Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Currency Trust Shares., 8029-8035 [E6-2128]
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Federal Register / Vol. 71, No. 31 / Wednesday, February 15, 2006 / Notices
All submissions should refer to File
Number SR–NASD–2006–008. 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 such filing also will be
available for inspection and copying at
the principal office of the NASD. 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–NASD–2006–008 and
should be submitted on or before March
8, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–2110 Filed 2–14–06; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53253; File No. SR–PCX–
2005–123]
Self-Regulatory Organizations; Pacific
Exchange, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto
Relating to Currency Trust Shares.
cprice-sewell on PROD1PC66 with NOTICES
February 8, 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 November
11, 2005, the Pacific Exchange, Inc.
(‘‘PCX’’ or ‘‘Exchange’’), through its
wholly owned subsidiary PCX Equities,
CFR 200.30–3(a)(12).
U.S.C 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange, through PCXE,
proposes to amend its rules governing
the Archipelago Exchange (‘‘ArcaEx’’),
the equities trading facility of PCXE.
The Exchange proposes new PCXE Rule
8.202 in order to permit trading, either
by listing or pursuant to unlisted trading
privileges (‘‘UTP’’), shares issued by a
trust that holds a specified non-U.S.
currency (‘‘Currency Trust Shares’’). In
addition, the Exchange proposes to
trade, pursuant to UTP, Euro Shares
(‘‘Shares’’ or ‘‘Euro Shares’’), which
represent units of fractional undivided
beneficial interest in and ownership of
the Euro Currency Trust (the ‘‘Trust’’),
which is sponsored by Rydex
Specialized Products LLC.
The text of the proposed rule change
appears below. Additions are in italics.
Deleted items are in [brackets].
*
*
*
*
*
Rule 8.202.
BILLING CODE 8010–01–P
10 17
Inc. (‘‘PCXE’’ or ‘‘Corporation’’), filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. On
January 13, 2006, PCX filed Amendment
No. 1 to the proposed rule change.3 On
January 13, 2006, PCX 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 and is approving the proposal
on an accelerated basis.
Currency Trust Shares
(a) The Corporation will consider for
trading, whether by listing or pursuant
to unlisted trading privileges, Currency
Trust Shares that meet the criteria of
this Rule.
(b) Applicability. This Rule is
applicable only to Currency Trust
Shares. Except to the extent inconsistent
with this Rule, or unless the context
otherwise requires, the provisions of the
trust issued receipts rules, Bylaws, and
all other rules and procedures of the
Board of Directors shall be applicable to
the trading on the Corporation of such
securities. Currency Trust Shares are
included within the definition of
‘‘security’’ or ‘‘securities’’ as such terms
3 3 In Amendment No. 1, the Exchange clarified
and supplemented certain aspects of its proposal.
Amendment No. 1 replaces and supplements the
information provided in various sections of the
Exchange’s Form 19b–4.
4 In Amendment No. 2, the Exchange further
clarified and supplemented certain aspects of its
proposal.
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8029
are used in the Bylaws and Rules of the
Corporation.
(c) Currency Trust Shares. The term
‘‘Currency Trust Shares’’ as used in the
Rules shall, unless the context otherwise
requires, mean a security that (a) is
issued by a trust (‘‘Trust’’) that holds a
specified non-U.S. currency deposited
with the Trust; (b) when aggregated in
some specified minimum number may
be surrendered to the Trust by the
beneficial owner to receive the specified
non-U.S. currency; and (c) pays
beneficial owners interest and other
distributions on the deposited non-U.S.
currency, if any, declared and paid by
the Trust.
(d) Designation of Non-U.S. Currency.
The Corporation may trade, either by
listing or pursuant to unlisted trading
privileges, Currency Trust Shares that
hold a specified non-U.S. currency.
Each issue of Currency Trust Shares
shall be designated as a separate series
and shall be identified by a unique
symbol.
(e) Initial and Continued Listing.
Currency Trust Shares will be listed and
traded on the Corporation subject to
application of the following criteria:
(1) Initial Listing —the Corporation
will establish a minimum number of
Currency Trust Shares required to be
outstanding at the time of
commencement of trading on the
Corporation.
(2) Continued Listing —following the
initial 12 month period following
commencement of trading on the
Corporation of Currency Trust Shares,
the Corporation will consider the
suspension of trading in or removal
from listing of such series under any of
the following circumstances:
(i) if the Trust has more than 60 days
remaining until termination and there
are fewer than 50 record and/or
beneficial holders of Currency Trust
Shares for 30 or more consecutive
trading days; or
(ii) if the Trust has fewer than 50,000
Currency Trust Shares issued and
outstanding; or
(iii) if the market value of all Currency
Trust Shares issued and outstanding is
less than $1,000,000; or
(iv) if the value of the applicable nonU.S. currency 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 applicable nonU.S. currency value;
(v) if the Indicative Trust Value is no
longer made available on at least a 15second delayed basis; or
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(vi) if such other event shall occur or
condition exists which in the opinion of
the Corporation makes further dealings
on the Corporation inadvisable.
Upon termination of a Trust, the
Corporation requires that Currency
Trust Shares issued in connection with
such entity Trust be removed from
Corporation 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 Trust
prospectus. However, a Trust 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
Corporation.
(5) Voting —Voting rights shall be as
set forth in the applicable Trust
prospectus.
(f) Limitation of Corporation Liability.
Neither the Corporation nor any agent
of the Corporation shall have any
liability for damages, claims, losses or
expenses caused by any errors,
omissions, or delays in calculating or
disseminating any applicable non-U.S.
currency value; the current value of the
applicable non-U.S. currency required
to be deposited to the Trust in
connection with issuance of Currency
Trust Shares; net asset value; or any
other information relating to the
purchase, redemption, or trading of the
Currency Trust Shares, resulting from
any negligent act or omission by the
Corporation, or any agent of the
Corporation; or any act, condition or
cause beyond the reasonable control of
the Corporation, 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
applicable non-U.S. currency.
(g) Information Barrier. An ETP
Holder acting as a registered Market
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Maker or Market Maker Authorized
Trader in Currency Trust Shares is
obligated to comply with PCXE Rule
7.26 pertaining to limitations on
dealings when such Market Maker or
Market Maker Authorized Trader, or
affiliate of such persons, engages in
Other Business Activities. For purposes
of Currency Trust Shares only, Other
Business Activities shall include trading
in the applicable non-U.S. currency,
options, futures or options on futures on
such currency, or any other derivatives
based on such currency.
(h) Market Maker Accounts. An ETP
Holder acting as a registered Market
Maker in Currency Trust Shares must
file with the Exchange in a manner
prescribed by the Exchange and keep
current a list identifying all accounts for
trading in the applicable non-U.S.
currency, options, futures or options on
futures on such currency, or any other
derivatives based on such currency,
which the Market Maker may have or
over which it may exercise investment
discretion. No Market Maker shall trade
in the applicable non-U.S. currency,
options, futures or options on futures on
such currency, or any other derivatives
based on such currency, in an account
in which a Market Maker, 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.
In addition to the existing obligations
under Exchange rules regarding the
production of books and records, the
ETP Holder acting as a Market Maker in
Currency Trust Shares shall make
available to the Exchange such books,
records or other information pertaining
to transactions by such entity or
registered or non-registered employee
affiliated with such entity for its or their
own accounts for trading the applicable
non-U.S. currency, options, futures or
options on futures on such currency, or
any other derivatives based on such
currency, as may be requested by the
Exchange.
(i) In connection with trading the
applicable non-U.S. currency, options,
futures or options on futures on such
currency, or any other derivatives based
on such currency (including Currency
Trust Shares), the ETP Holder acting as
a Market Maker in Currency Trust
Shares shall not use any material
nonpublic information received from
any person associated with an ETP
Holder or employee of such person
regarding trading by such person or
employee in the applicable non-U.S.
currency, options, futures or options on
futures on such currency, or any other
derivatives based on such currency.
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Commentary:
.01 A Currency Trust Share is a Trust
Issued Receipt that holds a specified
non-U.S. currency deposited with the
Trust.
.02 The Corporation requires that ETP
Holders provide all purchasers of newly
issued Currency Trust Shares a
prospectus for the series of Currency
Trust Shares.
.03 Transactions in Currency Trust
Shares will occur during the trading
hours specified in PCXE Rule 7.34.
.04 The Corporation will file separate
proposals under Section 19(b) of the
Securities Exchange Act of 1934 before
trading, either by listing or pursuant to
unlisted trading privileges, Currency
Trust 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
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change. The text of
these statements may be examined at
the places specified in Item III below,
and is set forth in Sections A, B, and C
below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add new
PCXE Rule 8.202 in order to permit
trading, either by listing or pursuant to
UTP, of Currency Trust Shares.5 The
Exchange also proposes to trade the
Shares of the Trust pursuant to UTP.
The New York Stock Exchange, Inc. (the
‘‘NYSE’’) has recently proposed to list
and trade the Shares.6 The Commission
5 Currency Trust Shares are securities issued by
a trust that represent investors’ discrete identifiable
and undivided beneficial ownership interest in the
non-U.S. currency deposited into the trust. The
Exchange notes that the Commission has approved
the listing and trading pursuant to UTP of other
securities products for which the underlying
interest was not a security trading on a regulated
market. See Securities Exchange Act Release Nos.
51067 (January 21, 2005), 70 FR 3952–01 (January
27, 2005) (approving general standards for the
listing and trading of Commodity-Based Trust
Shares and trading of shares of the iShares COMEX
Gold Trust pursuant to UTP); and 51245 (February
23, 2005), 70 FR 10731–01 (March 4, 2005)
(approving the trading of shares of the
streetTRACKS Gold Trust pursuant to UTP). Unlike
Commodity-Based Trust Shares under PCXE Rule
8.201, which hold one or more physical
commodities, Currency Trust Shares hold non-U.S.
currency.
6 See Securities Exchange Act Release No. 52843
(November 28, 2005), 70 FR 72486 (December 5,
2005) (order granting accelerated approval to SR–
NYSE–2005–65) (‘‘NYSE Order’’).
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previously approved the original listing
and trading of the Shares by the New
York Stock Exchange, Inc. (‘‘NYSE’’).7
The investment objective of the Trust
is for the Shares to reflect the value of
the euro. The Shares represent
beneficial ownership interests in the net
assets of the Trust consisting only of
euro on demand deposit in a eurodenominated, interest-bearing account,
less the expenses of the Trust.
(a) Currency Trust Shares
PCXE Rule 8.202 is intended to
accommodate possible future listing and
trading of trusts based on non-U.S.
currencies in addition to the euro. Any
new listing or trading of an issue of
Currency Trust Shares will be subject to
approval of a proposed rule change by
the Commission pursuant to Section
19(b)(2) 8 of the Securities Exchange Act
of 1934 (the ‘‘Act’’) and Rule 19b–4
thereunder.9
A description of the euro, foreign
exchange industry, foreign currency
regulation, operation of the Trust, and
the Shares is set forth in the NYSE
Order. Issuances of Shares will be made
only in baskets of 50,000 Shares or
multiples thereof (‘‘Basket’’). The Trust
will issue and redeem the Shares on a
continuous basis, by or through
participants that have entered into
participant agreements (each, an
‘‘Authorized Participant’’) 10 with the
trustee, the Bank of New York
(‘‘Trustee’’), at the net asset value
(‘‘NAV’’) per Share next determined
after an order to purchase a Basket is
received in proper form.
When calculating NAV, the Trustee
will value the euros held by the Trust
on the basis of the day’s announced
Noon Buying Rate, as determined by the
Federal Reserve Bank of New York. If
the Noon Buying Rate is not announced
by 2 p.m. (Eastern time (‘‘ET’’)), the
Trustee will use the most recently
announced Noon Buying Rate, unless
the Trustee, in consultation with the
Sponsor, determines to apply an
alternative basis for evaluation as a
result of extraordinary circumstances.
The calculation methodology for the
NAV is described in more detail in the
NYSE Order.
Baskets will be issued in exchange for
an amount of euros (‘‘Basket Euro
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7 Id.
8 15
U.S.C. 78s(b)(2).
CFR 240.19b–4.
10 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 Participant or an Indirect Participant, and
(iii) has in effect a valid Authorized Participant
Agreement.
Amount’’) based on the combined NAV
per Share of the number of Shares
included in the Baskets being created.
The Basket Euro Amount and NAV will
be determined by the Trustee ‘‘as
promptly as practicable’’ after the
Federal Reserve announces the Noon
Buying Rate and published on the
Trust’s Web site on each Business
Day.11 Authorized Participants that
wish to purchase a Basket must transfer
the Basket Euro Amount to the Trust in
exchange for a Basket. Baskets are then
separable upon issuance into the Shares
that will be traded on ArcaEx on a UTP
basis.12
The Shares will not be individually
redeemable but will only be redeemable
in Baskets. To redeem, an Authorized
Participant will be required to
accumulate enough Shares to constitute
a Basket (i.e., 50,000 Shares).
Authorized Participants that wish to
redeem a Basket will receive the Basket
Euro Amount in exchange for each
Basket surrendered. The operation of
the Trust and creation and redemption
process is described in more detail in
the NYSE Order.
(b) Dissemination of Information About
the Fund Shares and Underlying Euro
Although the spot price of a foreign
currency, such as the euro, is not
disseminated over the facilities of
Consolidated Tape Association
(‘‘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. Investors
may obtain on a 24-hour basis euro
pricing information based on the euro
spot price from various financial
information service providers. The
foreign exchange market is an over-thecounter dealer marketplace, and current
spot prices are also generally available
with bid/ask spreads from foreign
exchange dealers. Complete real-time
data for euro futures and options prices
traded on the Chicago Mercantile
Exchange (‘‘CME’’) and the Philadelphia
Stock Exchange (‘‘Phlx’’) are also
available by subscription from
information service providers. The CME
and Phlx also provide delayed futures
and options information on current and
past trading sessions and market news
free of charge on their respective Web
sites. There are a variety of other public
Web sites that provide information on
foreign currency and the euro, such as
9 17
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11 Ordinarily
no later than 2 p.m. (ET).
are separate and distinct from the
underlying euro comprising the portfolio of the
Trust. The Exchange expects that the number of
outstanding Shares will increase and decrease as a
result of in-kind deposits and withdrawals of the
underlying euro.
12 Shares
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8031
Bloomberg (https://www.bloomberg.com/
markets/currencies/
eurafr_currencies.html), which regularly
reports current foreign exchange pricing
for a fee. Other service providers
include CBS Market Watch (https://
www.marketwatch.com/tools/
stockresearch/globalmarkets) and
Yahoo! Finance (https://
finance.yahoo.com/currency). Many of
these sites offer price quotations drawn
from other published sources, and as the
information is supplied free of charge, it
generally is subject to time delays.13 The
Exchange states that, like bond
securities traded in the over-the-counter
market with respect to which pricing
information is available directly from
bond dealers, current euro spot prices
are also generally available with bid/ask
spreads from foreign currency dealers.
In addition, there is a considerable
amount of euro price and euro market
information available on public Web
sites and through professional and
subscription services. Current spot
prices are also generally available from
foreign exchange dealers.
The Trust’s Web site at (https://
www.currencyshares.com) (to which the
Exchange will provide a hyperlink) will
be publicly accessible at no charge and
will contain the following information:
(1) The euro spot price,14 including the
bid and offer and the midpoint between
the bid and offer for the euro spot price,
updated every 5 to 10 seconds; (2) an
intraday indicative value (‘‘IIV’’) per
Share calculated by multiplying the
indicative spot price of euro by the
quantity of euro backing each Share, on
a 5 to 10-second delayed basis; (3) a 20minute delayed basis indicative value,
which is used for calculating premium/
discount information; (4) premium/
discount information, calculated on a
20-minute delayed basis; (5) the NAV of
the Trust as calculated each Business
Day; (6) accrued interest per Share; (7)
13 There may be incremental differences in the
euro spot price among the various information
service sources. While the Exchange believes the
differences in the euro spot price may be relevant
to those entities engaging in arbitrage or in the
active daily trading of euro or foreign currency
derivatives, the Exchange believes such differences
are likely of less concern to individual investors
intending to hold the Shares as part of a long-term
investment strategy.
14 The Trust Web site’s euro spot price will be
provided by The Bullion Desk (https://
www.thebulliondesk.com), and the time of each
calculation is noted on the Trust’s Web site. The
Exchange will provide a hyperlink to the Trust Web
site. The Bullion Desk is not affiliated with the
Trust, Trustee, Sponsor, Depository, Distributor, or
the Exchange. In the event that the Trust’s Web site
should cease to provide this euro spot price
information from an unaffiliated source and the
intraday indicative value of the Shares, the NYSE
will halt trading in the Shares and commence
delisting proceedings for the Shares.
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the daily Noon Buying Rate; (8) the
Basket Euro Amount; and (9) the last
sale price of the Shares as traded in the
U.S. market, subject to a 20-minute
delay. The euro spot price and IIV per
Share are provided on an essentially
real-time basis and are available during
ArcaEx’s early and late trading sessions,
in addition to ArcaEx’s core trading
session.15
Between 12 p.m. and 2 p.m. (ET) each
business day, the Trustee will calculate
NAV and Basket Euro Amount based on
the combined NAV per Share of the
number of Shares included in the
Baskets being created of the Shares and
will post NAV on the Trust’s Web site
as soon as valuation of the euro held by
the Trust is complete (ordinarily by 2
p.m. (ET)). Ordinarily, it will be posted
no more than thirty minutes after the
Noon Buying Rate is published by the
Federal Reserve Bank of New York. In
the NYSE Order, NYSE represented that
all market participants will have access
to this data at the same time and,
therefore, no market participant will
have a time advantage in using such
data.
(c) Continued Listing and UTP Criteria
While the Exchange immediately
seeks to UTP the Euro Currency Shares,
the Exchange is also adopting general
initial and continued listing standards
applicable to all Currency Trust Shares
in the event the Exchange were to list
such Currency Trust Shares. In such an
event, the Exchange would still file a
Form 19b–416 to list such Currency
Trust Shares. When the Exchange is the
primary listing exchange, the Trust will
be subject to the continued trading
criteria under proposed PCXE Rule
8.202(e). In particular, the proposed
criteria provides that the Currency Trust
Shares may be removed from trading
following the initial 12-month period
from the date of commencement of
trading of the Currency Trust Shares on
the Exchange under any of the following
circumstances:
• If the Trust has more than 60 days
remaining until termination and there
are fewer than 50 record and/or
beneficial holders of the Currency Trust
Shares for 30 or more consecutive
trading days;
• If the Trust has fewer than 50,000
Currency Trust Shares issued and
outstanding;
• If the market value of all the
Currency Trust Shares is less than
$1,000,000;
15 Telephone Conference between David
Strandberg, Attorney, Archipelago, and Florence E.
Harmon, Senior Special Counsel, Division,
Commission, on February 6, 2006.
16 17 CFR 249.819.
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13:17 Feb 14, 2006
Jkt 208001
• If the value of the applicable nonU.S. currency 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 applicable nonU.S. currency value;
• If the Indicative Trust Value (‘‘ITV’’
or ‘‘IIV’’) is no longer made available on
at least a 15-second delayed basis; or
• If such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
In addition, the Exchange will remove
Currency Trust Shares from listing and
trading upon termination of the Trust.
If the Exchange is only trading the
Shares pursuant to UTP, then the
Exchange will cease trading in the
Shares if: (1) the primary market stops
trading the Shares because of a
regulatory halt similar to a halt based on
PCXE Rule 7.12 and/or a halt because
calculation and dissemination of the IIV
and/or the underlying value (the spot
price)17 of the applicable non-U.S.
currency has ceased; or (2) the primary
market delists the Shares. Additionally,
the Exchange may cease trading the
Currency Trust Shares if such other
event shall occur or condition exists
which in the opinion of the Exchange
makes further dealings on the Exchange
inadvisable.
(d) Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares of the Trust subject to the
Exchange’s existing rules governing the
trading of equity securities. Trading in
the Shares on the Exchange will occur
in accordance with PCXE Rule 7.34(a).
The minimum trading increment for
Shares on the Exchange will be $0.01.
Further, the Exchange has proposed
new PCXE Rules 8.202(g)—(i), which set
forth certain restrictions on equity
trading permit holders (‘‘ETP Holders’’)
acting as registered Market Makers in
Currency Trust Shares to facilitate
surveillance. PCXE Rule 8.202(h) will
require that the ETP Holder acting as a
registered Market Maker in the Shares
provide the Exchange with information
relating to its trading in the applicable
non-U.S. currency, options, futures or
17 For the purposes of trading the Euro Shares
pursuant to UTP, the applicable value would be the
Euro Spot price provided by The Bullion Desk at
https://www.thebulliondesk.com and at https://
www.currencyshares.com (to which the Exchange
will hyperlink). Telephone Conference between
David Strandberg, Attorney, Archipelago, and
Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006.
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
options on futures on such currency, or
any other derivatives based on such
currency. PCXE Rule 8.202(i) will
prohibit the ETP Holder acting as a
registered Market Maker in the Shares
from using any material nonpublic
information received from any person
associated with an ETP Holder or
employee of such person regarding
trading by such person or employee in
the applicable non-U.S. currency,
options, futures or options on futures on
such currency, or any other derivatives
based on such currency (including the
Shares). In addition, as stated above,
PCXE Rule 8.202(g) will prohibit the
ETP Holder acting as a registered Market
Maker in the Shares from being
affiliated with a market maker in the
applicable non-U.S. currency, options,
futures or options on futures on such
currency, or any other derivatives based
on such currency unless adequate
information barriers are in place, as
provided in PCXE Rule 7.26.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading on the Exchange in the Shares
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in euros, or (2) whether
other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. In addition, trading
in Shares will be subject to trading halts
caused by extraordinary market
volatility pursuant to the Exchange’s
‘‘circuit breaker’’ rule 18 or by the halt or
suspension of the trading of futures
contracts based on the euro. If the
Exchange is the listing market for
Currency Trust Shares, the Exchange
will halt trading in the Shares if the
Trust Web site (to which the PCX will
hyperlink) ceases to provide: (1) The
value of the euro updated at least every
15 seconds from a source not affiliated
with the Sponsor, Trust, Custodian, or
the Exchange (or this value is not
displayed on the appropriate Web site),
or (2) the IIV per Share updated at least
every 15 seconds. If the Exchange is
trading the shares pursuant to UTP,
such as the Euro Currency Shares, the
Exchange will cease trading the Shares
if: (1) The primary market stops trading
the Shares because of a regulatory halt
similar to PCXE Rule 7.12 and/or a halt
because of dissemination of the IIV and/
or because the underlying spot price has
ceased, or (2) the primary market delists
18 See
E:\FR\FM\15FEN1.SGM
PCXE Rule 7.12.
15FEN1
Federal Register / Vol. 71, No. 31 / Wednesday, February 15, 2006 / Notices
the shares. Because ArcaEx will be
trading the Shares during its early and
late trading sessions, when the primary
market is closed, the Exchange will
monitor the dissemination of the euro
spot price and IIV during these trading
sessions and cease trading the Shares if
these values are not disseminated at
least every 15 seconds and such values
are not displayed on the Exchange Web
site via a hyperlink with the Trust’s
Web site.19
Currency Trust Shares will be deemed
‘‘Eligible Listed Securities,’’ as defined
in PCXE Rule 7.55, for purposes of the
Intermarket Trading System (‘‘ITS’’)
Plan and therefore will be subject to the
trade through provisions of PCXE Rule
7.56, which require that ETP Holders
avoid initiating trade-throughs for ITS
securities.
The Commission exempted the
Currency Trust Shares from the short
sale requirements of Rule 10a–1 under
the Act and gave no-action relief from
Rule 200(g) of Regulation SHO under
the Act.20
proprietary or customer trades which
they effect on any relevant market. In
addition, the Exchange may obtain
trading information via the Intermarket
Surveillance Group (‘‘ISG’’) from other
exchanges who are members or affiliates
of the ISG. Specifically, the Exchange
can obtain such information from the
Phlx in connection with euro options
trading on the Phlx and from the CME
and the London International Financial
Futures Exchange (‘‘LIFFE’’) in
connection with euro futures trading on
those exchanges.
(f) Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Bulletin
will discuss the following: (1) The
procedures for purchases and
redemptions of Shares in Baskets; (2)
PCXE Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to
learn the essential facts relating to every
(e) Surveillance
customer prior to trading the Shares; 22
(3) how information regarding the IIV is
The Exchange intends to utilize its
disseminated; and (4) trading
existing surveillance procedures
information. The Information Bulletin
applicable to derivative products and
will also note to members their
shares of the streetTRACKS Gold
obligations regarding prospectus
21 to monitor trading in the Shares.
Trust
delivery requirements for the Shares.
The Exchange represents that these
The Exchange notes that investors
procedures are adequate to properly
purchasing Shares directly from the
monitor Exchange trading of the Shares
Trust (by delivery of the Basket Euro
in all trading sessions.
Amount) will receive a prospectus.
The Exchange’s current trading
Exchange members purchasing Shares
surveillance focuses on detecting
from the Trust for resale to investors
securities trading outside their normal
will deliver a prospectus to such
patterns. When such situations are
investors.
detected, surveillance analysis follows
In addition, the Information Bulletin
and investigations are opened, where
will reference that the Trust is subject
appropriate, to review the behavior of
to various fees and expenses described
all relevant parties for all relevant
in the Registration Statement, and that
trading violations. The Exchange is able the number of euros required to create
to obtain information regarding trading
a Basket or to be delivered upon a
in the Shares, euro options, and euro
redemption of a Basket may gradually
futures through ETP Holders, in
decrease over time in the event that the
connection with such ETP Holders’
cprice-sewell on PROD1PC66 with NOTICES
19 Telephone
Conference between David
Strandberg, Attorney, Archipelago, and Florence E.
Harmon, Senior Special Counsel, Division,
Commission, on February 6, 2006. In such case, the
Exchange would immediately contact the
Commission’s staff.
20 Currency Trust Shares are exempt from Rule
10a–1 under the Act permitting sales without regard
to the ‘‘tick’’ requirements of Rule 10a–1 under the
Act. Rule 10a–1(a)(1)(i) under the Act provides that
a short sale of an exchange-traded security may not
be effected (i) below the last regular-way sale price
(an ‘‘uptick’’) or (ii) at such price unless such price
is above the next preceding different price at which
a sale was reported (a ‘‘zero-plus tick’’). See letter
dated December 5, 2005 from James A. Brigagliano,
Division of Market Regulation, Commission, to
George T. Simon, Foley and Lardner.
21 See streetTRACKS Gold approval order, supra
note 5.
VerDate Aug<31>2005
13:17 Feb 14, 2006
Jkt 208001
22 The Exchange has proposed to amend PCXE
Rule 9.2(a) (‘‘Diligence as to Accounts’’) to provide
that ETP Holders, before recommending a
transaction, must have reasonable grounds to
believe that the recommendation is suitable for the
customer based on any facts disclosed by the
customer as to his other security holdings and as
to his financial situation and needs. Further, the
proposed rule amendment provides that prior to the
execution of a transaction recommended to a noninstitutional customer, the ETP Holders should
make reasonable efforts to obtain information
concerning the customer’s financial status, tax
status, investment objectives and any other
information that they believe would be useful to
make a recommendation. See Amendment No. 1 to
SR–PCX–2005–115 (November 21, 2005).
Telephone Conference between David Strandberg,
Attorney, Archipelago, and Florence E. Harmon,
Senior Special Counsel, Division, Commission, on
February 8, 2006.
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
8033
Trust is required to sell euros to pay the
Trust’s expenses, and that if done at a
time when the price of the euro is
relatively low, it could adversely affect
the value of the Shares. Finally,
Information Bulletin will also reference
the fact that there is no regulated source
of last sale information regarding the
euro, and that the Commission has no
jurisdiction over the trading of the euro.
2. Statutory Basis
The proposed rule change, as
amended, is consistent with Section 6(b)
of the Act 23 in general and furthers the
objectives of Section 6(b)(5),24 in
particular, in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transaction in securities, to
remove impediments and perfect the
mechanisms of a free and open market,
and, in general, to protect investors and
the public interest.
In addition, the Exchange believes
that the proposal is consistent with Rule
12f–5 under the Act 25 because it deems
the Shares to be equity securities, thus
rendering the Shares subject to the
Exchange’s existing rules governing the
trading of equity securities.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants or Others
Written comments on the proposed
rule change were neither solicited nor
received.
III. 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–PCX–2005–123 on the
subject line.
23 15
U.S.C. 78s(b).
U.S.C. 78s(b)(5).
25 17 CFR 240.12f–5.
24 15
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15FEN1
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Federal Register / Vol. 71, No. 31 / Wednesday, February 15, 2006 / Notices
general to protect investors and the
public interest.
• Send paper comments in triplicate
In addition, the Commission finds
to Nancy M. Morris, Secretary,
that the proposal is consistent with
Securities and Exchange Commission,
Section 12(f) of the Act,28 which permits
Station Place, 100 F Street, NE.,
an exchange to trade, pursuant to UTP,
Washington, DC 20549–1090.
a security that is listed and registered on
another exchange.29 The Commission
All submissions should refer to File
notes that it previously approved the
Number SR–PCX–2005–123. This file
listing and trading of the Shares on the
number should be included on the
30
subject line if e-mail is used. To help the NYSE. The Commission also finds that
the proposal is consistent with Rule
Commission process and review your
12f–5 under the Act,31 which provides
comments more efficiently, please use
only one method. The Commission will that an exchange shall not extend UTP
post all comments on the Commission’s to a security unless the exchange has in
effect a rule or rules providing for
Internet Web site (https://www.sec.gov/
transactions in the class or type of
rules/sro.shtml). Copies of the
security to which the exchange extends
submission, all subsequent
UTP. PCXE rules deem the Shares to be
amendments, all written statements
equity securities, thus trading in the
with respect to the proposed rule
Shares will be subject to the Exchange’s
change that are filed with the
existing rules governing the trading of
Commission, and all written
equity securities.
communications relating to the
The Commission further believes that
proposed rule change between the
the proposal is consistent with Section
Commission and any person, other than 11A(a)(1)(C)(iii) of the Act,32 which sets
those that may be withheld from the
forth Congress’s finding that it is in the
public in accordance with the
public interest and appropriate for the
provisions of 5 U.S.C. 552, will be
protection of investors and the
available for inspection and copying in
maintenance of fair and orderly markets
the Commission’s Public Reference
to assure the availability to brokers,
Room. Copies of such filing also will be dealers, and investors of information
available for inspection and copying at
with respect to quotations for and
the principal office of the PCX. All
transactions in securities.
comments received will be posted
In connection with the Exchange’s
without change; the Commission does
UTP of the Euro Shares, the Exchange
not edit personal identifying
will cease trading in the Shares if: (1)
information from submissions. You
The primary market stops trading the
should submit only information that
Shares because of a regulatory trading
you wish to make available publicly. All halt similar to a halt based on PCXE
submissions should refer to File
Rule 7.12; or (2) the primary market
Number SR–PCX–2005–123 and should stops trading the Shares because the
be submitted on or before March 8,
value of the euro is no longer calculated
2006.
or available on at least a 15 second
delayed basis from a source unaffiliated
IV. Commission’s Findings and Order
with the Sponsor, Trust, Custodian or
Granting Accelerated Approval of
the Exchange, or the Exchange stops
Proposed Rule Change
providing a hyperlink on its Web site to
any such unaffiliated euro value; or the
The Commission finds that the
IIV is no longer made available on at
proposed rule change, as amended, is
least a 15 second delayed basis 33 or if
consistent with the requirements of the
Act and the rules and regulations
28 15 U.S.C. 78l(f).
thereunder applicable to a national
29 Section 12(a) of the Act, 15 U.S.C. 78l(a),
securities exchange.26 In particular, the
generally prohibits a broker-dealer from trading a
Commission finds that the proposed
security on a national securities exchange unless
the security is registered on that exchange pursuant
rule change is consistent with Section
to Section 12 of the Act. Section 12(f) of the Act
6(b)(5) of the Act,27 which requires that
from this restriction
an exchange have rules designed, among excludesto which an exchangetrading in any
security
‘‘extends UTP.’’
other things, to promote just and
When an exchange extends UTP to a security, it
allows its members to trade the security as if it were
equitable principles of trade, to remove
listed and registered on the exchange even though
impediments to and perfect the
it is not so listed and registered.
mechanism of a free and open market
30 See NYSE Order, supra note 6.
and a national market system, and in
31 17 CFR 240.12f–5.
cprice-sewell on PROD1PC66 with NOTICES
Paper comments
32 15
26 In
approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
27 15 U.S.C. 78f(b)(5).
VerDate Aug<31>2005
13:17 Feb 14, 2006
Jkt 208001
U.S.C. 78k–1(a)(1)(C)(iii).
the Exchange is trading the Shares in
its early and late trading sessions, the Exchange will
ensure that trading of the Shares on ArcaEx will
cease during these trading sessions if the
unaffiliated value of the euro and the IIV per Share
33 Because
PO 00000
Frm 00123
Fmt 4703
Sfmt 4703
such other event occurs or condition
exists which, in the opinion of the
Exchange, makes further dealings on the
Exchange inadvisable; or (3) if the
primary market delists the Shares.
In support of the portion of the
proposed rule change regarding UTP of
the Euro Shares, the Exchange has made
the following representations:
1. PCX has appropriate rules to
facilitate transactions in this type of
security in all trading sessions.
2. PCX surveillance procedures are
adequate to properly monitor the
trading of the Shares on the Exchange.
3. PCX will distribute an Information
Bulletin to its members prior to the
commencement of trading of the Shares
on the Exchange that explains the terms,
characteristics, and risks of trading such
shares.
4. PCX will require a member with a
customer who purchases newly issued
Shares on the Exchange to provide that
customer with a product prospectus and
will note this prospectus delivery
requirement in the Information Bulletin.
5. The Exchange will cease trading in
the Shares if: (1) the primary market
stops trading the shares because of a
regulatory halt similar to a halt based on
PCX Rule 7.12 and/or a halt because
dissemination of the IIV and/or the
underlying value (spot price on the
euro) of the applicable non-U.S.
currency has ceased;34 or (2) the
primary market delists the Shares.
This approval order is conditioned on
PCX’s adherence to these
representations.
The Commission finds good cause for
approving this proposed rule change, as
amended, before the thirtieth day after
the publication of notice thereof in the
Federal Register. As noted previously,
the Commission previously found that
the listing and trading of these Shares
on the NYSE is consistent with the
Act.35 The Commission presently is not
aware of any issue that would cause it
to revisit that earlier finding or preclude
the trading of these funds on the
Exchange pursuant to UTP. Therefore,
accelerating approval of this proposed
rule change should benefit investors by
creating, without undue delay,
additional competition in the market for
these Shares.
are no longer calculated and disseminated at least
every 15 seconds during these trading sessions, or
the Exchange stops providing a hyperlink on the
Exchange’s Web site to such unaffiliated euro value
or IIV per Shares. Telephone Conference between
David Strandberg, Attorney, Archipelago, and
Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006.
34 Id.
35 See NYSE Order, supra note 6.
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Federal Register / Vol. 71, No. 31 / Wednesday, February 15, 2006 / Notices
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (SR–PCX–2005–
123), is hereby approved on an
accelerated basis.36
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.37
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6–2128 Filed 2–14–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53249; File No. SR–PCX–
2005–138]
Self-Regulatory Organizations; Pacific
Exchange, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of a Proposed Rule Change and
Amendments No. 1 and 2 Thereto To
Amend the PCX’s Rules Governing the
Hours of Trading in Equity Options
February 7, 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 December
16, 2005, the Pacific Exchange, Inc.
(‘‘PCX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the PCX. On January 13, 2006, the
Exchange filed Amendment No. 1 to the
proposed rule change.3 The Exchange
filed Amendment No. 2 to the proposed
rule change on January 31, 2006.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons and to approve the amended
proposal on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The PCX proposes to amend its hours
of trading for equity options as set forth
in PCX Rule 7.1 and to make a
corresponding clarifying change to PCX
Rule 6.24(g). The Exchange proposes
36 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, the Exchange provided
additional discussion to clarify its proposed rule
change.
4 In Amendment No. 2, the Exchange requested
that the implementation date for the new closing
time be changed from February 1, 2006, as was
originally proposed, to February 13, 2006.
cprice-sewell on PROD1PC66 with NOTICES
37 17
VerDate Aug<31>2005
13:17 Feb 14, 2006
Jkt 208001
that these changes be implemented on
February 13, 2006.5 The text of the
proposed rule change, as amended, is
available on the PCX’s Web site
(https://www.pacificex.com), at the
principal office of the PCX, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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, as
amended. The text of these statements
may be examined at the places specified
in Item III below. The Exchange has
prepared summaries, set forth in
sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
According to the Exchange, the
purpose of the proposed rule change, as
amended, is to amend PCX Rule 7.1,
Commentary .01 ‘‘Trading Sessions’’ to
adjust the closing time for equity
options trading on the PCX to 1 p.m.
(Pacific time). In addition, the Exchange
proposes to make a minor
‘‘housekeeping’’ change to PCX Rule
6.24(g) ‘‘Exercise of Options Contracts’’
so that the rule is consistent with the
new closing time.6 After the change
becomes effective, the 1 p.m. (Pacific
time) closing time for equity options
will coincide with the closing time of
the primary equity markets listing the
stocks underlying PCX options. The
primary exchanges generally close at 1
p.m. (Pacific time).
According to the Exchange, presently,
listed options are traded on all options
exchanges until 1:02 p.m. (Pacific time),
while the underlying equities cease
trading at 1 p.m. The extended time for
5 Id.
6 The
Exchange also proposes to delete certain
language contained in PCX Rule 7.1, Commentary
.01 which addresses the specific categories of
Market Makers that are eligible to effect trades
through the facilities of the Exchange. According to
PCX, its rules governing trading by Market Makers,
and the explanations of which types of Market
Makers are eligible to trade either on the Floor of
the Exchange or through the facilities of the
Exchange are included in PCX Rule 6.32(a) entitled
‘‘Market Makers Defined.’’ The PCX believes that it
is redundant to repeat this language in PCX Rule
7.1, and therefore proposes to delete it as part of
this proposed rule change. See Amendment No. 1,
supra note 3.
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
8035
options trading, which was
implemented prior to electronic order
entry and execution, provided an
opportunity for all orders that were
entered during market hours, especially
those entered near the close, to be
properly represented and executed if
possible. The extended time also
allowed options traders to respond to
late reports of closing prices of
underlying issues over the consolidated
tape. Due to technological advances in
options trading, most orders are no
longer manually handled or traded on
the floor. Customers and Market Makers
have the ability to transact business in
an all-electronic fashion with subsecond processing. Even though orders
can still be traded via open outcry on
the floor, these orders are limited in
number and do not create a processing
problem, even when entered near to the
end of the day. Therefore, the need to
provide an extended period of time in
order to accommodate any orders that
were unable to be processed during
normal trading hours is no longer
necessary. In addition, improvements in
the processing and reporting of
transactions have all but eliminated
delays in the reporting of closing prices
of underlying issues. Consequently, the
need to continue trading options, while
waiting for the correct closing price
from the primary market, is no longer
necessary.
The Exchange notes that if it were to
unilaterally modify its closing time, the
existence of dissimilar closing times
applicable to the different options
exchanges would likely lead to
confusion for options investors and
broker-dealers. It is the PCX’s
understanding that all options
exchanges will make similar changes to
their rules to change the closing time in
equity options from 1:02 p.m. to 1 p.m.
(Pacific time).7 The options exchanges
collectively have determined that they
would implement this new closing time
on February 13, 2006.8
2. Statutory Basis
The Exchange believes that the
proposed rule change, as amended, is
7 The PCX notes that, although certain other
exchanges are also proposing to change the closing
time for narrow-based index options, the PCX’s
proposed rule change does not include a provision
regarding narrow-based indexes. The Exchange
represents that, at this time, the PCX does not trade
options on narrow-based index products and does
not have any plans to list options on narrow-based
index products. PCX Rule 5.20(a) governs the
closing time for transactions in index options. If in
the future the PCX were to list options on narrowbased indexes, the PCX represents that it will, at
that time, make any necessary changes to PCX Rule
5.20(a) regarding the closing time for options on
narrow-based indexes. Id.
8 See Amendment No. 2, supra note 4.
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]]>Agencies
[Federal Register Volume 71, Number 31 (Wednesday, February 15, 2006)]
[Notices]
[Pages 8029-8035]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-2128]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53253; File No. SR-PCX-2005-123]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule Change
and Amendment Nos. 1 and 2 Thereto Relating to Currency Trust Shares.
February 8, 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 November 11, 2005, the Pacific Exchange, Inc. (``PCX'' or
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc.
(``PCXE'' or ``Corporation''), filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
On January 13, 2006, PCX filed Amendment No. 1 to the proposed rule
change.\3\ On January 13, 2006, PCX 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 and is approving the proposal on an accelerated
basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 3 In Amendment No. 1, the Exchange clarified and
supplemented certain aspects of its proposal. Amendment No. 1
replaces and supplements the information provided in various
sections of the Exchange's Form 19b-4.
\4\ In Amendment No. 2, the Exchange further clarified and
supplemented certain aspects of its proposal.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange, through PCXE, proposes to amend its rules governing
the Archipelago Exchange (``ArcaEx''), the equities trading facility of
PCXE. The Exchange proposes new PCXE Rule 8.202 in order to permit
trading, either by listing or pursuant to unlisted trading privileges
(``UTP''), shares issued by a trust that holds a specified non-U.S.
currency (``Currency Trust Shares''). In addition, the Exchange
proposes to trade, pursuant to UTP, Euro Shares (``Shares'' or ``Euro
Shares''), which represent units of fractional undivided beneficial
interest in and ownership of the Euro Currency Trust (the ``Trust''),
which is sponsored by Rydex Specialized Products LLC.
The text of the proposed rule change appears below. Additions are
in italics. Deleted items are in [brackets].
* * * * *
Rule 8.202.
Currency Trust Shares
(a) The Corporation will consider for trading, whether by listing
or pursuant to unlisted trading privileges, Currency Trust Shares that
meet the criteria of this Rule.
(b) Applicability. This Rule is applicable only to Currency Trust
Shares. Except to the extent inconsistent with this Rule, or unless the
context otherwise requires, the provisions of the trust issued receipts
rules, Bylaws, and all other rules and procedures of the Board of
Directors shall be applicable to the trading on the Corporation of such
securities. Currency Trust Shares are included within the definition of
``security'' or ``securities'' as such terms are used in the Bylaws and
Rules of the Corporation.
(c) Currency Trust Shares. The term ``Currency Trust Shares'' as
used in the Rules shall, unless the context otherwise requires, mean a
security that (a) is issued by a trust (``Trust'') that holds a
specified non-U.S. currency deposited with the Trust; (b) when
aggregated in some specified minimum number may be surrendered to the
Trust by the beneficial owner to receive the specified non-U.S.
currency; and (c) pays beneficial owners interest and other
distributions on the deposited non-U.S. currency, if any, declared and
paid by the Trust.
(d) Designation of Non-U.S. Currency. The Corporation may trade,
either by listing or pursuant to unlisted trading privileges, Currency
Trust Shares that hold a specified non-U.S. currency. Each issue of
Currency Trust Shares shall be designated as a separate series and
shall be identified by a unique symbol.
(e) Initial and Continued Listing. Currency Trust Shares will be
listed and traded on the Corporation subject to application of the
following criteria:
(1) Initial Listing --the Corporation will establish a minimum
number of Currency Trust Shares required to be outstanding at the time
of commencement of trading on the Corporation.
(2) Continued Listing --following the initial 12 month period
following commencement of trading on the Corporation of Currency Trust
Shares, the Corporation will consider the suspension of trading in or
removal from listing of such series under any of the following
circumstances:
(i) if the Trust has more than 60 days remaining until termination
and there are fewer than 50 record and/or beneficial holders of
Currency Trust Shares for 30 or more consecutive trading days; or
(ii) if the Trust has fewer than 50,000 Currency Trust Shares
issued and outstanding; or
(iii) if the market value of all Currency Trust Shares issued and
outstanding is less than $1,000,000; or
(iv) if the value of the applicable non-U.S. currency 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 applicable non-U.S. currency value;
(v) if the Indicative Trust Value is no longer made available on at
least a 15-second delayed basis; or
[[Page 8030]]
(vi) if such other event shall occur or condition exists which in
the opinion of the Corporation makes further dealings on the
Corporation inadvisable.
Upon termination of a Trust, the Corporation requires that Currency
Trust Shares issued in connection with such entity Trust be removed
from Corporation 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
Trust prospectus. However, a Trust 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 Corporation.
(5) Voting --Voting rights shall be as set forth in the applicable
Trust prospectus.
(f) Limitation of Corporation Liability. Neither the Corporation
nor any agent of the Corporation shall have any liability for damages,
claims, losses or expenses caused by any errors, omissions, or delays
in calculating or disseminating any applicable non-U.S. currency value;
the current value of the applicable non-U.S. currency required to be
deposited to the Trust in connection with issuance of Currency Trust
Shares; net asset value; or any other information relating to the
purchase, redemption, or trading of the Currency Trust Shares,
resulting from any negligent act or omission by the Corporation, or any
agent of the Corporation; or any act, condition or cause beyond the
reasonable control of the Corporation, 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 applicable non-U.S. currency.
(g) Information Barrier. An ETP Holder acting as a registered
Market Maker or Market Maker Authorized Trader in Currency Trust Shares
is obligated to comply with PCXE Rule 7.26 pertaining to limitations on
dealings when such Market Maker or Market Maker Authorized Trader, or
affiliate of such persons, engages in Other Business Activities. For
purposes of Currency Trust Shares only, Other Business Activities shall
include trading in the applicable non-U.S. currency, options, futures
or options on futures on such currency, or any other derivatives based
on such currency.
(h) Market Maker Accounts. An ETP Holder acting as a registered
Market Maker in Currency Trust Shares must file with the Exchange in a
manner prescribed by the Exchange and keep current a list identifying
all accounts for trading in the applicable non-U.S. currency, options,
futures or options on futures on such currency, or any other
derivatives based on such currency, which the Market Maker may have or
over which it may exercise investment discretion. No Market Maker shall
trade in the applicable non-U.S. currency, options, futures or options
on futures on such currency, or any other derivatives based on such
currency, in an account in which a Market Maker, 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.
In addition to the existing obligations under Exchange rules
regarding the production of books and records, the ETP Holder acting as
a Market Maker in Currency Trust Shares shall make available to the
Exchange such books, records or other information pertaining to
transactions by such entity or registered or non-registered employee
affiliated with such entity for its or their own accounts for trading
the applicable non-U.S. currency, options, futures or options on
futures on such currency, or any other derivatives based on such
currency, as may be requested by the Exchange.
(i) In connection with trading the applicable non-U.S. currency,
options, futures or options on futures on such currency, or any other
derivatives based on such currency (including Currency Trust Shares),
the ETP Holder acting as a Market Maker in Currency Trust Shares shall
not use any material nonpublic information received from any person
associated with an ETP Holder or employee of such person regarding
trading by such person or employee in the applicable non-U.S. currency,
options, futures or options on futures on such currency, or any other
derivatives based on such currency.
Commentary:
.01 A Currency Trust Share is a Trust Issued Receipt that holds a
specified non-U.S. currency deposited with the Trust.
.02 The Corporation requires that ETP Holders provide all
purchasers of newly issued Currency Trust Shares a prospectus for the
series of Currency Trust Shares.
.03 Transactions in Currency Trust Shares will occur during the
trading hours specified in PCXE Rule 7.34.
.04 The Corporation will file separate proposals under Section
19(b) of the Securities Exchange Act of 1934 before trading, either by
listing or pursuant to unlisted trading privileges, Currency Trust
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 Exchange included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add new PCXE Rule 8.202 in order to permit
trading, either by listing or pursuant to UTP, of Currency Trust
Shares.\5\ The Exchange also proposes to trade the Shares of the Trust
pursuant to UTP. The New York Stock Exchange, Inc. (the ``NYSE'') has
recently proposed to list and trade the Shares.\6\ The Commission
[[Page 8031]]
previously approved the original listing and trading of the Shares by
the New York Stock Exchange, Inc. (``NYSE'').\7\
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\5\ Currency Trust Shares are securities issued by a trust that
represent investors' discrete identifiable and undivided beneficial
ownership interest in the non-U.S. currency deposited into the
trust. The Exchange notes that the Commission has approved the
listing and trading pursuant to UTP of other securities products for
which the underlying interest was not a security trading on a
regulated market. See Securities Exchange Act Release Nos. 51067
(January 21, 2005), 70 FR 3952-01 (January 27, 2005) (approving
general standards for the listing and trading of Commodity-Based
Trust Shares and trading of shares of the iShares COMEX Gold Trust
pursuant to UTP); and 51245 (February 23, 2005), 70 FR 10731-01
(March 4, 2005) (approving the trading of shares of the streetTRACKS
Gold Trust pursuant to UTP). Unlike Commodity-Based Trust Shares
under PCXE Rule 8.201, which hold one or more physical commodities,
Currency Trust Shares hold non-U.S. currency.
\6\ See Securities Exchange Act Release No. 52843 (November 28,
2005), 70 FR 72486 (December 5, 2005) (order granting accelerated
approval to SR-NYSE-2005-65) (``NYSE Order'').
\7\ Id.
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The investment objective of the Trust is for the Shares to reflect
the value of the euro. The Shares represent beneficial ownership
interests in the net assets of the Trust consisting only of euro on
demand deposit in a euro-denominated, interest-bearing account, less
the expenses of the Trust.
(a) Currency Trust Shares
PCXE Rule 8.202 is intended to accommodate possible future listing
and trading of trusts based on non-U.S. currencies in addition to the
euro. Any new listing or trading of an issue of Currency Trust Shares
will be subject to approval of a proposed rule change by the Commission
pursuant to Section 19(b)(2) \8\ of the Securities Exchange Act of 1934
(the ``Act'') and Rule 19b-4 thereunder.\9\
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\8\ 15 U.S.C. 78s(b)(2).
\9\ 17 CFR 240.19b-4.
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A description of the euro, foreign exchange industry, foreign
currency regulation, operation of the Trust, and the Shares is set
forth in the NYSE Order. Issuances of Shares will be made only in
baskets of 50,000 Shares or multiples thereof (``Basket''). The Trust
will issue and redeem the Shares on a continuous basis, by or through
participants that have entered into participant agreements (each, an
``Authorized Participant'') \10\ with the trustee, the Bank of New York
(``Trustee''), at the net asset value (``NAV'') per Share next
determined after an order to purchase a Basket is received in proper
form.
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\10\ 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 Participant or an Indirect Participant, and
(iii) has in effect a valid Authorized Participant Agreement.
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When calculating NAV, the Trustee will value the euros held by the
Trust on the basis of the day's announced Noon Buying Rate, as
determined by the Federal Reserve Bank of New York. If the Noon Buying
Rate is not announced by 2 p.m. (Eastern time (``ET'')), the Trustee
will use the most recently announced Noon Buying Rate, unless the
Trustee, in consultation with the Sponsor, determines to apply an
alternative basis for evaluation as a result of extraordinary
circumstances. The calculation methodology for the NAV is described in
more detail in the NYSE Order.
Baskets will be issued in exchange for an amount of euros (``Basket
Euro Amount'') based on the combined NAV per Share of the number of
Shares included in the Baskets being created. The Basket Euro Amount
and NAV will be determined by the Trustee ``as promptly as
practicable'' after the Federal Reserve announces the Noon Buying Rate
and published on the Trust's Web site on each Business Day.\11\
Authorized Participants that wish to purchase a Basket must transfer
the Basket Euro Amount to the Trust in exchange for a Basket. Baskets
are then separable upon issuance into the Shares that will be traded on
ArcaEx on a UTP basis.\12\
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\11\ Ordinarily no later than 2 p.m. (ET).
\12\ Shares are separate and distinct from the underlying euro
comprising the portfolio of the Trust. The Exchange expects that the
number of outstanding Shares will increase and decrease as a result
of in-kind deposits and withdrawals of the underlying euro.
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The Shares will not be individually redeemable but will only be
redeemable in Baskets. To redeem, an Authorized Participant will be
required to accumulate enough Shares to constitute a Basket (i.e.,
50,000 Shares). Authorized Participants that wish to redeem a Basket
will receive the Basket Euro Amount in exchange for each Basket
surrendered. The operation of the Trust and creation and redemption
process is described in more detail in the NYSE Order.
(b) Dissemination of Information About the Fund Shares and Underlying
Euro
Although the spot price of a foreign currency, such as the euro, is
not disseminated over the facilities of Consolidated Tape Association
(``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. Investors may obtain on a 24-hour basis euro pricing information
based on the euro spot price from various financial information service
providers. The foreign exchange market is an over-the-counter dealer
marketplace, and current spot prices are also generally available with
bid/ask spreads from foreign exchange dealers. Complete real-time data
for euro futures and options prices traded on the Chicago Mercantile
Exchange (``CME'') and the Philadelphia Stock Exchange (``Phlx'') are
also available by subscription from information service providers. The
CME and Phlx also provide delayed futures and options information on
current and past trading sessions and market news free of charge on
their respective Web sites. There are a variety of other public Web
sites that provide information on foreign currency and the euro, such
as Bloomberg (https://www.bloomberg.com/markets/currencies/eurafr_
currencies.html), which regularly reports current foreign exchange
pricing for a fee. Other service providers include CBS Market Watch
(https://www.marketwatch.com/tools/ stockresearch/globalmarkets) and
Yahoo! Finance (https://finance.yahoo.com/currency). Many of these sites
offer price quotations drawn from other published sources, and as the
information is supplied free of charge, it generally is subject to time
delays.\13\ The Exchange states that, like bond securities traded in
the over-the-counter market with respect to which pricing information
is available directly from bond dealers, current euro spot prices are
also generally available with bid/ask spreads from foreign currency
dealers. In addition, there is a considerable amount of euro price and
euro market information available on public Web sites and through
professional and subscription services. Current spot prices are also
generally available from foreign exchange dealers.
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\13\ There may be incremental differences in the euro spot price
among the various information service sources. While the Exchange
believes the differences in the euro spot price may be relevant to
those entities engaging in arbitrage or in the active daily trading
of euro or foreign currency derivatives, the Exchange believes such
differences are likely of less concern to individual investors
intending to hold the Shares as part of a long-term investment
strategy.
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The Trust's Web site at (https://www.currencyshares.com) (to which
the Exchange will provide a hyperlink) will be publicly accessible at
no charge and will contain the following information: (1) The euro spot
price,\14\ including the bid and offer and the midpoint between the bid
and offer for the euro spot price, updated every 5 to 10 seconds; (2)
an intraday indicative value (``IIV'') per Share calculated by
multiplying the indicative spot price of euro by the quantity of euro
backing each Share, on a 5 to 10-second delayed basis; (3) a 20-minute
delayed basis indicative value, which is used for calculating premium/
discount information; (4) premium/discount information, calculated on a
20-minute delayed basis; (5) the NAV of the Trust as calculated each
Business Day; (6) accrued interest per Share; (7)
[[Page 8032]]
the daily Noon Buying Rate; (8) the Basket Euro Amount; and (9) the
last sale price of the Shares as traded in the U.S. market, subject to
a 20-minute delay. The euro spot price and IIV per Share are provided
on an essentially real-time basis and are available during ArcaEx's
early and late trading sessions, in addition to ArcaEx's core trading
session.\15\
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\14\ The Trust Web site's euro spot price will be provided by
The Bullion Desk (https://www.thebulliondesk.com), and the time of
each calculation is noted on the Trust's Web site. The Exchange will
provide a hyperlink to the Trust Web site. The Bullion Desk is not
affiliated with the Trust, Trustee, Sponsor, Depository,
Distributor, or the Exchange. In the event that the Trust's Web site
should cease to provide this euro spot price information from an
unaffiliated source and the intraday indicative value of the Shares,
the NYSE will halt trading in the Shares and commence delisting
proceedings for the Shares.
\15\ Telephone Conference between David Strandberg, Attorney,
Archipelago, and Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006.
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Between 12 p.m. and 2 p.m. (ET) each business day, the Trustee will
calculate NAV and Basket Euro Amount based on the combined NAV per
Share of the number of Shares included in the Baskets being created of
the Shares and will post NAV on the Trust's Web site as soon as
valuation of the euro held by the Trust is complete (ordinarily by 2
p.m. (ET)). Ordinarily, it will be posted no more than thirty minutes
after the Noon Buying Rate is published by the Federal Reserve Bank of
New York. In the NYSE Order, NYSE represented that all market
participants will have access to this data at the same time and,
therefore, no market participant will have a time advantage in using
such data.
(c) Continued Listing and UTP Criteria
While the Exchange immediately seeks to UTP the Euro Currency
Shares, the Exchange is also adopting general initial and continued
listing standards applicable to all Currency Trust Shares in the event
the Exchange were to list such Currency Trust Shares. In such an event,
the Exchange would still file a Form 19b-4\16\ to list such Currency
Trust Shares. When the Exchange is the primary listing exchange, the
Trust will be subject to the continued trading criteria under proposed
PCXE Rule 8.202(e). In particular, the proposed criteria provides that
the Currency Trust Shares may be removed from trading following the
initial 12-month period from the date of commencement of trading of the
Currency Trust Shares on the Exchange under any of the following
circumstances:
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\16\ 17 CFR 249.819.
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If the Trust has more than 60 days remaining until
termination and there are fewer than 50 record and/or beneficial
holders of the Currency Trust Shares for 30 or more consecutive trading
days;
If the Trust has fewer than 50,000 Currency Trust Shares
issued and outstanding;
If the market value of all the Currency Trust Shares is
less than $1,000,000;
If the value of the applicable non-U.S. currency 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 applicable non-U.S. currency value;
If the Indicative Trust Value (``ITV'' or ``IIV'') is no
longer made available on at least a 15-second delayed basis; or
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
In addition, the Exchange will remove Currency Trust Shares from
listing and trading upon termination of the Trust.
If the Exchange is only trading the Shares pursuant to UTP, then
the Exchange will cease trading in the Shares if: (1) the primary
market stops trading the Shares because of a regulatory halt similar to
a halt based on PCXE Rule 7.12 and/or a halt because calculation and
dissemination of the IIV and/or the underlying value (the spot
price)\17\ of the applicable non-U.S. currency has ceased; or (2) the
primary market delists the Shares. Additionally, the Exchange may cease
trading the Currency Trust Shares if such other event shall occur or
condition exists which in the opinion of the Exchange makes further
dealings on the Exchange inadvisable.
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\17\ For the purposes of trading the Euro Shares pursuant to
UTP, the applicable value would be the Euro Spot price provided by
The Bullion Desk at https://www.thebulliondesk.com and at https://
www.currencyshares.com (to which the Exchange will hyperlink).
Telephone Conference between David Strandberg, Attorney,
Archipelago, and Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006.
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(d) Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares of the Trust subject to the Exchange's
existing rules governing the trading of equity securities. Trading in
the Shares on the Exchange will occur in accordance with PCXE Rule
7.34(a). The minimum trading increment for Shares on the Exchange will
be $0.01.
Further, the Exchange has proposed new PCXE Rules 8.202(g)--(i),
which set forth certain restrictions on equity trading permit holders
(``ETP Holders'') acting as registered Market Makers in Currency Trust
Shares to facilitate surveillance. PCXE Rule 8.202(h) will require that
the ETP Holder acting as a registered Market Maker in the Shares
provide the Exchange with information relating to its trading in the
applicable non-U.S. currency, options, futures or options on futures on
such currency, or any other derivatives based on such currency. PCXE
Rule 8.202(i) will prohibit the ETP Holder acting as a registered
Market Maker in the Shares from using any material nonpublic
information received from any person associated with an ETP Holder or
employee of such person regarding trading by such person or employee in
the applicable non-U.S. currency, options, futures or options on
futures on such currency, or any other derivatives based on such
currency (including the Shares). In addition, as stated above, PCXE
Rule 8.202(g) will prohibit the ETP Holder acting as a registered
Market Maker in the Shares from being affiliated with a market maker in
the applicable non-U.S. currency, options, futures or options on
futures on such currency, or any other derivatives based on such
currency unless adequate information barriers are in place, as provided
in PCXE Rule 7.26.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading on the Exchange in the Shares may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which trading is not occurring in euros, or
(2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule \18\ or by the halt or suspension of the trading of
futures contracts based on the euro. If the Exchange is the listing
market for Currency Trust Shares, the Exchange will halt trading in the
Shares if the Trust Web site (to which the PCX will hyperlink) ceases
to provide: (1) The value of the euro updated at least every 15 seconds
from a source not affiliated with the Sponsor, Trust, Custodian, or the
Exchange (or this value is not displayed on the appropriate Web site),
or (2) the IIV per Share updated at least every 15 seconds. If the
Exchange is trading the shares pursuant to UTP, such as the Euro
Currency Shares, the Exchange will cease trading the Shares if: (1) The
primary market stops trading the Shares because of a regulatory halt
similar to PCXE Rule 7.12 and/or a halt because of dissemination of the
IIV and/or because the underlying spot price has ceased, or (2) the
primary market delists
[[Page 8033]]
the shares. Because ArcaEx will be trading the Shares during its early
and late trading sessions, when the primary market is closed, the
Exchange will monitor the dissemination of the euro spot price and IIV
during these trading sessions and cease trading the Shares if these
values are not disseminated at least every 15 seconds and such values
are not displayed on the Exchange Web site via a hyperlink with the
Trust's Web site.\19\
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\18\ See PCXE Rule 7.12.
\19\ Telephone Conference between David Strandberg, Attorney,
Archipelago, and Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006. In such case, the
Exchange would immediately contact the Commission's staff.
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Currency Trust Shares will be deemed ``Eligible Listed
Securities,'' as defined in PCXE Rule 7.55, for purposes of the
Intermarket Trading System (``ITS'') Plan and therefore will be subject
to the trade through provisions of PCXE Rule 7.56, which require that
ETP Holders avoid initiating trade-throughs for ITS securities.
The Commission exempted the Currency Trust Shares from the short
sale requirements of Rule 10a-1 under the Act and gave no-action relief
from Rule 200(g) of Regulation SHO under the Act.\20\
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\20\ Currency Trust Shares are exempt from Rule 10a-1 under the
Act permitting sales without regard to the ``tick'' requirements of
Rule 10a-1 under the Act. Rule 10a-1(a)(1)(i) under the Act provides
that a short sale of an exchange-traded security may not be effected
(i) below the last regular-way sale price (an ``uptick'') or (ii) at
such price unless such price is above the next preceding different
price at which a sale was reported (a ``zero-plus tick''). See
letter dated December 5, 2005 from James A. Brigagliano, Division of
Market Regulation, Commission, to George T. Simon, Foley and
Lardner.
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(e) Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products and shares of the
streetTRACKS Gold Trust \21\ to monitor trading in the Shares. The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions.
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\21\ See streetTRACKS Gold approval order, supra note 5.
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The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations. The Exchange is able to
obtain information regarding trading in the Shares, euro options, and
euro futures through ETP Holders, in connection with such ETP Holders'
proprietary or customer trades which they effect on any relevant
market. In addition, the Exchange may obtain trading information via
the Intermarket Surveillance Group (``ISG'') from other exchanges who
are members or affiliates of the ISG. Specifically, the Exchange can
obtain such information from the Phlx in connection with euro options
trading on the Phlx and from the CME and the London International
Financial Futures Exchange (``LIFFE'') in connection with euro futures
trading on those exchanges.
(f) Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The procedures for
purchases and redemptions of Shares in Baskets; (2) PCXE Rule 9.2(a),
which imposes a duty of due diligence on its ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
\22\ (3) how information regarding the IIV is disseminated; and (4)
trading information. The Information Bulletin will also note to members
their obligations regarding prospectus delivery requirements for the
Shares. The Exchange notes that investors purchasing Shares directly
from the Trust (by delivery of the Basket Euro Amount) will receive a
prospectus. Exchange members purchasing Shares from the Trust for
resale to investors will deliver a prospectus to such investors.
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\22\ The Exchange has proposed to amend PCXE Rule 9.2(a)
(``Diligence as to Accounts'') to provide that ETP Holders, before
recommending a transaction, must have reasonable grounds to believe
that the recommendation is suitable for the customer based on any
facts disclosed by the customer as to his other security holdings
and as to his financial situation and needs. Further, the proposed
rule amendment provides that prior to the execution of a transaction
recommended to a non-institutional customer, the ETP Holders should
make reasonable efforts to obtain information concerning the
customer's financial status, tax status, investment objectives and
any other information that they believe would be useful to make a
recommendation. See Amendment No. 1 to SR-PCX-2005-115 (November 21,
2005). Telephone Conference between David Strandberg, Attorney,
Archipelago, and Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 8, 2006.
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In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses described in the Registration
Statement, and that the number of euros required to create a Basket or
to be delivered upon a redemption of a Basket may gradually decrease
over time in the event that the Trust is required to sell euros to pay
the Trust's expenses, and that if done at a time when the price of the
euro is relatively low, it could adversely affect the value of the
Shares. Finally, Information Bulletin will also reference the fact that
there is no regulated source of last sale information regarding the
euro, and that the Commission has no jurisdiction over the trading of
the euro.
2. Statutory Basis
The proposed rule change, as amended, is consistent with Section
6(b) of the Act \23\ in general and furthers the objectives of Section
6(b)(5),\24\ in particular, in that it is designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transaction in securities, to
remove impediments and perfect the mechanisms of a free and open
market, and, in general, to protect investors and the public interest.
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\23\ 15 U.S.C. 78s(b).
\24\ 15 U.S.C. 78s(b)(5).
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In addition, the Exchange believes that the proposal is consistent
with Rule 12f-5 under the Act \25\ because it deems the Shares to be
equity securities, thus rendering the Shares subject to the Exchange's
existing rules governing the trading of equity securities.
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\25\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. 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 rule-comments@sec.gov. Please include
File Number SR-PCX-2005-123 on the subject line.
[[Page 8034]]
Paper comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-PCX-2005-123. 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 such
filing also will be available for inspection and copying at the
principal office of the PCX. 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-PCX-2005-123 and should be submitted on or before March
8, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change, as amended, is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\26\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\27\ which
requires that an exchange have rules designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and in general to protect investors and the public
interest.
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\26\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\27\ 15 U.S.C. 78f(b)(5).
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In addition, the Commission finds that the proposal is consistent
with Section 12(f) of the Act,\28\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\29\ The Commission notes that it previously approved the
listing and trading of the Shares on the NYSE.\30\ The Commission also
finds that the proposal is consistent with Rule 12f-5 under the
Act,\31\ which provides that an exchange shall not extend UTP to a
security unless the exchange has in effect a rule or rules providing
for transactions in the class or type of security to which the exchange
extends UTP. PCXE rules deem the Shares to be equity securities, thus
trading in the Shares will be subject to the Exchange's existing rules
governing the trading of equity securities.
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\28\ 15 U.S.C. 78l(f).
\29\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally
prohibits a broker-dealer from trading a security on a national
securities exchange unless the security is registered on that
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act
excludes from this restriction trading in any security to which an
exchange ``extends UTP.'' When an exchange extends UTP to a
security, it allows its members to trade the security as if it were
listed and registered on the exchange even though it is not so
listed and registered.
\30\ See NYSE Order, supra note 6.
\31\ 17 CFR 240.12f-5.
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The Commission further believes that the proposal is consistent
with Section 11A(a)(1)(C)(iii) of the Act,\32\ which sets forth
Congress's finding that it is in the public interest and appropriate
for the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities.
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\32\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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In connection with the Exchange's UTP of the Euro Shares, the
Exchange will cease trading in the Shares if: (1) The primary market
stops trading the Shares because of a regulatory trading halt similar
to a halt based on PCXE Rule 7.12; or (2) the primary market stops
trading the Shares because the value of the euro 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 euro value; or the IIV is no longer made available on at
least a 15 second delayed basis \33\ or if such other event occurs or
condition exists which, in the opinion of the Exchange, makes further
dealings on the Exchange inadvisable; or (3) if the primary market
delists the Shares.
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\33\ Because the Exchange is trading the Shares in its early and
late trading sessions, the Exchange will ensure that trading of the
Shares on ArcaEx will cease during these trading sessions if the
unaffiliated value of the euro and the IIV per Share are no longer
calculated and disseminated at least every 15 seconds during these
trading sessions, or the Exchange stops providing a hyperlink on the
Exchange's Web site to such unaffiliated euro value or IIV per
Shares. Telephone Conference between David Strandberg, Attorney,
Archipelago, and Florence E. Harmon, Senior Special Counsel,
Division, Commission, on February 6, 2006.
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In support of the portion of the proposed rule change regarding UTP
of the Euro Shares, the Exchange has made the following
representations:
1. PCX has appropriate rules to facilitate transactions in this
type of security in all trading sessions.
2. PCX surveillance procedures are adequate to properly monitor the
trading of the Shares on the Exchange.
3. PCX will distribute an Information Bulletin to its members prior
to the commencement of trading of the Shares on the Exchange that
explains the terms, characteristics, and risks of trading such shares.
4. PCX will require a member with a customer who purchases newly
issued Shares on the Exchange to provide that customer with a product
prospectus and will note this prospectus delivery requirement in the
Information Bulletin.
5. The Exchange will cease trading in the Shares if: (1) the
primary market stops trading the shares because of a regulatory halt
similar to a halt based on PCX Rule 7.12 and/or a halt because
dissemination of the IIV and/or the underlying value (spot price on the
euro) of the applicable non-U.S. currency has ceased;\34\ or (2) the
primary market delists the Shares.
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\34\ Id.
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This approval order is conditioned on PCX's adherence to these
representations.
The Commission finds good cause for approving this proposed rule
change, as amended, before the thirtieth day after the publication of
notice thereof in the Federal Register. As noted previously, the
Commission previously found that the listing and trading of these
Shares on the NYSE is consistent with the Act.\35\ The Commission
presently is not aware of any issue that would cause it to revisit that
earlier finding or preclude the trading of these funds on the Exchange
pursuant to UTP. Therefore, accelerating approval of this proposed rule
change should benefit investors by creating, without undue delay,
additional competition in the market for these Shares.
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\35\ See NYSE Order, supra note 6.
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[[Page 8035]]
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-PCX-2005-123), is hereby approved on
an accelerated basis.\36\
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\36\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\37\
J. Lynn Taylor,
Assistant Secretary.
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\37\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-2128 Filed 2-14-06; 8:45 am]
BILLING CODE 8010-01-P
