for delivery in settlement of a transaction 
on the London market. Silver bars meeting these requirements are 
referred to herein as ``London Good Delivery Bars.'' The silver spot 
price always refers to that of a London Good Delivery Bar, unless 
otherwise specified. In the OTC market, business is generally conducted 
over the phone and through a widely used electronic dealing system.
    A London silver ``fix'' is conducted each trading day at 12 p.m. 
London time (7 a.m. ET) providing reference silver prices for that 
day's trading.\20\ The Exchange notes that many long-term contracts are 
priced on the basis of the London silver fix and market participants 
will usually refer to the London silver fix when looking for a basis 
for valuation. The Exchange believes that the London fix is the most 
widely used benchmark for daily silver prices and is quoted by various 
financial information sources.
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    \20\ Formal participation in the London silver fix is limited to 
three (3) LBMA members, each of which is a bullion dealer. The 
chairmanship of the London silver fix committee is The Bank of Nova 
Scotia--ScotiaMocatta. The fix takes place by telephone at 12:00 
p.m. London time and also has a web-based commentary. The other 
members of the London silver fix are currently Deutsche Bank AG and 
HSBC Bank USA, NA. Any other market participant wishing to 
participate in trading on the fix is required to do so through one 
of these three (3) dealers. Clients place orders either with one of 
the three (3) fixing members or with another bullion dealer who will 
then be in contact with a fixing member during the fixing. The 
fixing members net-off all orders when communicating their net 
interest at the fixing. The fix begins with the fixing chairman 
suggesting a ``trying price,'' reflecting the market price 
prevailing at the opening of the fix. This is relayed by the fixing 
members to their dealing rooms that have direct communication with 
all interested parties. Any market participant may enter the fixing 
process at any time, or adjust or withdraw his order. The silver 
price is adjusted up or down until all the buy and sell orders are 
matched, at which time the price is declared fixed. All fixing 
orders are transacted on the basis of this fixed price, which is 
instantly relayed to the market through various media. Barclays and 
the Exchange believe that the London fix is widely viewed as a full 
and fair representation of all market interest at the time of the 
fix.
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    Futures Exchanges. The Exchange states that the most significant 
silver futures exchanges are the COMEX and the Tokyo Commodity Exchange 
(``TOCOM'').\21\ Trading on these exchanges is based on fixed delivery 
dates and transaction sizes for the futures and options contracts 
traded. Trading costs on these exchanges are negotiable. The Exchange 
represents that as a matter of practice, only a small percentage of the 
future market turnover ever comes to physical delivery of the silver 
represented by the contracts traded. Both COMEX and TOCUM permit 
trading on margin. COMEX operates through a central clearance system. 
TOCOM has a similar clearance system. In each case, the exchange acts 
as a counterparty for each member for clearing purposes.
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    \21\ There are other silver exchange markets, such as the London 
Metals Exchange, the Istanbul Gold Exchange, the Shanghai Gold 
Exchange, and the Hong Kong Chinese Gold & Silver Exchange Society.
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    Silver Market Regulation. There is no direct regulation of the 
global OTC market in silver. However, indirect regulation of some of 
the overseas participants does occur. In the United Kingdom, 
responsibility for the regulation of financial market participants, 
including the major participating members of the LBMA, falls under the 
authority of the Financial Services Authority (``FSA'') as provided by 
the Financial Services and Market Act of 2000 (``FSM Act''). The 
Exchange states that under the FSM Act, all UK-based banks, together 
with other investment firms, are subject to a range of requirements, 
including fitness and properness, capital adequacy, liquidity, and 
systems and controls. The FSA is responsible for regulating investment 
products, including derivatives, and those who deal in investment 
products. Regulation of spot, commercial forwards and deposits of 
silver not covered by the FSM Act is provided for by The London Code of 
Conduct for Non-Investment Products, which was established by market 
participants in conjunction with the Bank of England, and is a 
voluntary code of conduct among market participants.
    The Exchange states that participants in the U.S. OTC market for 
silver are

[[Page 3573]]

generally regulated by their institutional supervisors, which regulate 
their activities in the other markets in which they operate. For 
example, participating banks are regulated by the banking authorities. 
In the U.S., the Commodities Futures Trading Commission (``CFTC''), an 
independent governmental agency with the mandate to regulate commodity 
futures and options markets in the U.S., regulates market participants 
and has established rules designed to prevent market manipulation, 
abusive trade practices and fraud.
    The Exchange states that TOCOM has authority to perform financial 
and operational surveillance on its members' trading activities, 
scrutinize positions held by members and large-scale customers, and 
monitor price movements of futures markets by comparing them with cash 
and other derivative markets' prices.
    Product Description. 1. Creation and Redemption Process. Issuances 
of Silver Shares will be made only in baskets of 50,000 shares or 
multiples thereof (the ``Basket Aggregations'' or ``Baskets'').\22\ The 
Trust will issue and redeem Basket Aggregations on a continuous basis, 
by or through registered broker-dealers that have entered into 
participant agreements (each, an ``Authorized Participant'') \23\ with 
the Sponsor and the Trustee, Bank of New York (``BNY'').\24\ Following 
issuance, the Shares will be traded on the Exchange similar to other 
equity securities, such as shares of the iShares COMEX Gold Trust and 
the streetTRACKS Gold Trust.\25\
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    \22\ Initially, each Share represents 10 ounces of silver. 
Telephone conference between Jeffrey Burns, Associate General 
Counsel, Amex, and Florence Harmon, Senior Special Counsel, Division 
of Market Regulation, Commission, on January 13, 2006.
    \23\ An ``Authorized Participant'' is a person, who at the time 
of submitting to the Trustee an order to create or redeem one or 
more Baskets, (i) is a registered broker-dealer, (ii) is a 
Depository Trust Company (``DTC'') Participant or an Indirect 
Participant and (iii) has in effect a valid Authorized Participant 
Agreement.
    \24\ BNY will charge a transaction fee in connection with the 
redemption and/or creation of Baskets. In addition, Barclays 
Capital, Inc., the Initial Purchaser, will purchase 150,000 shares 
of the Trust that compose the initial Baskets.
    \25\ See supra notes 7 and 10.
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    Basket Aggregations of Shares will be issued as an in-kind exchange 
for a corresponding amount of silver. The basket amount of silver, 
measured in ounces (the ``Basket Silver Amount'') will be determined on 
each business day by the Trustee, BNY.\26\ Authorized Participants that 
wish to purchase a Basket must transfer the Basket Silver Amount to the 
Trust in exchange for a Basket of Shares. Authorized Participants that 
wish to redeem a Basket of Shares will receive the Basket Silver Amount 
in exchange for each Basket surrendered. JP Morgan Chase Bank, N.A., 
London Branch (``JP Morgan Chase'' or ``Custodian'') will be the 
custodian for the Trust and responsible for safekeeping the silver.\27\ 
Silver deposited with JP Morgan Chase must meet the specifications for 
weight, dimensions, fineness (or purity), identifying marks and 
appearance of silver bars as set forth in ``The Good Delivery Rules for 
Silver and Silver Bars'' published by the LBMA.
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    \26\ A troy ounce, equal to 1.0971428 ounces avoirdupois, with a 
minimum fineness of 0.999. ``Avoirdupois'' is the system of weights 
used in the U.S. and U.K. for goods other than precious metals, gems 
and drugs. In that system, a pound is 16 ounces and an ounce is 16 
drams.
    \27\ If the total value of the Trust's silver held by the 
Custodian exceeds $1 billion, then the Custodian will be under no 
obligation to accept additional silver deliveries. In such a case, 
the trustee will retain an additional custodian.
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    On each business day, BNY will make available immediately prior to 
the opening of trading on the Amex, the Indicative Basket Silver Amount 
for the creation of a Basket.\28\ BNY will adjust the quantity of 
silver included in the Basket Silver Amount (determined shortly after 4 
p.m.) to reflect sales of silver to cover expenses and any loss of 
deposited silver that may occur since the previous calculation. The 
Amex will disseminate at least every 15 seconds throughout the trading 
day, via the facilities of the CTA, an amount representing on a per 
share basis, the current value of the Basket Silver Amount, known as 
the ``Indicative Trust Amount.'' It is anticipated that the deposit of 
silver in exchange for Silver Shares 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.\29\ Silver Shares are expected 
to be traded on the Exchange by professionals, as well as institutional 
and retail investors. Silver Shares may be acquired in two (2) ways: 
(1) Through a deposit of the Basket Silver Amount with BNY during 
normal business hours by Authorized Participants, or (2) through a 
purchase on the Exchange by investors.
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    \28\ The Sponsor will also make the next day's Indicative Basket 
Silver Amount available on the Trust Web site (http://www.iShares.com
) shortly after 4 p.m. ET each business day. The 

Basket Silver Amount, Indicative Basket Silver Amount, and net asset 
value (``NAV'') will be publicly available simultaneously to all 
market participants (to avoid any informational advantage) on either 
the Trust Web site or Amex Web site. These items will also be 
communicated to Authorized Participants via facsimile or electronic 
mail message. Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006.
    \29\ Silver Shares are separate and distinct from the underlying 
silver comprising the portfolio of the Silver Trust. The Exchange 
expects that the number of outstanding Silver Shares will increase 
and decrease as a result of in-kind deposits and withdrawals of the 
underlying silver.
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    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 Silver Shares to constitute a 
Basket Aggregation (i.e., 50,000 shares). An Authorized Participant 
redeeming a Basket Aggregation will receive the silver amount of the 
Basket Silver Amount announced by the Trustee. Upon the surrender of 
the Shares and payment of applicable Trustee's fee and any expenses, 
taxes or charges, BNY will deliver to the redeeming Authorized 
Participant the amount of silver corresponding to the redeemed Baskets. 
Unless otherwise requested by the Authorized Participants, silver will 
then be delivered to the redeeming Authorized Participants in the form 
of physical bars only. Silver Shares will be registered in book entry 
form through DTC.
    The Exchange states that the Basket Silver Amount necessary for the 
creation of a Basket will slightly diminish each day depending on the 
Trust's daily expense accrual. The initial Basket Silver Amount is 
500,000 ounces of silver (with each Share initially representing 10 
ounces of Silver). On each day that the Amex is open for regular 
trading, BNY will adjust the quantity of silver constituting the Basket 
Silver Amount as appropriate to reflect sales of silver needed for 
payment of the Sponsor's fee (which is similar to an expense ratio) 
\30\ and any extraordinary expenses or liabilities not assumed by the 
Sponsor. BNY will determine the Basket Silver Amount for a given 
business day by subtracting the daily expense accrual from the previous 
day's total ounces of silver in the Trust and then dividing by the 
number of Baskets outstanding. Fractions of an

[[Page 3574]]

ounce of silver smaller than .001 will be disregarded.
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    \30\ The Sponsor has agreed to assume the following 
administrative and marketing expenses incurred by the Trust: The 
Trustee's fee, the Custodian's fee, Amex listing fees, SEC 
registration fees, printing and mailing costs, audit fees and 
expenses and up to $100,000 per annum in legal fees and expenses. 
The Sponsor will also pay the costs of the Trust's organization and 
the initial sale of the iShares, including applicable SEC 
registration fees. Telephone conference between Jeffrey Burns, 
Associate General Counsel, Amex, and Florence Harmon, Senior Special 
Counsel, Division of Market Regulation, Commission, on January 13, 
2006.
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    The creation/redemption process in connection with the Silver 
Shares is an in-kind exchange of silver for Shares, rather than an 
exchange of silver for cash. Except for the accrual of the Sponsor's 
fee or extraordinary expenses or liabilities, the process is based 
entirely on the delivery of silver in exchange for Shares. Thus, 
throughout each business day, the Exchange states that the actual 
number of ounces required for the Basket Silver Amount usually will not 
change even though the value of the Basket Silver Amount may change 
based on the market price of silver.
    2. Determination of NAV, Basket Silver Amount, and Indicative 
Basket Amount. Shortly after 4 p.m. (ET) each business day, the BNY 
will determine the NAV of the Trust, utilizing that day's announced 
London silver fix price (unless the Sponsor, in consultation with the 
Trustee, determines that an alternative publicly available pricing 
benchmark more fairly represents the commercial value of the silver 
held by the Trust).\31\ Once the value of the silver is determined, BNY 
will then determine an ``adjusted NAV'' by subtracting all accrued fees 
(other than the fees to be computed by reference to the value of the 
Trust or its assets (i.e., the Sponsor's fee)), expenses, and other 
liabilities of the Trust from the total value of silver and all other 
assets of the Trust. This adjusted NAV is then used to compute the 
Sponsor's fees that are calculated from the value of Trust assets. Then 
to determine the final NAV, BNY will subtract from the adjusted NAV the 
amount of accrued fees from the value of Trust assets. BNY will 
calculate the NAV per share by dividing the NAV by the number of Silver 
Shares outstanding.
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    \31\ In Amendment No. 1, Amex clarified that if there is no 
London silver fix price on that day, the BNY will use the most 
recently announced London silver fix price unless the BNY, in 
consultation, with Barclays Global Investors International, Inc. 
(``Barclays''), determines such London silver fix price to be 
inappropriate.
    Barclays, in consultation with the BNY, may determine that an 
alternative publicly available pricing benchmark more fairly 
represents the commercial value of silver held by the Trust. In the 
case of a temporary disruption of the London silver fix price, the 
Exchange believes that it is unnecessary for a filing pursuant to 
Section 19(b) under the Act to be submitted to the Commission. The 
Exchange submits that for a temporary disruption of the London 
silver fix, a determination by Barclays, in consultation with the 
BNY, to use an alternative pricing source for silver, is 
appropriate. However, the Exchange represents that if the use of an 
alternative pricing source for the London silver fix price is more 
than of a temporary nature, a rule filing will be submitted pursuant 
to Section 19(b) of the Act.
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    After the NAV is determined, at or about 4 p.m. each business day, 
BNY will then determine the Basket Silver Amount for orders placed by 
Authorized Participants received before 4 p.m. that day. BNY will also 
at the same time determine an ``Indicative Basket Silver Amount'' that 
Authorized Participants can use as an indicative amount of silver to be 
deposited for issuance of the Silver Shares on the next business day. 
Thus, although Authorized Participants place orders to purchase Silver 
Shares throughout the trading day, the actual Basket Silver Amount is 
determined at 4 p.m. or shortly thereafter.
    Shortly after 4 p.m. each business day, BNY and the Sponsor will 
disseminate the NAV for the Silver Shares, the Basket Silver Amount 
(for orders properly placed by 4 p.m. during the day), and the next 
day's Indicative Basket Silver Amount. The Basket Silver Amount, the 
Indicative Basket Silver Amount, and the NAV are communicated by BNY to 
all Authorized Participants via facsimile or electronic mail message 
and on the Trust's Web site at http://www.ishares.com. The Amex will 

also disclose the NAV, Basket Silver Amount, and Indicative Basket 
Silver Amount on its Web site.
    The Sponsor fee, in the absence of any extraordinary expenses and 
liabilities, is established at 0.50% of the net assets of the Trust. As 
a result, assuming there is no extraordinary movement in the intra-day 
market price of silver, the amount of silver by which the Basket Silver 
Amount will decrease each day will be predictable (i.e., \1/365\ of the 
net asset value of the Trust multiplied by 0.50%). Given the 
anticipated predictability of the daily decline in the Basket Silver 
Amount, as stated, BNY will disclose and disseminate the Indicative 
Basket Silver Amount for the next business day shortly after 4 p.m. 
Authorized Participants may use the Indicative Basket Silver Amount as 
guidance regarding the amount of silver expected to be deposited with 
the custodian, JP Morgan Chase, in connection with the issuance of 
Silver Shares on the next business day.
    As a result, the amount of silver required for the Basket Silver 
Amount is not disseminated during the trading day to correspond to 
changes in the value of silver as measured by spot silver prices.\32\ 
Before 4 p.m., the Authorized Participants may use the Indicative 
Basket Silver Amount published by the Sponsor and BNY the day before as 
guidance in respect of the amount of silver that they may expect to be 
required to deposit. But if the Indicative Basket Silver Amount 
published by the Sponsor and BNY turns out to be incorrect (for 
example, because the Trust incurred an extraordinary expense such as 
legal fees in excess of the amount assumed by the Sponsor), the amount 
actually determined by BNY will control.
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    \32\ The Amex will disseminate an ``Indicative Trust Value'' at 
least every 15 seconds during the trading day that represents an 
indicative value for the Silver Shares based on the silver spot 
price.
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    3. Liquidity. The Exchange states that the amount of the discount 
or premium in the trading price relative to the NAV per Share may be 
influenced by the non-concurrent trading hours between the major silver 
markets and the Amex. While the Silver Shares will trade on the 
Exchange until 4:15 p.m. ET, liquidity in the OTC market for silver 
will be reduced after the close of the major world silver markets, 
including London, Zurich, and the COMEX. As a result, trading spreads 
and the resulting premium or discount on the Silver Shares may widen as 
a result of reduced liquidity.\33\
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    \33\ As noted above in the section titled ''Description of the 
Silver Market,'' the period of greatest liquidity in the silver 
market is typically that time of the day when trading in the 
European time zones overlaps with trading in the United States, 
which is when OTC market trading in New York, London, Zurich and 
other centers coincides with futures and options trading on the 
COMEX division of the NYMEX. This period lasts for approximately 
four hours each New York business day morning.
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    The Exchange believes that Silver Shares will not trade at a 
material discount or premium to the underlying silver held by the Trust 
based on potential arbitrage opportunities. Due to the fact that the 
Shares can be created and redeemed only in Basket Aggregations, the 
Exchange submits that arbitrage opportunities should provide a 
mechanism to mitigate the effect of any premiums or discounts that may 
exist from time to time. If the price of the Shares deviates enough 
from the price of silver to create a material discount or premium, an 
arbitrage opportunity is created. If the Shares are inexpensive 
compared to the silver that underlies them, an arbitrageur may buy the 
Shares at a discount, immediately redeem them in exchange for silver, 
and sell the silver in the cash market at a profit. If the Shares are 
expensive compared to the silver that underlies them, an arbitrageur 
may sell the Shares short, buy enough silver to acquire the number of 
Shares sold short, acquire the Shares through the creation process, and

[[Page 3575]]

deliver the Shares to close out the short position. In both instances, 
the arbitrageur serves efficiently to correct price discrepancies 
between the Shares and the underlying silver.
    Availability of Information Regarding Silver Prices. Although the 
spot price of silver will not be disseminated over the facilities of 
CTA, the last sale price for the Shares, as is the case for all equity 
securities traded on the Exchange will be disseminated over the CTA's 
Network B. In addition, there is a considerable amount of silver price 
and market information available on public Web sites and through 
professional and subscription services.
    Investors may obtain on a 24-hour basis silver pricing information 
based on the spot price of an ounce of silver from various financial 
information service providers, such as Reuters and Bloomberg. In 
addition, the daily London silver fix is also disseminated by various 
market data vendors and is available from the LBMA's Web site. Reuters 
and Bloomberg provide at no charge on their Web sites delayed 
information regarding the spot price of silver and last sale prices of 
silver futures contracts and related options, as well as information 
about news and developments in the silver market. Reuters and Bloomberg 
also offer a professional service to subscribers for a fee that 
provides information on silver prices directly from market 
participants.\34\ Complete real-time data for silver futures contracts 
and options prices traded on the COMEX (a division of the NYMEX) is 
available by subscription from Reuters and Bloomberg and also on a 
delayed basis free of charge on the NYMEX Web site at http://www.nymex.com.
 The Exchange also notes that there are a variety of 

other public Web sites providing information on silver, ranging from 
those specializing in precious metals to sites maintained by major 
newspapers, such as The Wall Street Journal. Current silver spot prices 
are also generally available with bid/ask spreads from silver bullion 
dealers.
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    \34\ In addition, EBS also provides an electronic trading 
platform to institutions such as bullion banks and dealers for the 
trading of spot silver, as well as a feed of live streaming prices 
to Reuters and Moneyline Telerate subscribers. EBS was launched in 
September 1993 by a group of the world's largest foreign exchange 
market making banks. The Exchange states that EBS is the pre-eminent 
provider of precious metals and foreign exchange trading solutions 
to the precious metals and interbank spot foreign exchange 
community. Approximately 500,000 ounces in gold, 4 million ounces in 
silver and $110 billion a day in spot foreign exchange transactions 
is traded each day over the EBS trading platform. The shareholders 
of EBS include the subsidiaries of the following organizations: ABN 
AMRO, Bank of America, Barclays, Citibank, Commerzbank, Credit 
Suisse First Boston, Lehman Brothers, HSBC, JPMorgan Chase, The 
Royal Bank of Scotland, S-E-Banken, UBS AG and the Minex Corporation 
of Japan. See http://www.ebs.com.

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

    The Amex, via a link to the Trust's Web site, will provide at no 
charge continuously updated bids and offers indicative of the spot 
price (i.e., real time information) of silver on its own public Web 
site at http://www.amex.com. \35\

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    \35\ The Trust Web site's silver spot price will be provided by 
The Bullion Desk at http://www.thebulliondesk.com. The Amex will 

provide a link to the Trust Web site. The Bullion Desk is not 
affiliated with the Trust, Sponsor, Custodian or the Exchange. The 
silver spot price is indicative only, constructed using a variety of 
sources to compile a spot price that is intended to represent a 
theoretical quote that might be obtained from a market maker from 
time to time. The Trust Web site will indicate, as noted above in 
the discussion titled ``Availability of Information Regarding Silver 
Prices,'' that there are other sources for obtaining the silver spot 
price. In the event that the Trust Web site should cease to provide 
this indicative spot price from an unaffiliated source and the 
intraday indicative value of the Shares, the Exchange will delist 
the shares. See ``Criteria for Initial and Continued Listing,'' 
below.
---------------------------------------------------------------------------

    Availability of Information Regarding Silver Shares. The Web site 
for the Trust, which will be publicly accessible at no charge, will 
contain the following information: (a) The prior business day's NAV and 
the reported closing price; (b) the mid-point of the bid-ask price \36\ 
in relation to the NAV as of the time the NAV is calculated (the ``Bid-
Asked Price''); (c) calculation of the premium or discount of such 
price against such NAV; (d) data in chart form displaying the frequency 
distribution of discounts and premiums of the Bid-Ask Price against the 
NAV, within appropriate ranges for each of the four (4) previous 
calendar quarters; (e) the Basket Silver Amount; (f) the Indicative 
Basket Silver Amount; (g) the Prospectus; and (h) other applicable 
quantitative information.
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    \36\ 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 Trust will be calculated and 
disseminated daily. The Amex also intends to disseminate for the Trust 
on a daily basis by means of CTA/CQ High Speed Lines information with 
respect to the Indicative Trust Value (as discussed below), recent NAV, 
and shares outstanding. As stated, the Trust Web site will also provide 
a real time indicative silver spot price through The Bullion Desk at 
http://www.thebulliondesk.com, which will be used to calculate the 

Indicative Trust Value.\37\ Notwithstanding that they will be provided 
free of charge, the indicative spot price from BullionDesk.com and the 
Indicative Trust Value per Share will be provided essentially on a 
real-time basis.\38\ The Exchange will also make available on its Web 
site daily trading volume, closing prices, NAV, and the Basket Silver 
Amount. The London silver fix price is readily available from the LBMA 
at http://www.lbma.org.uk, automated quotation systems, published or 

other public sources, or on-line information services such as Bloomberg 
or Reuters. In addition, the Exchange will provide a hyperlink on its 
Web site at http://www.amex.com to the Trust's Web site at http://www
.ishares.com.
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    \37\ Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006.
    \38\ The Trust Web site is expected to indicate that these 
values are subject to an average delay of 5 to 10 seconds.
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    Dissemination of Indicative Trust Value. As noted above, BNY 
calculates the NAV of the Silver Trust once each trading day. In 
addition, BNY causes to be made available on a daily basis the required 
amount of silver to be deposited in connection with the issuance of 
Silver Shares in Basket Aggregations. In addition, other investors can 
request such information directly from the BNY.
    In order to provide updated information relating to the Trust for 
use by investors, professionals, and Authorized Persons wishing to 
create or redeem Silver Shares, the Exchange will disseminate through 
the facilities of CTA an updated Indicative Trust Value (the 
``Indicative Trust Value''). The Indicative Trust Value will be 
disseminated on a per Silver Share basis at least every 15 seconds 
during regular Amex trading hours of 9:30 a.m. to 4:15 p.m. ET. The 
Indicative Trust Value will be calculated based on the amount of silver 
required for creations and redemptions and a price of silver derived 
from updated bids and offers indicative of the spot price of 
silver.\39\ The Indicative Trust Value on a per Silver 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.
---------------------------------------------------------------------------

    \39\ See supra note 29.
---------------------------------------------------------------------------

    The Exchange believes that dissemination of the Indicative Trust 
Value based on the amount of silver required for a Basket Aggregation 
provides additional information that is not otherwise available to the 
public and is useful to professionals and investors in connection with 
Silver Shares trading on the Exchange or the creation or redemption of 
Silver Shares.

[[Page 3576]]

In addition, the Trust's Web site at http://www.ishares.com will also 

provide from The Bullion Desk continuously updated bids and offers 
indicative of the spot price of silver in the OTC market for the 
purpose of disclosing to investors on a real-time basis the underlying 
or spot price of silver.
    Termination Events. The Trust will be terminated if any of the 
following circumstances occur: (1) The Silver 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 Silver Shares are 
delisted; (2) holders of at least 75% of the outstanding Silver Shares 
notify the Trustee 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 Sponsor of its intent 
to resign; (4) the Commission finds that the Trust should be registered 
as an investment company under the Investment Company Act of 1940, and 
the Trustee has actual knowledge of the Commission finding; (5) the 
aggregate market capitalization of the Trust, based upon the closing 
price for the Silver Trust, was less than $350 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 Trust; (6) the CFTC determines that the Trust 
is a commodity pool under the Commodity Exchange Act and the Trustee 
has actual knowledge of that determination; or (7) the Trust 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 Trust is 
advisable.
    If not terminated earlier by the trustee, the Trust will terminate 
in 2045 on a date to be determined once the Trust is established. Upon 
termination of the Trust, holders of the Silver Shares will surrender 
their shares and receive from the Trustee their portion of the 
underlying silver.
    Criteria for Initial and Continued Listing. The Trust will be 
subject to the criteria in Amex Rules 1201A and 1202A for initial and 
continued listing of Silver Shares. The continued listing criteria 
provides for the delisting or removal from listing of the Silver Shares 
under any of the following circumstances:
     Following the initial twelve month period from the date of 
commencement of trading of the Silver Shares: (i) If the Trust has more 
than 60 days remaining until termination and there are fewer than 50 
record and/or beneficial holders of the Silver Shares for 30 or more 
consecutive trading days; (ii) if the Trust has fewer than 50,000 
Silver Shares issued and outstanding; or (iii) if the market value of 
all Silver Shares is less than $1,000,000.
     If the value of the underlying silver is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, Trust, custodian or the Exchange 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated silver value.
     The Indicative Trust Value is no longer made available on 
at least a 15-second delayed basis.
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    It is anticipated that a minimum of 150,000 Silver Shares will be 
required to be outstanding at the start of trading. The minimum number 
of shares required to be outstanding at the start of trading is 
comparable to requirements that have been applied to previously listed 
series of the iShares COMEX Gold Trust, the streetTRACKS Gold Trust, 
trust issues receipts and exchange-traded funds (``ETFs''). It is 
anticipated that the initial price of a Silver Share will be 
approximately $91.\40\ The Exchange believes that the anticipated 
minimum number of Silver Shares outstanding at the start of trading is 
sufficient to provide adequate market liquidity and to further the 
Trust's objective to seek to provide a simple and cost effective means 
of making an investment similar to an investment in silver.
---------------------------------------------------------------------------

    \40\ Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006 
(updating initial price of a Silver Share that initially will 
represent 10 ounces of silver).
---------------------------------------------------------------------------

    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 Exchange Act of 1934 (the ``1934 Act'').\41\
---------------------------------------------------------------------------

    \41\ See Rule 10A-3(c)(7) under the 1934 Act.
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    Original and Annual Listing Fees. The Amex original listing fee 
applicable to the listing of the Silver Trust is $5,000. In addition, 
the annual listing fee applicable under section 141 of the Amex Company 
Guide (``Company Guide'') will be based upon the year-end aggregate 
number of shares in all series of Silver Trusts outstanding at the end 
of each calendar year.
    Trading Rules. Silver 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 Silver Shares. Silver 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 priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i-v). The Exchange 
has designated Silver Shares as eligible for this treatment.\42\
---------------------------------------------------------------------------

    \42\ 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).
---------------------------------------------------------------------------

    Silver 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 Silver Shares made in connection with 
the creation and redemption of Silver Shares will not be subject to the 
prohibitions of Amex Rule 190.\43\ Unless exemptive or no-action relief 
is available, Silver Shares will be subject to the short sale rule, 
Rule 10a-1 and Regulation SHO under the Act.\44\ If exemptive or no-
action relief is provided, the Exchange will issue a notice detailing 
the terms of the exemption or relief. The Silver 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 Silver Shares into parity with the underlying

[[Page 3577]]

silver and/or futures price. Commentary .01 to Amex Rule 1203A sets 
forth this limited exception to Amex Rule 170.
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    \43\ See Commentary .05 to Amex Rule 190.
    \44\ The Silver Trust has requested relief in connection with 
the trading of Silver Shares from the operation of the short sale 
rule, Rule 10a-1 and Regulation SHO under the Act.
---------------------------------------------------------------------------

    Amex Rule 1203A relating to certain specialist prohibitions 
addresses potential conflicts of interest in connection with acting as 
a specialist in the Silver Shares. Specifically, Amex Rule 1203A 
provides that the prohibitions in Amex Rule 175(c) apply to a 
specialist in the Silver Shares so that the specialist or affiliated 
person may not act or function as a market maker in the underlying 
silver, related silver futures contract or option or any other related 
silver 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 Silver Shares on 
another market center, in the underlying silver, related silver futures 
or options, or any other related silver derivative. In particular, Amex 
Rule 1203A provides that an approved person of an equity specialist 
that has established and obtained Exchange approval for procedures 
restricting the flow of material, non-public market information between 
itself and the specialist member organization, and any member, officer, 
or employee associated therewith, may act in a market making capacity, 
other than as a specialist in the Silver Shares on another market 
center, in the underlying commodity, related commodity futures or 
options on commodity futures, or any other related commodity 
derivatives.
    Amex Rule 1204A(a) provides that the member organization acting as 
specialist in Commodity-Based Trust Shares is obligated to conduct all 
trading in the Shares 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 Commodity-Based Trust Shares 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 commodity, related commodity futures or options on commodity 
futures, or any other related commodity 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 Commodity-Based Trust Shares shall trade in the 
underlying physical commodity, related commodity futures or options on 
commodity futures, or any other related commodity 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.\45\
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    \45\ Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006 
(inserting discussion of Amex Rule 1204A(a)).
---------------------------------------------------------------------------

    Amex Rule 1204A(b) also ensures that specialists handling the 
Silver Shares provide the Exchange with all the necessary information 
relating to their trading in physical silver, related silver futures 
contracts and options thereon or any other silver 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 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.
    Amex Rule 1204A(c) also prohibits the specialist in the Silver 
Shares from using any material nonpublic information received from any 
person associated with a member or employee of such person regarding 
trading by such person or employee in physical silver, silver futures 
contracts, options on silver futures, or any other silver derivative 
(including the Silver Shares).\46\
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    \46\ Telephone conference between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division of Market Regulation, Commission, on January 13, 2006 
(inserting discussion of Amex Rule 1204A(c)).
---------------------------------------------------------------------------

    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 Silver 
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 
may halt trading in Silver Shares if conditions in the underlying 
silver market have caused disruptions and/or lack of trading. 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. The Exchange will halt 
trading in the Shares if the Trust Web site (to which Amex will link) 
ceases to provide: (1) The value of the silver updated at least every 
15 seconds from a source not affiliated with the Sponsor, Trust, or the 
Exchange, or (2) the Indicative Trust Value per Share updated at least 
every 15 seconds.\47\
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    \47\ In the event such spot price of silver or Indicative Trust 
Value is no lo