Self-Regulatory Organizations; New York Stock Exchange, LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to List and Trade Index-Linked Securities of Barclays Bank PLC Linked to the Performance of the GSCI® Total Return Index, 21064-21074 [E6-6073]
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21064
Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / Notices
CHAPTER III.
Rules of Fair Practice
Rule 3.1. Business Conduct of Members
A member, in the conduct of his
business, shall observe high standards
of commercial honor and just and
equitable principles of trade
Interpretations and Policies:
01. A member may not split any order
into multiple smaller orders for any
purpose other than seeking the best
execution for the entire order.
*
*
*
*
*
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 and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
NSX 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
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1. Purpose
The Commission has expressed
concern that participants in the United
States securities markets may be
engaging in the practice of ‘‘tape
shredding,’’ the practice of unbundling
customer orders into multiple smaller
orders for the primary purpose of
maximizing payments to the participant
or participant firms. Accordingly, the
Commission has requested selfregulatory organizations to adopt rules
to prohibit the practice.
The Exchange strongly believes that
the practice of tape shredding is
inappropriate and should be prohibited.
Further, it believes that tape shredding
constitutes conduct that is inconsistent
with the high standard of commercial
honor and just and equitable principles
of trade. Accordingly, the Exchange is
adding an interpretation and policy to
its Rule 3.1 to explicitly prohibit NSX
members from splitting large orders into
multiple smaller orders for any purpose
other than best execution.
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the Act,3
in general, and furthers the objectives of
Section 6(b)(5) of the Act,4 in particular,
in that it is designed 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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any inappropriate burden on
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NSX–2006–05 on the
subject line.
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–NSX–2006–05. 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 offices of NSX. 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–NSX–2006–05 and should
be submitted on or before May 15, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.5
Nancy M. Morris,
Secretary.
[FR Doc. E6–6067 Filed 4–21–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53658; File No. SR–NYSE–
2006–20]
Self-Regulatory Organizations; New
York Stock Exchange, LLC; Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto to List and
Trade Index-Linked Securities of
Barclays Bank PLC Linked to the
Performance of the GSCI Total Return
Index
April 14, 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 March 13,
2006 the New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
5 17
CFR 200.30–3(a)(12).
U.S.C 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
3 15
U.S.C. 78f(b).
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U.S.C. 78f(b)(5).
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Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / Notices
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. On March
27, 2006, NYSE filed Amendment No. 1
to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE proposes to list and trade
Index-Linked Securities (the ‘‘Notes’’) of
Barclays Bank PLC (‘‘Barclays’’) linked
to the performance of the GSCI Total
Return Index (the ‘‘Index’’). The text of
the proposed rule change is available on
the Exchange’s Web site (https://
www.nyse.com), at the principal office
of the Exchange, 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
NYSE included statements concerning
the purpose of, and basis for, the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The NYSE 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 the
Statutory Basis for, the Proposed Rule
Change
under the name ‘‘iPath SM ExchangeTraded Notes.’’ 5
The Exchange believes that the Notes
will conform to the initial listing
standards for equity securities under
section 703.19 of the Manual, as
Barclays is an affiliate of Barclays PLC,6
an Exchange listed company in good
standing, the Notes will have a
minimum life of one year, the minimum
public market value of the Notes at the
time of issuance will exceed $4 million,
there will be at least one million Notes
outstanding, and there will be at least
400 holders at the time of issuance.
The Notes are a series of mediumterm debt securities of Barclays that
provide for a cash payment at maturity
or upon earlier exchange at the holder’s
option, based on the performance of the
Index subject to the adjustments
described below. The principal amount
of each Note is expected to be $50. The
Notes will trade on the Exchange’s
equity trading floor, and the Exchange’s
existing equity trading rules will apply
to trading in the Notes. The Notes will
not have a minimum principal amount
that will be repaid and, accordingly,
payment on the Notes prior to or at
maturity may be less than the original
issue price of the Notes. In fact, the
value of the Index must increase for the
investor to receive at least the $50
principal amount per Note at maturity
or upon exchange or redemption. If the
value of the Index decreases or does not
increase sufficiently to offset the
investor fee (described below), the
investor will receive less, and possibly
significantly less, than the $50 principal
amount per Note. In addition, holders of
the Notes will not receive any interest
payments from the Notes. The Notes are
expected to have a term of 30 years. The
Notes are not callable.7
1. Purpose
The Notes
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Under section 703.19 of the NYSE
Listed Company Manual (the
‘‘Manual’’), the Exchange may approve
for listing and trading securities not
otherwise covered by the criteria of
sections 1 and 7 of the Manual,
provided the issue is suited for auction
market trading.4 The Exchange proposes
to list and trade, under section 703.19
of the Manual, the Notes, which are
linked to the performance of the Index.
Barclays intends to issue the Notes
3 In Amendment No. 1, the Exchange notes a
proposed Supplementary Material to Rule 1301B in
SR–NYSE–2006–17, which sets forth guidelines for
specialists applicable to this product.
4 See Securities Exchange Act Release No. 28217
(July 18, 1990), 55 FR 30056 (July 24, 1990) (SR–
NYSE–90–30).
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5 Goldman, Sachs & Co. and Barclays have
entered into a license agreement granting to
Barclays a non-transferable, non-exclusive license
to use the Goldman Sachs Commodity Index or
any sub-indices (individually and collectively, the
‘‘GSCI ’’) in connection with the Notes. Goldman,
Sachs & Co. or any of its affiliates or subsidiaries,
individually or collectively, are referred to as the
‘‘Index Sponsor.’’
6 The issuer of the Notes, Barclays, is an affiliate
of an Exchange-listed company (Barclays PLC) and
not an Exchange-listed company itself. However,
Barclays, though an affiliate of Barclays PLC, would
exceed the Exchange’s earnings and minimum
tangible net worth requirements in section 102.
Additionally, the Exchange states that the Notes
when combined with the original issue price of all
other Note offerings of the issuer that are listed on
a national securities exchange (or association) does
not exceed 25% of the issuer’s net worth.
Telephone conference between Florence E. Harmon,
Senior Special Counsel, Division of Market
Regulation (‘‘Division’’), Commission, and John
Carey, Assistant General Counsel, Exchange, on
April 11, 2006 (‘‘April 11 Telephone Conference’’).
7 April 11 Telephone Conference.
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Holders who have not previously
redeemed their Notes will receive a cash
payment at maturity equal to the
principal amount of their Notes times
the index factor on the Final Valuation
Date (as defined below) minus the
investor fee on the Final Valuation Date.
The ‘‘index factor’’ on any given day
will be equal to the closing value of the
Index on that day divided by the initial
index level. The index factor on the
Final Valuation Date will be equal to the
final index level divided by the initial
index level. The ‘‘initial index level’’ is
the closing value of the Index on the
date of issuance of the Notes (the ‘‘Trade
Date’’), and the ‘‘final index level’’ is the
closing value of the Index on the Final
Valuation Date. The investor fee is equal
to 0.75% per year times the principal
amount of a holder’s Notes times the
index factor, calculated on a daily basis
in the following manner: the investor
fee on the Trade Date will equal zero.
On each subsequent calendar day until
maturity or early redemption, the
investor fee will increase by an amount
equal to 0.75% times the principal
amount of a holder’s Notes times the
index factor on that day (or, if such day
is not a trading day, the index factor on
the immediately preceding trading day)
divided by 365. The investor fee is the
only fee holders will be charged in
connection with their ownership of the
Notes.
Prior to maturity, holders may, subject
to certain restrictions, redeem their
Notes on any Redemption Date (defined
below) during the term of the Notes
provided that they present at least
50,000 Notes for redemption, or they act
through a broker or other financial
intermediaries (such as a bank or other
financial institution not required to
register as a broker-dealer to engage in
securities transactions) that are willing
to bundle their Notes for redemption
with other investors’ Notes. If a holder
chooses to redeem such holder’s Notes
on a Redemption Date, such holder will
receive a cash payment on such date
equal to the principal amount of such
holder’s Notes times the index factor on
the applicable Valuation Date minus the
investor fee on the applicable Valuation
Date. A ‘‘Redemption Date’’ is the third
business day following a Valuation Date
(other than the Final Valuation Date
(defined below)). A ‘‘Valuation Date’’ is
each Thursday from the first Thursday
after issuance of the Notes until the last
Thursday before maturity of the Notes
(the ‘‘Final Valuation Date’’) inclusive
(or, if such date is not a trading day,8
8 A ‘‘trading day’’ is a day on which (i) the value
of the Index is published by the Index Sponsor, (ii)
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Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / Notices
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the next succeeding trading day), unless
the calculation agent determines that a
market disruption event, as described
below, occurs or is continuing on that
day.9 In that event, the Valuation Date
for the maturity date or corresponding
Redemption Date, as the case may be,
will be the first following trading day on
which the calculation agent determines
that a market disruption event does not
occur and is not continuing. In no event,
however, will a Valuation Date be
postponed by more than five trading
days.
Any of the following will be a market
disruption event: (i) A material
limitation, suspension or disruption in
the trading of any Index component that
results in a failure by the trading facility
on which the relevant contract is traded
to report a daily contract reference price
(i.e., the price of the relevant contract
that is used as a reference or benchmark
by market participants);10 (ii) the daily
contract reference price for any Index
component is a ‘‘limit price,’’ which
means that the daily contract reference
price for such contract has increased or
decreased from the previous day’s daily
contract reference price by the
maximum amount permitted under the
applicable rules or procedures of the
relevant trading facility; (iii) failure by
the Index Sponsor to publish the closing
value of the Index or of the applicable
trading facility or other price source to
announce or publish the daily contract
reference price for one or more Index
components; or (iv) any other event, if
the calculation agent determines in its
sole discretion that the event materially
interferes with Barclays’ ability or the
ability of any of Barclays’ affiliates to
trading is generally conducted on the Exchange,
and (iii) trading is generally conducted on the
markets on which the futures contracts underlying
the GSCI are traded, in each case as determined
by the calculation agent in its sole discretion.
9 Barclays will serve as the initial calculation
agent.
10 The ‘‘daily contract reference price’’ with
respect to each contract expiration and contract is
the price of the relevant contract, expressed in U.S.
dollars, that is generally used by participants in the
related cash or over-the-counter market as a
benchmark for transactions related to such contract.
The daily contract reference price may, but is not
required to, be the price (i) used by such trading
facility or related clearing facility to determine the
margin obligations (if any) of its members or
participants or (ii) referred to generally as the
reference, closing or settlement price of the relevant
contract. If a trading facility publishes a daily
settlement price for a particular contract expiration,
such settlement price will generally serve as the
daily contract reference price for such contract
expiration unless, in the reasonable judgment of the
Index Sponsor, in consultation with the Policy
Committee, such settlement price does not satisfy
the criteria set forth in this definition. The daily
contract reference price of a contract may be
determined and published either by the relevant
trading facility or by one or more third parties.
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unwind all or a material portion of a
hedge with respect to the Notes that
Barclays or Barclays’ affiliates have
effected or may effect as described
herein in connection with the sale of the
Notes.11
If a Valuation Date is postponed by
five trading days, that fifth day will
nevertheless be the date on which the
value of the Index will be determined by
the calculation agent. In such an event,
the calculation agent will make a good
faith estimate in its sole discretion of
the value of the Index.
To redeem their Notes, holders must
instruct their broker or other person
through whom they hold their Notes to
take the following steps:
• Deliver a notice of redemption to
Barclays via email by no later than 11
a.m. New York time on the business day
prior to the applicable Valuation Date.
If Barclays receives such notice by the
time specified in the preceding
sentence, it will respond by sending the
holder a confirmation of redemption;
• Deliver the signed confirmation of
redemption to Barclays via facsimile in
the specified form by 4 p.m. New York
time on the same day. Barclays must
acknowledge receipt in order for the
confirmation to be effective; and
• Transfer such holder’s book-entry
interest in its Notes to the trustee, The
Bank of New York, on Barclays’ behalf
at or prior to 10 a.m. New York time on
the applicable Redemption Date (the
third business day following the
Valuation Date).12
If holders elect to redeem their Notes,
Barclays may request that Barclays
Capital Inc. (a broker-dealer) purchase
the Notes for the cash amount that
would otherwise have been payable by
Barclays upon redemption. In this case,
Barclays will remain obligated to
redeem the Notes if Barclays Capital Inc.
fails to purchase the Notes. Any Notes
purchased by Barclays Capital Inc. may
remain outstanding.
If an event of default occurs and the
maturity of the Notes is accelerated
Barclays will pay the default amount in
respect of the principal of the Notes at
maturity. The default amount for the
Notes on any day will be an amount,
determined by the calculation agent in
its sole discretion, equal to the cost of
11 If a ‘‘market disruption event’’ is of more than
a temporary nature, the Exchange will file a
proposed rule change pursuant to Rule 19b–4 under
the Act. Unless approved for continued trading, the
Exchange would commence delisting proceedings.
See ‘‘Continued Listing Criteria,’’ infra. Telephone
conference between Florence Harmon, Senior
Special Counsel, Division, Commission; John Carey,
Assistant General Counsel, Exchange; and Michael
Cavalier, Assistant General Counsel, Exchange, on
April 10, 2006 (‘‘April 10 Telephone Conference’’).
12 April 10 Telephone Conference.
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having a qualified financial institution,
of the kind and selected as described
below, expressly assume all Barclays’
payment and other obligations with
respect to the Notes as of that day and
as if no default or acceleration had
occurred, or to undertake other
obligations providing substantially
equivalent economic value to the
holders of the Notes with respect to the
Notes. That cost will equal:
• The lowest amount that a qualified
financial institution would charge to
effect this assumption or undertaking,
plus
• The reasonable expenses, including
reasonable attorneys’ fees, incurred by
the holders of the Notes in preparing
any documentation necessary for this
assumption or undertaking.13
Indicative Value
An intraday ‘‘Indicative Value’’ meant
to approximate the intrinsic economic
value of the Notes will be calculated
and published via the facilities of the
Consolidated Tape Association (‘‘CTA’’)
every 15 seconds throughout the NYSE
trading day on each day on which the
Notes are traded on the Exchange.14
Additionally, Barclays or an affiliate
will calculate and publish the closing
Indicative Value of the Notes on each
trading day at www.ipathetn.com. In
connection with the Notes, the term
‘‘Indicative Value’’ refers to the value at
a given time determined based on the
following equation:
Indicative Value = Principal Amount
per Unit X (Current Index Level
Initial Index Level)—Current
Investor Fee
where:
Principal Amount per Unit = $50.
Current Index Level = The most recent
published level of the Index as
reported by the Index Sponsor.
Initial Index Level = The Index level on
the trade date for the Notes.
13 Additional information about the default
provisions of the Notes is provided in the
Exchange’s Form 19b–4 and Barclays Bank PLC
Registration Statement Form F–3 (333–126811), as
amended by Amendment No. 1 on September 11,
2005.
14 The Indicative Value calculation will be
provided for reference purposes only. It is not
intended as a price or quotation, or as an offer or
solicitation for the purchase, sale, redemption or
termination of the Notes, nor does it reflect hedging
or transaction costs, credit considerations, market
liquidity, or bid-offer spreads. Published Index
levels from the index sponsors may occasionally be
subject to delay or postponement. Any such delays
or postponements will affect the Current Index
Level and therefore the Indicative Value of the
Notes. Index levels provided by the index sponsors
will not necessarily reflect the depth and liquidity
of the underlying commodities markets. For this
reason and others, the actual trading price of the
Notes may be different from their Indicative Value.
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Current Investor Fee = The most recent
daily calculation of the investor fee
with respect to the Notes,
determined as described above
(which, during any trading day, will
be the investor fee determined on
the preceding calendar day).
The Indicative Value will not reflect
price changes to the price of an
underlying commodity between the
close of trading of the futures contract
at the relevant futures exchange and the
close of trading on the NYSE at 4 p.m.
New York time.15 The value of the Notes
may accordingly be influenced by nonconcurrent trading hours between the
NYSE and the various futures exchanges
on which the futures contracts based on
the Index commodities are traded.
While the Notes will trade on the NYSE
from 9:30 a.m. to 4 p.m. New York time,
the table below lists the trading hours
for each of the Index components.16
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CBOT:
Corn .......................
Soybeans ...............
Wheat ....................
CME:
Feeder Cattle .........
Lean Hogs .............
Live Cattle .............
COMEX:
Gold .......................
Silver .....................
CSCE:
Coffee ....................
Cocoa .....................
Sugar #11 ..............
ICE Futures:
Brent Crude Oil ....
Gas Oil ..................
KCBOT:
Kansas Wheat .......
NYBOT:
Cotton #2 ...............
NYMEX:
Heating Oil ............
Natural Gas ...........
Unleaded Gasoline
WTI Crude Oil ......
LME:
Aluminum .............
Copper ...................
Lead .......................
Nickel ....................
Zinc .......................
10:30 a.m.–2:15 p.m.
10:30 a.m.–2:15 p.m.
10:30 a.m.–2:15 p.m.
10:05 a.m.–2 p.m.
10:10 a.m.–2 p.m.
10:05 a.m.–2 p.m.
8:20 a.m.–1:30 p.m.
8:25 a.m.–1:25 p.m.
9:15 a.m.–12:30 p.m.
8 a.m.–11:50 a.m.
9 a.m.–12 p.m.
8 p.m.–5 p.m.
8 p.m.–5 p.m.
10:30 a.m.–2:15 p.m.
10:30 a.m.–2:15 p.m.
10:05 a.m.–2:30 p.m.
10 a.m.–2:30 p.m.
10:05 a.m.–2:30 p.m.
10 a.m.–2:30 p.m.
6:55 a.m.–12 p.m.
7 a.m.–12 p.m.
7:05 a.m.–11:50 a.m.
7:15 a.m.–11:55 a.m.
7:10 a.m.–11:55 a.m.
While the market for futures trading
for each of the Index commodities is
open, the Indicative Value can be
expected to closely approximate the
redemption value of the Notes.
However, during NYSE trading hours
when the futures contracts have ceased
trading, spreads and resulting premiums
or discounts may widen, and therefore,
increase the difference between the
price of the Notes and their redemption
value. The Indicative Value
15 April
10 Telephone Conference.
16 Id.
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Jkt 208001
disseminated during NYSE trading
hours should not be viewed as a real
time update of the redemption value.
Description of the Index
The Exchange states that all
disclosure in this filing regarding the
Index and the GSCI is derived from
publicly available information. The
GSCI is a separate index from the Index;
however, the value of the Index is
derived from the GSCI, as described
below.17
The Index was established in May
1991, and is designed to be a diversified
benchmark for physical commodities as
an asset class. The Index reflects the
excess returns that are potentially
available through an unleveraged
investment in the contracts comprising
the GSCI plus the Treasury Bill rate of
interest that could be earned on funds
committed to the trading of the
underlying contracts.18 The value of the
Index, on any given day, reflects (i) the
price levels of the contracts included in
the GSCI (which represents the value
of the GSCI); (ii) the ‘‘contract daily
return,’’ which is the percentage change
in the total dollar weight of the GSCI
from the previous day to the current
day; and (iii) the Treasury Bill rate of
interest that could be earned on funds
committed to the trading of the
underlying contracts.
Because the value of the Index reflects
the futures contracts included in the
GSCI, the Exchange below describes the
index methodology for the GSCI. The
GSCI, upon which the Index is based,
is a proprietary index on a productionweighted basket of futures contracts on
physical commodities traded on trading
facilities in major industrialized
countries.19 The GSCI is designed to be
a measure of the performance over time
of the markets for these commodities.
The only commodities represented in
the GSCI are those physical
commodities on which active and liquid
contracts are traded on trading facilities
in major industrialized countries. The
17 Telephone conference between Florence E.
Harmon, Senior Special Counsel, Division,
Commission, and John Carey, Assistant General
Counsel, Exchange, on April 14, 2006 (‘‘April 14
Telephone Conference with John Carey’’). See also
footnote 5, supra.
18 The Treasury Bill rate of interest used for
purposes of calculating the index on any day is the
91-day auction high rate for U.S. Treasury Bills, as
reported on Telerate page 56, or any successor page,
on the most recent of the weekly auction dates prior
to such day.
19 Futures contracts on physical commodities and
commodity indices are traded on regulated futures
exchanges. Futures exchanges in the United States
are subject to regulation by the Commodity Futures
Trading Commission (‘‘CFTC’’) and futures markets
outside the United States are generally subject to
regulation by comparable regulatory authorities.
PO 00000
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21067
commodities represented in the GSCI
are weighted, on a production basis, to
reflect their relative significance (in the
view of the Index Sponsor, in
consultation with the Policy Committee)
to the world economy. The fluctuations
in the value of the GSCI are intended
generally to correlate with changes in
the prices of such physical commodities
in global markets. The value of the
GSCI has been normalized such that its
hypothetical level on January 2, 1970
was 100. Futures contracts on the
GSCI, and options on such futures
contracts, are currently listed for trading
on the Chicago Mercantile Exchange.
The contracts to be included in the
GSCI at any given time must satisfy
several sets of eligibility criteria
established by the Index Sponsor.20
First, the Index Sponsor identifies those
contracts that meet the general criteria
for eligibility. Second, the contract
volume and weight requirements are
applied and the number of contracts is
determined, which serves to reduce the
list of eligible contracts. At that point,
the list of designated contracts for the
relevant period is complete. The
composition of the GSCI is also
reviewed on a monthly basis by the
Index Sponsor.21
Set forth below is a summary of the
composition of and the methodology
used to calculate the GSCI as of this
date. The methodology for determining
the composition and weighting of the
GSCI and for calculating its value is
subject to modification in a manner
consistent with the purposes of the
GSCI, as described below. The Index
Sponsor makes the official calculations
of the GSCI. At present, this
calculation is performed continuously
20 Goldman, Sachs & Co. is the Index Sponsor for
both the Index and the GSCI. Telephone conference
between Florence E. Harmon, Senior Special
Counsel, Division, Commission, and Michael
Cavalier, Assistant General Counsel, Exchange, on
April 13, 2006 (‘‘April 13 Telephone Conference’’).
21 The Index Sponsor, Goldman, Sachs & Co., who
calculates the GSCI and thus the Index, is a brokerdealer. The Index Sponsor has represented to
Barclays that it will (i) implement and maintain
procedures reasonably designed to prevent the use
and dissemination by officers and directors of the
Index Sponsor, in violation of applicable laws, rules
and regulations, of material non-public information
relating to changes in the composition or method
of computation or calculation of the Index and (ii)
periodically check the application of such
procedures as they relate to officers and directors
of the Index Sponsor directly responsible for such
changes. In addition, the Policy Committee
members (as described below) are subject to written
policies with respect to material, non-public
information. Telephone conversation between
Florence Harmon, Senior Special Counsel, Division,
Commission; John Carey, Assistant General
Counsel, Exchange; and Michael Cavalier, Assistant
General Counsel, Exchange, on April 14, 2006
(‘‘April 14 Telephone Conference with John Carey
and Michael Cavalier’’).
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and is reported on Reuters page GSCI
(or any successor or replacement page)
and will be updated on Reuters at least
every 15 seconds during business hours
on each day on which the offices of the
Index Sponsor in New York City are
open for business (a ‘‘GSCI Business
Day’’).22 The settlement price for the
Index is also reported on Reuters page
GSCI (or any successor or replacement
page) on each GSCI Business Day
between 4 p.m. and 6 p.m., New York
time.
In light of the rapid development of
electronic trading platforms and the
potential for significant shifts in
liquidity between traditional exchanges
and such platforms, the Index Sponsor
has undertaken a review of both the
procedures for determining the
contracts to be included in the GSCI,
as well as the procedures for evaluating
available liquidity on an intra-year basis
in order to provide GSCI market
participants with efficient access to new
sources of liquidity and the potential for
more efficient trading. In particular, the
Index Sponsor is examining the
conditions under which an instrument
traded on an electronic platform, rather
than a traditional futures contract traded
on a traditional futures exchange,
should be permitted to be included in
the GSCI and how the composition of
the GSCI should respond to rapid
shifts in liquidity between such
instruments and contracts currently
included in the GSCI. Any changes
made to the GSCI composition or
methodology as a result of this
examination will be announced by the
Index Sponsor and provided in a
written statement to any investor upon
request to the calculation agent.
Barclays will not have any obligation to
notify holders of the Notes if the Index
Sponsor changes the composition of the
GSCI, the methodology of calculating
the value of the GSCI or any other
policies of the Index Sponsor relevant to
the Index. However, the Exchange
would have to file a proposed rule
22 Additionally, the intraday index value of the
Index will be updated and disseminated at least
every 15 seconds by a major market data vendor
during the time the Notes trade on the Exchange.
April 13 Telephone Conference. The intraday
information with respect to the Index reported on
Reuters is derived solely from trading prices on the
principal trading markets for the various Index
components. For example, the Index currently
includes contracts traded on ICE Futures (‘‘ICE’’)
and the London Metal Exchange (the ‘‘LME’’), both
of which are located in London and consequently
have trading days that end several hours before
those of the U.S.-based markets on which the rest
of the Index components are traded. During the
portion of the New York trading day when ICE and
LME are closed, the last reported prices for Index
Components traded on ICE or LME are used to
calculate the intraday Index information
disseminated on Reuters.
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14:56 Apr 21, 2006
Jkt 208001
change pursuant to Rule 19b–4,23
seeking Commission approval to
continue trading the Notes. Unless
approved for continued listing, the
Exchange would commence delisting
proceedings.24
Index Disruptions
The Index is determined, calculated
and maintained solely by the Index
Sponsor. If the Index Sponsor
discontinues publication of the Index
and it or any other person or entity
publishes a substitute index that the
calculation agent determines is
comparable to the Index and approves
as a successor index then the
calculation agent will determine the
value of the Index on the applicable
Valuation Date and the amount payable
at maturity or upon redemption by
reference to such successor index.
If the calculation agent determines
that the publication of the Index is
discontinued and that there is no
successor index, or that the closing
value of the Index is not available
because of a market disruption event (as
defined below) or for any other reason,
on the date on which the value of the
Index is required to be determined, or
if for any other reason the Index is not
available to Barclays or the calculation
agent on the relevant date, the
calculation agent will determine the
amount payable by a computation
methodology that the calculation agent
determines will as closely as reasonably
possible replicate the Index.25
If the calculation agent determines
that the Index, the Index components or
the method of calculating the Index has
been changed at any time in any
respect—including any addition,
deletion or substitution and any
reweighting or rebalancing of Index
components, and whether the change is
made by the Index Sponsor under its
existing policies or following a
modification of those policies, is due to
the publication of a successor index, is
due to events affecting one or more of
the Index components, or is due to any
other reason—then the calculation agent
will be permitted (but not required) to
make such adjustments to the Index or
method of calculating the Index as it
believes are appropriate to ensure that
the value of the Index used to determine
23 17
CFR 240.19b–4.
‘‘Continued Listing Criteria,’’ infra. April
10 Telephone Conference.
25 In such case, the Exchange will file a proposed
rule change pursuant to Rule 19b-4 under the Act.
Unless approved for continued trading, the
Exchange would commence delisting proceedings.
See ‘‘Continued Listing Criteria,’’ infra. April 10
Telephone Conference.
24 See
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the amount payable on the maturity date
or upon redemption is equitable.26
The Exchange states that all
determinations and adjustments to be
made by the calculation agent with
respect to the value of the Index and the
amount payable at maturity or upon
redemption or otherwise relating to the
value of the Index may be made by the
calculation agent in its sole discretion.27
The Policy Committee
The Index Sponsor has established a
Policy Committee to assist it with the
operation of the GSCI.28 The principal
purpose of the Policy Committee is to
advise the Index Sponsor with respect
to, among other things, the calculation
of the GSCI, the effectiveness of the
GSCI as a measure of commodity
futures market performance and the
need for changes in the composition or
the methodology of the GSCI. The
Policy Committee acts solely in an
advisory and consultative capacity. All
decisions with respect to the
composition, calculation and operation
of the GSCI and the Index are made by
the Index Sponsor.
The Policy Committee generally meets
in October of each year. Prior to the
meeting, the Index Sponsor determines
the contracts to be included in the
GSCI for the following calendar year
and the weighting factors for each
commodity. The Policy Committee’s
members receive the proposed
composition of the GSCI in advance of
the meeting and discuss the
composition at the meeting. The Index
Sponsor also consults the Policy
Committee on any other significant
matters with respect to the calculation
and operation of the GSCI. The Policy
Committee may, if necessary or
practicable, meet at other times during
the year as issues arise that warrant its
consideration.
The Policy Committee currently
consists of eight persons, three of whom
are employees of the Index Sponsor or
its affiliates and five of whom are not
affiliated with the Index Sponsor.29
26 Id.
27 Id.
28 The component selections for the GSCI would
obviously affect the Index. Telephone conference
between Florence Harmon, Senior Special Counsel,
Division, Commission, and Michael Cavalier,
Assistant General Counsel, Exchange, on April 12,
2006 (‘‘April 12 Telephone Conference’’).
29 The current members of the Policy Committee
who are affiliated with the Index Sponsor are Peter
O’Hagan, Steven Strongin and Laurie Ferber, each
of whom is a Managing Director of Goldman, Sachs
& Co. The current non-affiliated members and their
affiliations are: Richard Redding (Chicago
Mercantile Exchange), Kenneth A. Froot (finance
professor at the Harvard Business School), Dan
Kelly (Harvard Management Company), Jelle
Beenen (PGGM), and Tham Chiew Kit (GIC). As
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Composition of the GSCI
GSCI,
rmajette on PROD1PC67 with NOTICES
In order to be included in the
a contract must satisfy the following
eligibility criteria:
(1) The contract must:
• Be in respect of a physical
commodity (rather than a financial
commodity);
• Have a specified expiration or term,
or provide in some other manner for
delivery or settlement at a specified
time, or within a specified period, in the
future; and
• At any given point in time, be
available for trading at least five months
prior to its expiration or such other date
or time period specified for delivery or
settlement.
(2) The commodity must be the
subject of a contract that:
• Is denominated in U.S. dollars; and
• Is traded on or through an
exchange, facility or other platform
(referred to as a ‘‘trading facility’’) that
has its principal place of business or
operations in a country which is a
member of the Organization for
Economic Cooperation and
Development 30 and:
• Makes price quotations generally
available to its members or participants
(and, if the Index Sponsor is not such
a member or participant, to the Index
Sponsor) in a manner and with a
frequency that is sufficient to provide
reasonably reliable indications of the
level of the relevant market at any given
point in time;
• Makes reliable trading volume
information available to the Index
Sponsor with at least the frequency
required by the Index Sponsor to make
the monthly determinations;
• Accepts bids and offers from
multiple participants or price providers;
and
• Is accessible by a sufficiently broad
range of participants.
(3) The daily contract reference price
for the relevant contract generally must
have been available on a continuous
basis for at least two years prior to the
proposed date of inclusion in the
stated, the Policy Committee are subject to written
policies with respect to material, non-public
information. Telephone conference between
Florence Harmon, Senior Special Counsel, Division,
Commission, and Michael Cavalier, Assistant
General Counsel, Exchange, on April 14, 2006
(‘‘April 14 Telephone Conference with Michael
Cavalier’’).
30 The Organization for Economic Cooperation
and Development has 30 member countries:
Australia, Austria, Belgium, Canada, Czech
Republic, Denmark, Finland, France, Germany,
Greece, Hungary, Iceland, Ireland, Italy, Japan,
Korea, Luxembourg, Mexico, Netherlands, New
Zealand, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden, Switzerland, Turkey,
United Kingdom, and the United States.
VerDate Aug<31>2005
14:56 Apr 21, 2006
Jkt 208001
GSCI. In appropriate circumstances,
however, the Index Sponsor may
determine that a shorter time period is
sufficient or that historical daily
contract reference prices for such
contract may be derived from daily
contract reference prices for a similar or
related contract. The daily contract
reference price may be (but is not
required to be) the settlement price or
other similar price published by the
relevant trading facility for purposes of
margining transactions or for other
purposes.
(4) At and after the time a contract is
included in the GSCI, the daily
contract reference price for such
contract must be published between 10
a.m. and 4 p.m., New York time, on
each GSCI Business Day relating to
such contract by the trading facility on
or through which it is traded and must
generally be available to all members of,
or participants in, such facility (and, if
the Index Sponsor is not such a member
or participant, to the Index Sponsor) on
the same day from the trading facility or
through a recognized third-party data
vendor. Such publication must include,
at all times, daily contract reference
prices for at least one expiration or
settlement date that is five months or
more from the date the determination is
made, as well as for all expiration or
settlement dates during such five-month
period.
(5) Volume data with respect to such
contract must be available for at least
the three months immediately preceding
the date on which the determination is
made.
(6) A contract that is not included in
the GSCI at the time of determination
and that is based on a commodity that
is not represented in the GSCI at such
time must, in order to be added to the
GSCI at such time, have a total dollar
value traded, over the relevant period,
as the case may be and annualized, of
at least U.S. $15 billion. The total dollar
value traded is the dollar value of the
total quantity of the commodity
underlying transactions in the relevant
contract over the period for which the
calculation is made, based on the
average of the daily contract reference
prices on the last day of each month
during the period.
(7) A contract that is already included
in the GSCI at the time of
determination and that is the only
contract on the relevant commodity
included in the GSCI must, in order to
continue to be included in the GSCI
after such time, have a total dollar value
traded, over the relevant period, as the
case may be and annualized, of at least
U.S. $5 billion and at least U.S. $10
billion during at least one of the three
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21069
most recent annual periods used in
making the determination.
(8) A contract that is not included in
the GSCI at the time of determination
and that is based on a commodity on
which there are one or more contracts
already included in the GSCI at such
time must, in order to be added to the
GSCI at such time, have a total dollar
value traded, over the relevant period,
as the case may be and annualized, of
at least U.S. $30 billion.
(9) A contract that is already included
in the GSCI at the time of
determination and that is based on a
commodity on which there are one or
more contracts already included in the
GSCI at such time must, in order to
continue to be included in the GSCI
after such time, have a total dollar value
traded, over the relevant period, as the
case may be and annualized, of at least
U.S. $10 billion and at least U.S. $20
billion during at least one of the three
most recent annual periods used in
making the determination.
(10) A contract that is already
included in the GSCI at the time of
determination must, in order to
continue to be included after such time,
have a reference percentage dollar
weight of at least 0.10%. The reference
percentage dollar weight of a contract is
determined by multiplying the CPW
(defined below) of a contract by the
average of its daily contract reference
prices on the last day of each month
during the relevant period. These
amounts are summed for all contracts
included in the GSCI and each
contract’s percentage of the total is then
determined.
(11) A contract that is not included in
the GSCI at the time of determination
must, in order to be added to the GSCI
at such time, have a reference
percentage dollar weight of at least
1.00%.
(12) In the event that two or more
contracts on the same commodity satisfy
the eligibility criteria, such contracts
will be included in the GSCI in the
order of their respective total quantity
traded during the relevant period
(determined as the total quantity of the
commodity underlying transactions in
the relevant contract), with the contract
having the highest total quantity traded
being included first, provided that no
further contracts will be included if
such inclusion would result in the
portion of the GSCI attributable to such
commodity exceeding a particular level.
If additional contracts could be
included with respect to several
commodities at the same time, that
procedure is first applied with respect
to the commodity that has the smallest
portion of the GSCI attributable to it at
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the time of determination. Subject to the
other eligibility criteria set forth above,
the contract with the highest total
quantity traded on such commodity will
be included. Before any additional
contracts on the same commodity or on
any other commodity are included, the
portion of the GSCI attributable to all
commodities is recalculated. The
selection procedure described above is
then repeated with respect to the
contracts on the commodity that then
has the smallest portion of the GSCI
attributable to it.
Currently, 24 contracts meet the
eligibility requirement for inclusion on
the GSCI.
CONTRACTS INCLUDED IN THE GSCI
FOR 2006, AS OF MARCH 2, 2006
Trading
facility
Commodity
(contract)
CBOT ...
Wheat (Chicago
Wheat).
Wheat (Kansas Wheat).
Corn ..............
Soybeans .....
Coffee ‘‘C’’ ....
Sugar #11 .....
Cocoa ...........
Cotton #2 ......
Lean Hogs ....
Cattle (Live
Cattle).
Cattle (Feeder Cattle).
Oil (No. 2
Heating Oil,
NY).
Oil (Gasoil) ...
Oil (Unleaded
Reg Gas,
NY).
Oil (WTI
Crude Oil).
Oil (Brent
Crude Oil).
Natural Gas ..
High Grade
Primary
Aluminum.
Copper—
Grade A.
Standard
Lead.
Primary Nickel.
Special High
Grade Zinc.
Gold ..............
Silver ............
KCBOT
CBOT ...
CBOT ...
CSCE ...
CSCE ...
CSCE ...
NYBOT
CME .....
CME .....
CME .....
NYMEX
ICE .......
NYMEX
NYMEX
ICE .......
NYMEX
LME .....
LME .....
LME .....
LME .....
LME .....
COMEX
COMEX
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2006 Reference
price dollar weight
(percent)
2.51
1.00
2.35
1.53
0.73
2.06
0.19
0.93
1.49
2.50
.68
8.28
4.49
7.55
30.59
14.79
7.98
3.18
3.09
0.33
0.70
0.88
1.94
0.24
Copyright 2006, The Goldman
Group, Inc. Used by permission.
Sachs
The quantity of each of the contracts
included in the GSCI is determined on
the basis of a five-year average (referred
to as the ‘‘world production average’’) of
the production quantity of the
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14:56 Apr 21, 2006
Jkt 208001
underlying commodity as published by
the United Nations Statistical Yearbook,
the Industrial Commodity Statistics
Yearbook and other official sources.
However, if a commodity is primarily a
regional commodity, based on its
production, use, pricing, transportation
or other factors, the Index Sponsor may
calculate the weight of such commodity
based on regional, rather than world,
production data.
The five-year moving average is
updated annually for each commodity
included in the GSCI, based on the
most recent five-year period (ending
approximately two years prior to the
date of calculation and moving
backwards) for which complete data for
all commodities is available. The
contract production weights (the
‘‘CPW’’) used in calculating the GSCI
are derived from world or regional
production averages, as applicable, of
the relevant commodities, and are
calculated based on the total quantity
traded for the relevant contract and the
world or regional production average, as
applicable, of the underlying
commodity.
However, if the volume of trading in
the relevant contract, as a multiple of
the production levels of the commodity,
is below specified thresholds, the CPW
of the contract is reduced until the
threshold is satisfied. This is designed
to ensure that trading in each such
contract is sufficiently liquid relative to
the production of the commodity.
In addition, the Index Sponsor
performs this calculation on a monthly
basis and, if the multiple of any contract
is below the prescribed threshold, the
composition of the GSCI is
reevaluated, based on the criteria and
weighting procedure described above.
This procedure is undertaken to allow
the GSCI to shift from contracts that
have lost substantial liquidity into more
liquid contracts during the course of a
given year. As a result, it is possible that
the composition or weighting of the
GSCI will change on one or more of
these monthly Valuation Dates. In
addition, regardless of whether any
changes have occurred during the year,
the Index Sponsor reevaluates the
composition of the GSCI at the
conclusion of each year, based on the
above criteria. Other commodities that
satisfy such criteria, if any, will be
added to the GSCI. Commodities
included in the GSCI which no longer
satisfy such criteria, if any, will be
deleted.
The Index Sponsor also determines
whether modifications in the selection
criteria or the methodology for
determining the composition and
weights of and for calculating the GSCI
PO 00000
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are necessary or appropriate in order to
assure that the GSCI represents a
measure of commodity market
performance. The Index Sponsor has the
discretion to make any such
modifications.
Contract Expirations
Because the GSCI is comprised of
actively traded contracts with scheduled
expirations, it can only be calculated by
reference to the prices of contracts for
specified expiration, delivery or
settlement periods, referred to as
‘‘contract expirations.’’ The contract
expirations included in the GSCI for
each commodity during a given year are
designated by the Index Sponsor,
provided that each such contract must
be an ‘‘active contract.’’ An ‘‘active
contract’’ for this purpose is a liquid,
actively traded contract expiration, as
defined or identified by the relevant
trading facility or, if no such definition
or identification is provided by the
relevant trading facility, as defined by
standard custom and practice in the
industry. The relative liquidity of the
various active contracts is one of the
factors that may be taken into
consideration in determining which of
them the Index Sponsor includes in the
GSCI (and thus the Index).
If a trading facility deletes one or
more contract expirations, the GSCI
will be calculated during the remainder
of the year in which such deletion
occurs on the basis of the remaining
contract expirations designated by the
Index Sponsor. If a trading facility
ceases trading in all contract expirations
relating to a particular contract, the
Index Sponsor may designate a
replacement contract on the commodity.
The replacement contract must satisfy
the eligibility criteria for inclusion in
the GSCI. To the extent practicable, the
replacement will be effected during the
next monthly review of the composition
of the index. If that timing is not
practicable, the Index Sponsor will
determine the date of the replacement
and will consider a number of factors,
including the differences between the
existing contract and the replacement
contract with respect to contractual
specifications and contract expirations.
Value of the GSCI
The value of the GSCI on any given
day is equal to the total dollar weight of
the GSCI divided by a normalizing
constant that assures the continuity of
the GSCI over time. The total dollar
weight of the GSCI is the sum of the
dollar weight of each index component.
The dollar weight of each such index
component on any given day is equal to:
• The daily contract reference price,
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• Multiplied by the appropriate
CPWs, and
• During a roll period, the
appropriate ‘‘roll weights’’ (discussed
below).
The daily contract reference price
used in calculating the dollar weight of
each index component on any given day
is the most recent daily contract
reference price made available by the
relevant trading facility, except that the
daily contract reference price for the
most recent prior day will be used if the
exchange is closed or otherwise fails to
publish a daily contract reference price
on that day. In addition, if the trading
facility fails to make a daily contract
reference price available or publishes a
daily contract reference price that, in
the reasonable judgment of the Index
Sponsor, reflects manifest error, the
relevant calculation will be delayed
until the price is made available or
corrected. However, if the price is not
made available or corrected by 4 p.m.
New York time, the Index Sponsor, if it
deems such action to be appropriate
under the circumstances, will determine
the appropriate daily contract reference
price for the applicable futures contract
in its reasonable judgment for purposes
of the relevant GSCI calculation.31
Contract Daily Return
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The contract daily return on any given
day is equal to the sum, for each of the
commodities included in the GSCI, of
the applicable daily contract reference
price on the relevant contract multiplied
by the appropriate CPW and the
appropriate ‘‘roll weight,’’ divided by
the total dollar weight of the GSCI on
the preceding day, minus one.
The ‘‘roll weight’’ of each commodity
reflects the fact that the positions in
contracts must be liquidated or rolled
forward into more distant contract
expirations as they approach expiration.
If actual positions in the relevant
markets were rolled forward, the roll
would likely need to take place over a
period of days. Since the GSCI is
designed to replicate the performance of
actual investments in the underlying
contracts, the rolling process
incorporated in the GSCI also takes
place over a period of days at the
beginning of each month (referred to as
the ‘‘roll period’’). On each day of the
roll period, the ‘‘roll weights’’ of the
31 If such actions by the Index Sponsor are
implemented on more than a temporary basis, the
Exchange will contact the Commission Staff and, as
necessary, file a proposed rule change pursuant to
Rule 19b–4 seeking Commission approval to
continue to trade the Shares. Unless approved for
continued trading, the Exchange would commence
delisting proceedings. See ‘‘Continued Listing
Criteria,’’ infra. April 10 Telephone Conference.
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14:56 Apr 21, 2006
Jkt 208001
first nearby contract expirations on a
particular commodity and the more
distant contract expiration into which it
is rolled are adjusted, so that the
hypothetical position in the contract on
the commodity that is included in the
GSCI is gradually shifted from the first
nearby contract expiration to the more
distant contract expiration.
If on any day during a roll period any
of the following conditions exists, the
portion of the roll that would have taken
place on that day is deferred until the
next day on which such conditions do
not exist:
• No daily contract reference price is
available for a given contract expiration;
• Any such price represents the
maximum or minimum price for such
contract month, based on exchange
price limits (referred to as a ‘‘Limit
Price’’);
• The daily contract reference price
published by the relevant trading
facility reflects manifest error, or such
price is not published by 4 p.m., New
York time. In that event, the Index
Sponsor may, but is not required to,
determine a daily contract reference
price and complete the relevant portion
of the roll based on such price;
provided, that, if the trading facility
publishes a price before the opening of
trading on the next day, the Index
Sponsor will revise the portion of the
roll accordingly; or
• Trading in the relevant contract
terminates prior to its scheduled closing
time.
If any of these conditions exist
throughout the roll period, the roll with
respect to the affected contract, will be
effected in its entirety on the next day
on which such conditions no longer
exist.
Value of the Index
The Exchange now describes the
value of the Index (as opposed to the
above description of the GSCI) which
the Notes are designed to track. The
value of the Index on any GSCI Business
Day is equal to the product of (1) the
value of the Index on the immediately
preceding GSCI Business Day
multiplied by (2) one plus the sum of
the contract daily return and the
Treasury Bill return on the GSCI
Business Day on which the calculation
is made multiplied by (3) one plus the
Treasury Bill return for each non-GSCI
Business Day since the immediately
preceding GSCI Business Day. The
Treasury Bill return is the return on a
hypothetical investment in the GSCI at
a rate equal to the interest rate on a
specified U.S. Treasury Bill. The initial
value of the GSCI was normalized such
PO 00000
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21071
that the hypothetical level of the Index
on January 2, 1970 was 100.
Historical Performance
While the following historical
performance table is based on the
selection criteria and methodology
described herein, the Index was not
actually calculated and published prior
to May 1, 1991. Accordingly, the
following table illustrates:
(i) On a hypothetical basis, how the
Index would have performed from
January 2, 1970 to January 2, 1991 based
on the selection criteria and
methodology described above; and
(ii) On an actual basis, how the Index
has performed from January 2, 1992
onwards.
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
2,
4,
3,
2,
2,
2,
2,
3,
3,
2,
2,
2,
4,
3,
3,
3,
2,
2,
4,
3,
2,
2,
2,
4,
3,
3,
2,
2,
2,
4,
3,
2,
2,
2,
2,
3,
3,
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
....................
100.00
115.78
138.90
198.45
354.32
478.50
400.02
351.05
390.02
515.25
692.40
764.66
593.61
657.98
747.23
760.67
833.67
868.83
1,105.18
1,371.33
1,937.46
2,346.03
2,304.20
2,371.27
2,111.22
2,185.21
2,711.25
3,591.15
3,019.39
1,992.32
2,766.77
4,022.43
2,891.27
3,819.38
4,520.70
5,173.25
6,729.99
The historical performance of the
Index should not be taken as an
indication of future performance, and
no assurance can be given that the value
of the Index will increase sufficiently to
cause holders of the Note receive a
payment at maturity or upon
redemption equal to or in excess of the
principal amount of such Notes.
Continued Listing Criteria
The Exchange prohibits the initial
and/or continued listing of any security
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21072
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that is not in compliance with Rule
10A–3 under the Act.32
The Exchange will delist the Notes:
• If, following the initial twelve
month period from the date of
commencement of trading of the Notes,
the Notes have more than 60 days
remaining until maturity and (i) there
are fewer than 50 beneficial holders of
the Notes for 30 or more consecutive
trading days; (ii) if fewer than 50,000
Notes remain issued and outstanding; or
(iii) if the market value of all
outstanding Notes is less than
$1,000,000;
• If the Index value ceases to be
calculated or available during the time
the Notes trade on the Exchange on at
least every 15 second basis through one
or more major market data vendors; 33
• If, during the time the Notes trade
on the Exchange, the Indicative Value
ceases to be available on 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.
Additionally, the Exchange will file a
proposed rule change pursuant to Rule
19b–4 under the Act 34 seeking approval
to continue trading the Notes and unless
approved, the Exchange will commence
delisting the Notes if:
• The Index Sponsor substantially
changes either the Index component
selection methodology or the weighting
methodology;
• If a new component is added to the
Index (or pricing information is used for
a new or existing component) that
constitutes more than 10% of the weight
of the Index with whose principal
trading market the Exchange does not
have a comprehensive surveillance
sharing agreement; 35 or
• If a successor or substitute index is
used in connection with the Notes. The
filing will address, among other things
the listing and trading characteristics of
the successor or substitute index and
the Exchange’s surveillance procedures
applicable thereto.
Trading Rules
The Exchange’s existing equity
trading rules will apply to trading of the
Notes. The Notes will trade between the
hours of 9:30 a.m. and 4 p.m. New York
32 17
CFR 240.10A–3; see also 15 U.S.C. 78a.
Exchange confirmed that the Index value
(along with the GSCI index value) will be
disseminated at least every 15 seconds by one or
more major market data vendors during the time the
Notes trade on the Exchange. The Exchange also
confirmed these indexes have daily settlement
values that are widely disclosed. April 13
Telephone Conference.
34 17 CFR 240.19b–4.
35 April 10 Telephone Conference.
rmajette on PROD1PC67 with NOTICES
33 The
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14:56 Apr 21, 2006
Jkt 208001
time and will be subject to the equity
margin rules of the Exchange.36
(1) Trading Halts
The Exchange will cease trading the
Notes if there is a halt or disruption in
the dissemination of the Index value or
the Indicative Value.37 The Exchange
will also cease trading the Notes if a
‘‘market disruption event’’ occurs that is
of more than a temporary nature.38 In
the event that the Exchange is open for
business on a day that is not a GSCI
Business Day, the Exchange will not
permit trading of the Notes on that day.
(2) Specialist Trading Obligations
Pursuant to new Supplementary
Material .10 to NYSE Rule 1301B, the
provisions of NYSE Rules 1300B(b) and
1301B would be applied to certain
securities listed on the Exchange
pursuant to section 703.19 (‘‘Other
Securities’’) of the Exchange’s Manual.
Specifically, NYSE Rules 1300B(b) and
1301B will apply to securities listed
under section 703.19 of the Manual
where the price of such securities is
based in whole or part on the price of
(a) a commodity or commodities; (b) any
futures contracts or other derivatives
based on a commodity or commodities;
or (c) any index based on either (a) or
(b) above.
As a result of application of NYSE
Rule 1300B(b), the specialist in the
Notes, the specialist’s member
organization and other specified persons
will be prohibited under paragraph (m)
of NYSE Rule 105 Guidelines from
acting as market maker or functioning in
any capacity involving market-making
responsibilities in the Index
components, the commodities
underlying the Index components, or
options, futures or options on futures on
the Index, or any other derivatives
(collectively, ‘‘derivative instruments’’)
based on the Index or based on any
Index component or any physical
commodity underlying an Index
component. If the member organization
acting as specialist in the Notes is
entitled to an exemption under NYSE
Rule 98 from paragraph (m) of NYSE
Rule 105 Guidelines, then that member
organization could act in a market
making capacity in the Index
components, the commodities
36 See
NYSE Rule 431.
the event the Index value or Indicative Value
is no longer calculated or disseminated, the
Exchange would immediately contact the
Commission to discuss measures that may be
appropriate under the circumstances.
38 In the event a ‘‘market disruption event’’ occurs
that is of more than a temporary nature, the
Exchange would immediately contact the
Commission to discuss measures that may be
appropriate under the circumstances.
37 In
PO 00000
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Fmt 4703
Sfmt 4703
underlying the Index components, or
derivative instruments based on the
Index or based on any Index component
or commodity underlying an Index
component, other than as a specialist in
the Notes themselves, in another market
center.
Under NYSE Rule 1301B(a), the
member organization acting as specialist
in the Notes (1) will be obligated to
conduct all trading in the Notes in its
specialist account, (subject only to the
ability to have one or more investment
accounts, all of which must be reported
to the Exchange), (2) will be required to
file with the Exchange and keep current
a list identifying all accounts for trading
in the Index components or the physical
commodities underlying the Index
components, or derivative instruments
based on the Index or based on the
Index components or the physical
commodities underlying the Index
components, which the member
organization acting as specialist may
have or over which it may exercise
investment discretion, and (3) will be
prohibited from trading in the Index
components or the physical
commodities underlying the Index
components, or derivative instruments
based on the Index or based on the
Index components or the physical
commodities underlying the Index
components, in an account in which a
member organization acting as
specialist, controls trading activities
which have not been reported to the
Exchange as required by NYSE Rule
1301B.
Under NYSE Rule 1301B(b), the
member organization acting as specialist
in the Notes will be required to make
available to the Exchange such books,
records or other information pertaining
to transactions by the member
organization and other specified persons
for its or their own accounts in the
Index components or the physical
commodities underlying the Index
components, or derivative instruments
based on the Index or based on the
Index components or the physical
commodities underlying the Index
components, as may be requested by the
Exchange. This requirement is in
addition to existing obligations under
Exchange rules regarding the production
of books and records.
Under NYSE Rule 1301B(c), in
connection with trading the Index
components or the physical
commodities underlying the Index
components, or derivative instruments
based on the Index or based on the
Index components or the physical
commodities underlying the Index
components, the specialist could not
use any material nonpublic information
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Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / Notices
received from any person associated
with a member or employee of such
person regarding trading by such person
or employee in the Index components or
the physical commodities underlying
the Index components, or derivative
instruments based on the Index or based
on the Index components or the
physical commodities underlying the
Index components.
rmajette on PROD1PC67 with NOTICES
Surveillance
The Exchange represents that its
surveillance procedures are adequate to
properly monitor the trading of the
Notes and the Index components. The
Exchange will rely upon existing NYSE
surveillance procedures governing
equities with respect to surveillance of
the Notes. The Exchange believes that
these procedures are adequate to
monitor Exchange trading of the Notes
and to detect violations of Exchange
rules, consequently deterring
manipulation. In this regard, the
Exchange currently has the authority
under NYSE Rule 476 to request the
Exchange specialist in the Notes to
provide NYSE Regulation with
information that the specialist uses in
connection with pricing the Notes on
the Exchange, including specialist
proprietary or other information
regarding securities, commodities,
futures, options on futures or other
derivative instruments. The Exchange
believes it also has authority to request
any other information from its
members—including floor brokers,
specialists and ‘‘upstairs’’ firms—to
fulfill its regulatory obligations.
With regard to the Index components,
the Exchange can obtain market
surveillance information, including
customer identity information, with
respect to transactions occurring on the
New York Mercantile Exchange
(‘‘NYMEX’’), the Kansas City Board of
Trade, ICE, and the LME, pursuant to its
comprehensive information sharing
agreements with each of those
exchanges. All of the other trading
venues on which current Index
components are traded are members of
the Intermarket Surveillance Group
(‘‘ISG’’), and the Exchange therefore has
access to all relevant trading
information with respect to those
contracts without any further action
being required on the part of the
Exchange. All these surveillance
arrangements constitute comprehensive
surveillance sharing arrangements.39
39 April 14 Telephone Conference with John
Carey.
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14:56 Apr 21, 2006
Jkt 208001
Suitability
Pursuant to NYSE Rule 405, the
Exchange will impose a duty of due
diligence on its members and member
firms to learn the essential facts relating
to every customer prior to trading the
Notes.40 With respect to suitability
recommendations and risks, the
Exchange will require members,
member organizations and employees
thereof recommending a transaction in
the Notes: (1) To determine that such
transaction is suitable for the customer,
and (2) to have a reasonable basis for
believing that the customer can evaluate
the special characteristics of, and is able
to bear the financial risks of, such
transaction.
Information Memorandum
The Exchange will, prior to trading
the Notes, distribute an information
memorandum to the membership
providing guidance with regard to
member firm compliance
responsibilities (including suitability
recommendations) when handling
transactions in the Notes. The
information memorandum will note to
members language in the prospectus
used by Barclays in connection with the
sale of the Notes regarding prospectus
delivery requirements for the Notes.
Specifically, in the initial distribution of
the Notes,41 and during any subsequent
distribution of the Notes, NYSE
members will deliver a prospectus to
investors purchasing from such
distributors.42
The information memorandum will
discuss the special characteristics and
risks of trading this type of security.
Specifically, the information
memorandum, among other things, will
discuss what the Notes are, how the
Notes are redeemed, applicable
Exchange rules, dissemination of
information regarding the Index value
and the Indicative Value, trading
information and applicable suitability
rules.
The information memorandum will
also notify members and member
organizations about the procedures for
redemptions of Notes and that Notes are
not individually redeemable but are
redeemable only in aggregations of at
least 50,000 Notes.
The information memorandum will
also reference the fact that there is no
regulated source of last sale information
40 NYSE Rule 405 requires that every member,
member firm or member corporation use due
diligence to learn the essential facts relative to
every customer and to every order or account
accepted.
41 The Registration Statement reserves the right to
do subsequent distributions of these Notes.
42 April 10 Telephone Conference.
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Sfmt 4703
21073
regarding physical commodities and
that the SEC has no jurisdiction over the
trading of physical commodities such as
aluminum, gold, crude oil, heating oil,
corn and wheat, or the futures contracts
on which the value of the Notes is
based, and that the CFTC has no
regulatory jurisdiction over the trading
of certain foreign based futures
contracts.43
The information memorandum will
also discuss other exemptive or noaction relief under the Act provided by
the Commission staff.44
2. Statutory Basis
The Exchange believes that the basis
under the Act for this proposed rule
change is the requirement under section
6(b)(5) 45 that an exchange have rules
that are designed to prevent fraudulent
and manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
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
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the NYSE consents, the
Commission will:
(A) By order approve such proposed
rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
The Commission is considering
granting accelerated approval of the
43 April 14 Telephone Conference with John
Carey.
44 April 10 Telephone Conference.
45 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 71, No. 78 / Monday, April 24, 2006 / Notices
proposed rule change at the end of a 15day comment period.46
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.47
Nancy M. Morris,
Secretary.
[FR Doc. E6–6073 Filed 4–21–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
• 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–NYSE–2006–20 on the
subject line.
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto To List and
Trade Shares of the iShares GSCI
Commodity Indexed Trust Under New
Rules 1300B and 1301B, et seq.
Paper Comments
rmajette on PROD1PC67 with NOTICES
Electronic Comments
[Release No. 34–53659; File No. SR–NYSE–
2006–17]
April 17, 2006.
• 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–NYSE–2006–20. 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 NYSE. 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–NYSE–2006–20 and should
be submitted on or before May 9, 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 March 7,
2006, the New York Stock Exchange
LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which items
have been prepared by the NYSE. On
March 24, 2006, the Exchange filed
Amendment No. 1 to the proposed rule
change.3 The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons.
46 The NYSE has requested accelerated approval
of this proposed rule change prior to the 30th day
after the date of publication of the notice of the
filing thereof, following the conclusion of a 15-day
comment period. April 10 Telephone Conference.
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14:56 Apr 21, 2006
Jkt 208001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE proposes to list and trade
under new NYSE Rules 1300B, et seq.
shares (‘‘Commodity Trust Shares’’ or
47 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, the NYSE made some
technical and clarifying changes. In addition, the
Exchange added Supplementary Material .10 to its
proposed Rule 1301B, applying the provisions of its
proposed Rules 1300B(b) and 1301B to certain
securities listed on the Exchange pursuant to
section 703.19 (‘‘Other Securities’’) of the NYSE
Listed Company Manual, in addition to the
securities in this proposal. Specifically, NYSE Rules
1300B(b) and 1301B would apply to securities
listed under section 703.19 where the price of such
securities is based in whole or part on the price of
a commodity or commodities, a commodities index,
or any futures contracts or other derivatives based
thereon. Examples of the securities to which these
securities will apply are the subjects of File No. SR–
NYSE–2006–16 (proposal to list and trade IndexLinked Securities of Barclays Bank PLC (‘‘Notes’’)
linked to the performance of the Dow Jones-AIG
Commodity Index Total Return TM and File No. SR–
NYSE–2006–20 (proposal to list and trade Notes
linked to the performance of GSCI Total Return
Index).
1 15
PO 00000
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Fmt 4703
Sfmt 4703
‘‘Shares’’) of the iShares GSCI
Commodity—Indexed Trust (‘‘Trust’’),
which will issue units of beneficial
interest representing fractional
undivided beneficial interests in the net
assets of the Trust. NYSE Rules 1300B
and 1301B are set forth below, with new
text underlined:
Rule 1300B
Commodity Trust Shares
(a) The provisions of this Rule 1300B
series apply only to Commodity Trust
Shares. The term ‘‘Commodity Trust
Shares’’ as used in this Rule and in Rule
1301B means a security that (a) is
issued by a trust (‘‘Trust’’) which (i) is
a commodity pool that is managed by a
commodity pool operator registered as
such with the Commodity Futures
Trading Commission, and (ii) which
holds positions in futures contracts on
a specified commodity index, or
interests in a commodity pool which, in
turn, holds such positions; (b) when
aggregated in some specified minimum
number may be surrendered to the Trust
by the beneficial owner to receive
positions in futures contracts on a
specified index and cash or short term
securities. The term ‘‘futures contract’’
is commonly known as a ‘‘contract of
sale of a commodity for future delivery’’
set forth in section 2(a) of the
Commodity Exchange Act. While
Commodity Trust Shares are not
technically Investment Company Units
and thus are not covered by Rule 1100,
all other rules that reference
‘‘Investment Company Units,’’ as
defined and used in Para. 703.16 of the
Listed Company Manual, including, but
not limited to Rules 13, 36.30, 98, 104,
460.10, 1002, and 1005 shall also apply
to Commodity Trust Shares. When these
rules reference Investment Company
Units, the word ‘‘index’’ (or derivative or
similar words) will be deemed to be the
applicable commodity index and the
word ‘‘security’’ (or derivative or similar
words) will be deemed to be
‘‘Commodity Trust Shares’’.
(b) As is the case with Investment
Company Units, paragraph (m) of the
Guidelines to Rule 105 shall also apply
to Commodity Trust Shares.
Specifically, Rule 105(m) shall be
deemed to prohibit an equity specialist,
his member organization, other member,
allied member or approved person in
such member organization or officer or
employee thereof from acting as a
market maker or functioning in any
capacity involving market-making
responsibilities in the physical
commodities included in, or options,
futures or options on futures on, the
index underlying an issue of Commodity
E:\FR\FM\24APN1.SGM
24APN1
]]>Agencies
[Federal Register Volume 71, Number 78 (Monday, April 24, 2006)]
[Notices]
[Pages 21064-21074]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-6073]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53658; File No. SR-NYSE-2006-20]
Self-Regulatory Organizations; New York Stock Exchange, LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to
List and Trade Index-Linked Securities of Barclays Bank PLC Linked to
the Performance of the GSCI[supreg] Total Return Index
April 14, 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 March 13, 2006 the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the
[[Page 21065]]
Securities and Exchange Commission (``Commission'' or ``SEC'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. On March 27, 2006, NYSE filed
Amendment No. 1 to the proposed rule change.\3\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange notes a proposed
Supplementary Material to Rule 1301B in SR-NYSE-2006-17, which sets
forth guidelines for specialists applicable to this product.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NYSE proposes to list and trade Index-Linked Securities (the
``Notes'') of Barclays Bank PLC (``Barclays'') linked to the
performance of the GSCI[supreg] Total Return Index (the ``Index''). The
text of the proposed rule change is available on the Exchange's Web
site (https://www.nyse.com), at the principal office of the Exchange,
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 NYSE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The NYSE 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Notes
Under section 703.19 of the NYSE Listed Company Manual (the
``Manual''), the Exchange may approve for listing and trading
securities not otherwise covered by the criteria of sections 1 and 7 of
the Manual, provided the issue is suited for auction market trading.\4\
The Exchange proposes to list and trade, under section 703.19 of the
Manual, the Notes, which are linked to the performance of the Index.
Barclays intends to issue the Notes under the name ``iPath \SM\
Exchange-Traded Notes.'' \5\
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\4\ See Securities Exchange Act Release No. 28217 (July 18,
1990), 55 FR 30056 (July 24, 1990) (SR-NYSE-90-30).
\5\ Goldman, Sachs & Co. and Barclays have entered into a
license agreement granting to Barclays a non-transferable, non-
exclusive license to use the Goldman Sachs Commodity Index[supreg]
or any sub-indices (individually and collectively, the ``GSCI
[supreg]'') in connection with the Notes. Goldman, Sachs & Co. or
any of its affiliates or subsidiaries, individually or collectively,
are referred to as the ``Index Sponsor.''
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The Exchange believes that the Notes will conform to the initial
listing standards for equity securities under section 703.19 of the
Manual, as Barclays is an affiliate of Barclays PLC,\6\ an Exchange
listed company in good standing, the Notes will have a minimum life of
one year, the minimum public market value of the Notes at the time of
issuance will exceed $4 million, there will be at least one million
Notes outstanding, and there will be at least 400 holders at the time
of issuance.
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\6\ The issuer of the Notes, Barclays, is an affiliate of an
Exchange-listed company (Barclays PLC) and not an Exchange-listed
company itself. However, Barclays, though an affiliate of Barclays
PLC, would exceed the Exchange's earnings and minimum tangible net
worth requirements in section 102. Additionally, the Exchange states
that the Notes when combined with the original issue price of all
other Note offerings of the issuer that are listed on a national
securities exchange (or association) does not exceed 25% of the
issuer's net worth. Telephone conference between Florence E. Harmon,
Senior Special Counsel, Division of Market Regulation
(``Division''), Commission, and John Carey, Assistant General
Counsel, Exchange, on April 11, 2006 (``April 11 Telephone
Conference'').
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The Notes are a series of medium-term debt securities of Barclays
that provide for a cash payment at maturity or upon earlier exchange at
the holder's option, based on the performance of the Index subject to
the adjustments described below. The principal amount of each Note is
expected to be $50. The Notes will trade on the Exchange's equity
trading floor, and the Exchange's existing equity trading rules will
apply to trading in the Notes. The Notes will not have a minimum
principal amount that will be repaid and, accordingly, payment on the
Notes prior to or at maturity may be less than the original issue price
of the Notes. In fact, the value of the Index must increase for the
investor to receive at least the $50 principal amount per Note at
maturity or upon exchange or redemption. If the value of the Index
decreases or does not increase sufficiently to offset the investor fee
(described below), the investor will receive less, and possibly
significantly less, than the $50 principal amount per Note. In
addition, holders of the Notes will not receive any interest payments
from the Notes. The Notes are expected to have a term of 30 years. The
Notes are not callable.\7\
---------------------------------------------------------------------------
\7\ April 11 Telephone Conference.
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Holders who have not previously redeemed their Notes will receive a
cash payment at maturity equal to the principal amount of their Notes
times the index factor on the Final Valuation Date (as defined below)
minus the investor fee on the Final Valuation Date. The ``index
factor'' on any given day will be equal to the closing value of the
Index on that day divided by the initial index level. The index factor
on the Final Valuation Date will be equal to the final index level
divided by the initial index level. The ``initial index level'' is the
closing value of the Index on the date of issuance of the Notes (the
``Trade Date''), and the ``final index level'' is the closing value of
the Index on the Final Valuation Date. The investor fee is equal to
0.75% per year times the principal amount of a holder's Notes times the
index factor, calculated on a daily basis in the following manner: the
investor fee on the Trade Date will equal zero. On each subsequent
calendar day until maturity or early redemption, the investor fee will
increase by an amount equal to 0.75% times the principal amount of a
holder's Notes times the index factor on that day (or, if such day is
not a trading day, the index factor on the immediately preceding
trading day) divided by 365. The investor fee is the only fee holders
will be charged in connection with their ownership of the Notes.
Prior to maturity, holders may, subject to certain restrictions,
redeem their Notes on any Redemption Date (defined below) during the
term of the Notes provided that they present at least 50,000 Notes for
redemption, or they act through a broker or other financial
intermediaries (such as a bank or other financial institution not
required to register as a broker-dealer to engage in securities
transactions) that are willing to bundle their Notes for redemption
with other investors' Notes. If a holder chooses to redeem such
holder's Notes on a Redemption Date, such holder will receive a cash
payment on such date equal to the principal amount of such holder's
Notes times the index factor on the applicable Valuation Date minus the
investor fee on the applicable Valuation Date. A ``Redemption Date'' is
the third business day following a Valuation Date (other than the Final
Valuation Date (defined below)). A ``Valuation Date'' is each Thursday
from the first Thursday after issuance of the Notes until the last
Thursday before maturity of the Notes (the ``Final Valuation Date'')
inclusive (or, if such date is not a trading day,\8\
[[Page 21066]]
the next succeeding trading day), unless the calculation agent
determines that a market disruption event, as described below, occurs
or is continuing on that day.\9\ In that event, the Valuation Date for
the maturity date or corresponding Redemption Date, as the case may be,
will be the first following trading day on which the calculation agent
determines that a market disruption event does not occur and is not
continuing. In no event, however, will a Valuation Date be postponed by
more than five trading days.
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\8\ A ``trading day'' is a day on which (i) the value of the
Index is published by the Index Sponsor, (ii) trading is generally
conducted on the Exchange, and (iii) trading is generally conducted
on the markets on which the futures contracts underlying the
GSCI[supreg] are traded, in each case as determined by the
calculation agent in its sole discretion.
\9\ Barclays will serve as the initial calculation agent.
---------------------------------------------------------------------------
Any of the following will be a market disruption event: (i) A
material limitation, suspension or disruption in the trading of any
Index component that results in a failure by the trading facility on
which the relevant contract is traded to report a daily contract
reference price (i.e., the price of the relevant contract that is used
as a reference or benchmark by market participants);\10\ (ii) the daily
contract reference price for any Index component is a ``limit price,''
which means that the daily contract reference price for such contract
has increased or decreased from the previous day's daily contract
reference price by the maximum amount permitted under the applicable
rules or procedures of the relevant trading facility; (iii) failure by
the Index Sponsor to publish the closing value of the Index or of the
applicable trading facility or other price source to announce or
publish the daily contract reference price for one or more Index
components; or (iv) any other event, if the calculation agent
determines in its sole discretion that the event materially interferes
with Barclays' ability or the ability of any of Barclays' affiliates to
unwind all or a material portion of a hedge with respect to the Notes
that Barclays or Barclays' affiliates have effected or may effect as
described herein in connection with the sale of the Notes.\11\
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\10\ The ``daily contract reference price'' with respect to each
contract expiration and contract is the price of the relevant
contract, expressed in U.S. dollars, that is generally used by
participants in the related cash or over-the-counter market as a
benchmark for transactions related to such contract. The daily
contract reference price may, but is not required to, be the price
(i) used by such trading facility or related clearing facility to
determine the margin obligations (if any) of its members or
participants or (ii) referred to generally as the reference, closing
or settlement price of the relevant contract. If a trading facility
publishes a daily settlement price for a particular contract
expiration, such settlement price will generally serve as the daily
contract reference price for such contract expiration unless, in the
reasonable judgment of the Index Sponsor, in consultation with the
Policy Committee, such settlement price does not satisfy the
criteria set forth in this definition. The daily contract reference
price of a contract may be determined and published either by the
relevant trading facility or by one or more third parties.
\11\ If a ``market disruption event'' is of more than a
temporary nature, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act. Unless approved for continued
trading, the Exchange would commence delisting proceedings. See
``Continued Listing Criteria,'' infra. Telephone conference between
Florence Harmon, Senior Special Counsel, Division, Commission; John
Carey, Assistant General Counsel, Exchange; and Michael Cavalier,
Assistant General Counsel, Exchange, on April 10, 2006 (``April 10
Telephone Conference'').
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If a Valuation Date is postponed by five trading days, that fifth
day will nevertheless be the date on which the value of the Index will
be determined by the calculation agent. In such an event, the
calculation agent will make a good faith estimate in its sole
discretion of the value of the Index.
To redeem their Notes, holders must instruct their broker or other
person through whom they hold their Notes to take the following steps:
Deliver a notice of redemption to Barclays via email by no
later than 11 a.m. New York time on the business day prior to the
applicable Valuation Date. If Barclays receives such notice by the time
specified in the preceding sentence, it will respond by sending the
holder a confirmation of redemption;
Deliver the signed confirmation of redemption to Barclays
via facsimile in the specified form by 4 p.m. New York time on the same
day. Barclays must acknowledge receipt in order for the confirmation to
be effective; and
Transfer such holder's book-entry interest in its Notes to
the trustee, The Bank of New York, on Barclays' behalf at or prior to
10 a.m. New York time on the applicable Redemption Date (the third
business day following the Valuation Date).\12\
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\12\ April 10 Telephone Conference.
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If holders elect to redeem their Notes, Barclays may request that
Barclays Capital Inc. (a broker-dealer) purchase the Notes for the cash
amount that would otherwise have been payable by Barclays upon
redemption. In this case, Barclays will remain obligated to redeem the
Notes if Barclays Capital Inc. fails to purchase the Notes. Any Notes
purchased by Barclays Capital Inc. may remain outstanding.
If an event of default occurs and the maturity of the Notes is
accelerated Barclays will pay the default amount in respect of the
principal of the Notes at maturity. The default amount for the Notes on
any day will be an amount, determined by the calculation agent in its
sole discretion, equal to the cost of having a qualified financial
institution, of the kind and selected as described below, expressly
assume all Barclays' payment and other obligations with respect to the
Notes as of that day and as if no default or acceleration had occurred,
or to undertake other obligations providing substantially equivalent
economic value to the holders of the Notes with respect to the Notes.
That cost will equal:
The lowest amount that a qualified financial institution
would charge to effect this assumption or undertaking, plus
The reasonable expenses, including reasonable attorneys'
fees, incurred by the holders of the Notes in preparing any
documentation necessary for this assumption or undertaking.\13\
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\13\ Additional information about the default provisions of the
Notes is provided in the Exchange's Form 19b-4 and Barclays Bank PLC
Registration Statement Form F-3 (333-126811), as amended by
Amendment No. 1 on September 11, 2005.
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Indicative Value
An intraday ``Indicative Value'' meant to approximate the intrinsic
economic value of the Notes will be calculated and published via the
facilities of the Consolidated Tape Association (``CTA'') every 15
seconds throughout the NYSE trading day on each day on which the Notes
are traded on the Exchange.\14\ Additionally, Barclays or an affiliate
will calculate and publish the closing Indicative Value of the Notes on
each trading day at www.ipathetn.com. In connection with the Notes, the
term ``Indicative Value'' refers to the value at a given time
determined based on the following equation:
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\14\ The Indicative Value calculation will be provided for
reference purposes only. It is not intended as a price or quotation,
or as an offer or solicitation for the purchase, sale, redemption or
termination of the Notes, nor does it reflect hedging or transaction
costs, credit considerations, market liquidity, or bid-offer
spreads. Published Index levels from the index sponsors may
occasionally be subject to delay or postponement. Any such delays or
postponements will affect the Current Index Level and therefore the
Indicative Value of the Notes. Index levels provided by the index
sponsors will not necessarily reflect the depth and liquidity of the
underlying commodities markets. For this reason and others, the
actual trading price of the Notes may be different from their
Indicative Value.
Indicative Value = Principal Amount per Unit X (Current Index Level
---------------------------------------------------------------------------
Initial Index Level)--Current Investor Fee
where:
Principal Amount per Unit = $50.
Current Index Level = The most recent published level of the Index as
reported by the Index Sponsor.
Initial Index Level = The Index level on the trade date for the Notes.
[[Page 21067]]
Current Investor Fee = The most recent daily calculation of the
investor fee with respect to the Notes, determined as described above
(which, during any trading day, will be the investor fee determined on
the preceding calendar day).
The Indicative Value will not reflect price changes to the price of
an underlying commodity between the close of trading of the futures
contract at the relevant futures exchange and the close of trading on
the NYSE at 4 p.m. New York time.\15\ The value of the Notes may
accordingly be influenced by non-concurrent trading hours between the
NYSE and the various futures exchanges on which the futures contracts
based on the Index commodities are traded. While the Notes will trade
on the NYSE from 9:30 a.m. to 4 p.m. New York time, the table below
lists the trading hours for each of the Index components.\16\
---------------------------------------------------------------------------
\15\ April 10 Telephone Conference.
\16\ Id.
CBOT:
Corn.................................... 10:30 a.m.-2:15 p.m.
Soybeans................................ 10:30 a.m.-2:15 p.m.
Wheat................................... 10:30 a.m.-2:15 p.m.
CME:
Feeder Cattle........................... 10:05 a.m.-2 p.m.
Lean Hogs............................... 10:10 a.m.-2 p.m.
Live Cattle............................. 10:05 a.m.-2 p.m.
COMEX:
Gold.................................... 8:20 a.m.-1:30 p.m.
Silver.................................. 8:25 a.m.-1:25 p.m.
CSCE:
Coffee.................................. 9:15 a.m.-12:30 p.m.
Cocoa................................... 8 a.m.-11:50 a.m.
Sugar 11....................... 9 a.m.-12 p.m.
ICE Futures:
Brent Crude Oil......................... 8 p.m.-5 p.m.
Gas Oil................................. 8 p.m.-5 p.m.
KCBOT:
Kansas Wheat............................ 10:30 a.m.-2:15 p.m.
NYBOT:
Cotton 2....................... 10:30 a.m.-2:15 p.m.
NYMEX:
Heating Oil............................. 10:05 a.m.-2:30 p.m.
Natural Gas............................. 10 a.m.-2:30 p.m.
Unleaded Gasoline....................... 10:05 a.m.-2:30 p.m.
WTI Crude Oil........................... 10 a.m.-2:30 p.m.
LME:
Aluminum................................ 6:55 a.m.-12 p.m.
Copper.................................. 7 a.m.-12 p.m.
Lead.................................... 7:05 a.m.-11:50 a.m.
Nickel.................................. 7:15 a.m.-11:55 a.m.
Zinc.................................... 7:10 a.m.-11:55 a.m.
While the market for futures trading for each of the Index
commodities is open, the Indicative Value can be expected to closely
approximate the redemption value of the Notes. However, during NYSE
trading hours when the futures contracts have ceased trading, spreads
and resulting premiums or discounts may widen, and therefore, increase
the difference between the price of the Notes and their redemption
value. The Indicative Value disseminated during NYSE trading hours
should not be viewed as a real time update of the redemption value.
Description of the Index
The Exchange states that all disclosure in this filing regarding
the Index and the GSCI[supreg] is derived from publicly available
information. The GSCI is a separate index from the Index; however, the
value of the Index is derived from the GSCI, as described below.\17\
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\17\ Telephone conference between Florence E. Harmon, Senior
Special Counsel, Division, Commission, and John Carey, Assistant
General Counsel, Exchange, on April 14, 2006 (``April 14 Telephone
Conference with John Carey''). See also footnote 5, supra.
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The Index was established in May 1991, and is designed to be a
diversified benchmark for physical commodities as an asset class. The
Index reflects the excess returns that are potentially available
through an unleveraged investment in the contracts comprising the
GSCI[supreg] plus the Treasury Bill rate of interest that could be
earned on funds committed to the trading of the underlying
contracts.\18\ The value of the Index, on any given day, reflects (i)
the price levels of the contracts included in the GSCI[supreg] (which
represents the value of the GSCI[supreg]); (ii) the ``contract daily
return,'' which is the percentage change in the total dollar weight of
the GSCI[supreg] from the previous day to the current day; and (iii)
the Treasury Bill rate of interest that could be earned on funds
committed to the trading of the underlying contracts.
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\18\ The Treasury Bill rate of interest used for purposes of
calculating the index on any day is the 91-day auction high rate for
U.S. Treasury Bills, as reported on Telerate page 56, or any
successor page, on the most recent of the weekly auction dates prior
to such day.
---------------------------------------------------------------------------
Because the value of the Index reflects the futures contracts
included in the GSCI, the Exchange below describes the index
methodology for the GSCI. The GSCI[supreg], upon which the Index is
based, is a proprietary index on a production-weighted basket of
futures contracts on physical commodities traded on trading facilities
in major industrialized countries.\19\ The GSCI[supreg] is designed to
be a measure of the performance over time of the markets for these
commodities. The only commodities represented in the GSCI[supreg] are
those physical commodities on which active and liquid contracts are
traded on trading facilities in major industrialized countries. The
commodities represented in the GSCI[supreg] are weighted, on a
production basis, to reflect their relative significance (in the view
of the Index Sponsor, in consultation with the Policy Committee) to the
world economy. The fluctuations in the value of the GSCI[supreg] are
intended generally to correlate with changes in the prices of such
physical commodities in global markets. The value of the GSCI[supreg]
has been normalized such that its hypothetical level on January 2, 1970
was 100. Futures contracts on the GSCI[supreg], and options on such
futures contracts, are currently listed for trading on the Chicago
Mercantile Exchange.
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\19\ Futures contracts on physical commodities and commodity
indices are traded on regulated futures exchanges. Futures exchanges
in the United States are subject to regulation by the Commodity
Futures Trading Commission (``CFTC'') and futures markets outside
the United States are generally subject to regulation by comparable
regulatory authorities.
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The contracts to be included in the GSCI[supreg] at any given time
must satisfy several sets of eligibility criteria established by the
Index Sponsor.\20\ First, the Index Sponsor identifies those contracts
that meet the general criteria for eligibility. Second, the contract
volume and weight requirements are applied and the number of contracts
is determined, which serves to reduce the list of eligible contracts.
At that point, the list of designated contracts for the relevant period
is complete. The composition of the GSCI[supreg] is also reviewed on a
monthly basis by the Index Sponsor.\21\
---------------------------------------------------------------------------
\20\ Goldman, Sachs & Co. is the Index Sponsor for both the
Index and the GSCI. Telephone conference between Florence E. Harmon,
Senior Special Counsel, Division, Commission, and Michael Cavalier,
Assistant General Counsel, Exchange, on April 13, 2006 (``April 13
Telephone Conference'').
\21\ The Index Sponsor, Goldman, Sachs & Co., who calculates the
GSCI and thus the Index, is a broker-dealer. The Index Sponsor has
represented to Barclays that it will (i) implement and maintain
procedures reasonably designed to prevent the use and dissemination
by officers and directors of the Index Sponsor, in violation of
applicable laws, rules and regulations, of material non-public
information relating to changes in the composition or method of
computation or calculation of the Index and (ii) periodically check
the application of such procedures as they relate to officers and
directors of the Index Sponsor directly responsible for such
changes. In addition, the Policy Committee members (as described
below) are subject to written policies with respect to material,
non-public information. Telephone conversation between Florence
Harmon, Senior Special Counsel, Division, Commission; John Carey,
Assistant General Counsel, Exchange; and Michael Cavalier, Assistant
General Counsel, Exchange, on April 14, 2006 (``April 14 Telephone
Conference with John Carey and Michael Cavalier'').
---------------------------------------------------------------------------
Set forth below is a summary of the composition of and the
methodology used to calculate the GSCI[supreg] as of this date. The
methodology for determining the composition and weighting of the
GSCI[supreg] and for calculating its value is subject to modification
in a manner consistent with the purposes of the GSCI[supreg], as
described below. The Index Sponsor makes the official calculations of
the GSCI[supreg]. At present, this calculation is performed
continuously
[[Page 21068]]
and is reported on Reuters page GSCI[supreg] (or any successor or
replacement page) and will be updated on Reuters at least every 15
seconds during business hours on each day on which the offices of the
Index Sponsor in New York City are open for business (a ``GSCI Business
Day'').\22\ The settlement price for the Index is also reported on
Reuters page GSCI[supreg] (or any successor or replacement page) on
each GSCI Business Day between 4 p.m. and 6 p.m., New York time.
---------------------------------------------------------------------------
\22\ Additionally, the intraday index value of the Index will be
updated and disseminated at least every 15 seconds by a major market
data vendor during the time the Notes trade on the Exchange. April
13 Telephone Conference. The intraday information with respect to
the Index reported on Reuters is derived solely from trading prices
on the principal trading markets for the various Index components.
For example, the Index currently includes contracts traded on ICE
Futures (``ICE'') and the London Metal Exchange (the ``LME''), both
of which are located in London and consequently have trading days
that end several hours before those of the U.S.-based markets on
which the rest of the Index components are traded. During the
portion of the New York trading day when ICE and LME are closed, the
last reported prices for Index Components traded on ICE or LME are
used to calculate the intraday Index information disseminated on
Reuters.
---------------------------------------------------------------------------
In light of the rapid development of electronic trading platforms
and the potential for significant shifts in liquidity between
traditional exchanges and such platforms, the Index Sponsor has
undertaken a review of both the procedures for determining the
contracts to be included in the GSCI[supreg], as well as the procedures
for evaluating available liquidity on an intra-year basis in order to
provide GSCI[supreg] market participants with efficient access to new
sources of liquidity and the potential for more efficient trading. In
particular, the Index Sponsor is examining the conditions under which
an instrument traded on an electronic platform, rather than a
traditional futures contract traded on a traditional futures exchange,
should be permitted to be included in the GSCI[supreg] and how the
composition of the GSCI[supreg] should respond to rapid shifts in
liquidity between such instruments and contracts currently included in
the GSCI[supreg]. Any changes made to the GSCI[supreg] composition or
methodology as a result of this examination will be announced by the
Index Sponsor and provided in a written statement to any investor upon
request to the calculation agent. Barclays will not have any obligation
to notify holders of the Notes if the Index Sponsor changes the
composition of the GSCI[supreg], the methodology of calculating the
value of the GSCI[supreg] or any other policies of the Index Sponsor
relevant to the Index. However, the Exchange would have to file a
proposed rule change pursuant to Rule 19b-4,\23\ seeking Commission
approval to continue trading the Notes. Unless approved for continued
listing, the Exchange would commence delisting proceedings.\24\
---------------------------------------------------------------------------
\23\ 17 CFR 240.19b-4.
\24\ See ``Continued Listing Criteria,'' infra. April 10
Telephone Conference.
---------------------------------------------------------------------------
Index Disruptions
The Index is determined, calculated and maintained solely by the
Index Sponsor. If the Index Sponsor discontinues publication of the
Index and it or any other person or entity publishes a substitute index
that the calculation agent determines is comparable to the Index and
approves as a successor index then the calculation agent will determine
the value of the Index on the applicable Valuation Date and the amount
payable at maturity or upon redemption by reference to such successor
index.
If the calculation agent determines that the publication of the
Index is discontinued and that there is no successor index, or that the
closing value of the Index is not available because of a market
disruption event (as defined below) or for any other reason, on the
date on which the value of the Index is required to be determined, or
if for any other reason the Index is not available to Barclays or the
calculation agent on the relevant date, the calculation agent will
determine the amount payable by a computation methodology that the
calculation agent determines will as closely as reasonably possible
replicate the Index.\25\
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\25\ In such case, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act. Unless approved for continued
trading, the Exchange would commence delisting proceedings. See
``Continued Listing Criteria,'' infra. April 10 Telephone
Conference.
---------------------------------------------------------------------------
If the calculation agent determines that the Index, the Index
components or the method of calculating the Index has been changed at
any time in any respect--including any addition, deletion or
substitution and any reweighting or rebalancing of Index components,
and whether the change is made by the Index Sponsor under its existing
policies or following a modification of those policies, is due to the
publication of a successor index, is due to events affecting one or
more of the Index components, or is due to any other reason--then the
calculation agent will be permitted (but not required) to make such
adjustments to the Index or method of calculating the Index as it
believes are appropriate to ensure that the value of the Index used to
determine the amount payable on the maturity date or upon redemption is
equitable.\26\
---------------------------------------------------------------------------
\26\ Id.
---------------------------------------------------------------------------
The Exchange states that all determinations and adjustments to be
made by the calculation agent with respect to the value of the Index
and the amount payable at maturity or upon redemption or otherwise
relating to the value of the Index may be made by the calculation agent
in its sole discretion.\27\
---------------------------------------------------------------------------
\27\ Id.
---------------------------------------------------------------------------
The Policy Committee
The Index Sponsor has established a Policy Committee to assist it
with the operation of the GSCI[supreg].\28\ The principal purpose of
the Policy Committee is to advise the Index Sponsor with respect to,
among other things, the calculation of the GSCI[supreg], the
effectiveness of the GSCI[supreg] as a measure of commodity futures
market performance and the need for changes in the composition or the
methodology of the GSCI[supreg]. The Policy Committee acts solely in an
advisory and consultative capacity. All decisions with respect to the
composition, calculation and operation of the GSCI[supreg] and the
Index are made by the Index Sponsor.
---------------------------------------------------------------------------
\28\ The component selections for the GSCI would obviously
affect the Index. Telephone conference between Florence Harmon,
Senior Special Counsel, Division, Commission, and Michael Cavalier,
Assistant General Counsel, Exchange, on April 12, 2006 (``April 12
Telephone Conference'').
---------------------------------------------------------------------------
The Policy Committee generally meets in October of each year. Prior
to the meeting, the Index Sponsor determines the contracts to be
included in the GSCI[supreg] for the following calendar year and the
weighting factors for each commodity. The Policy Committee's members
receive the proposed composition of the GSCI[supreg] in advance of the
meeting and discuss the composition at the meeting. The Index Sponsor
also consults the Policy Committee on any other significant matters
with respect to the calculation and operation of the GSCI[supreg]. The
Policy Committee may, if necessary or practicable, meet at other times
during the year as issues arise that warrant its consideration.
The Policy Committee currently consists of eight persons, three of
whom are employees of the Index Sponsor or its affiliates and five of
whom are not affiliated with the Index Sponsor.\29\
---------------------------------------------------------------------------
\29\ The current members of the Policy Committee who are
affiliated with the Index Sponsor are Peter O'Hagan, Steven Strongin
and Laurie Ferber, each of whom is a Managing Director of Goldman,
Sachs & Co. The current non-affiliated members and their
affiliations are: Richard Redding (Chicago Mercantile Exchange),
Kenneth A. Froot (finance professor at the Harvard Business School),
Dan Kelly (Harvard Management Company), Jelle Beenen (PGGM), and
Tham Chiew Kit (GIC). As stated, the Policy Committee are subject to
written policies with respect to material, non-public information.
Telephone conference between Florence Harmon, Senior Special
Counsel, Division, Commission, and Michael Cavalier, Assistant
General Counsel, Exchange, on April 14, 2006 (``April 14 Telephone
Conference with Michael Cavalier'').
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[[Page 21069]]
Composition of the GSCI[supreg]
In order to be included in the GSCI[supreg], a contract must
satisfy the following eligibility criteria:
(1) The contract must:
Be in respect of a physical commodity (rather than a
financial commodity);
Have a specified expiration or term, or provide in some
other manner for delivery or settlement at a specified time, or within
a specified period, in the future; and
At any given point in time, be available for trading at
least five months prior to its expiration or such other date or time
period specified for delivery or settlement.
(2) The commodity must be the subject of a contract that:
Is denominated in U.S. dollars; and
Is traded on or through an exchange, facility or other
platform (referred to as a ``trading facility'') that has its principal
place of business or operations in a country which is a member of the
Organization for Economic Cooperation and Development \30\ and:
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\30\ The Organization for Economic Cooperation and Development
has 30 member countries: Australia, Austria, Belgium, Canada, Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary,
Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico,
Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic,
Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United
States.
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Makes price quotations generally available to its members
or participants (and, if the Index Sponsor is not such a member or
participant, to the Index Sponsor) in a manner and with a frequency
that is sufficient to provide reasonably reliable indications of the
level of the relevant market at any given point in time;
Makes reliable trading volume information available to the
Index Sponsor with at least the frequency required by the Index Sponsor
to make the monthly determinations;
Accepts bids and offers from multiple participants or
price providers; and
Is accessible by a sufficiently broad range of
participants.
(3) The daily contract reference price for the relevant contract
generally must have been available on a continuous basis for at least
two years prior to the proposed date of inclusion in the GSCI[supreg].
In appropriate circumstances, however, the Index Sponsor may determine
that a shorter time period is sufficient or that historical daily
contract reference prices for such contract may be derived from daily
contract reference prices for a similar or related contract. The daily
contract reference price may be (but is not required to be) the
settlement price or other similar price published by the relevant
trading facility for purposes of margining transactions or for other
purposes.
(4) At and after the time a contract is included in the
GSCI[supreg], the daily contract reference price for such contract must
be published between 10 a.m. and 4 p.m., New York time, on each
GSCI[supreg] Business Day relating to such contract by the trading
facility on or through which it is traded and must generally be
available to all members of, or participants in, such facility (and, if
the Index Sponsor is not such a member or participant, to the Index
Sponsor) on the same day from the trading facility or through a
recognized third-party data vendor. Such publication must include, at
all times, daily contract reference prices for at least one expiration
or settlement date that is five months or more from the date the
determination is made, as well as for all expiration or settlement
dates during such five-month period.
(5) Volume data with respect to such contract must be available for
at least the three months immediately preceding the date on which the
determination is made.
(6) A contract that is not included in the GSCI[supreg] at the time
of determination and that is based on a commodity that is not
represented in the GSCI[supreg] at such time must, in order to be added
to the GSCI[supreg] at such time, have a total dollar value traded,
over the relevant period, as the case may be and annualized, of at
least U.S. $15 billion. The total dollar value traded is the dollar
value of the total quantity of the commodity underlying transactions in
the relevant contract over the period for which the calculation is
made, based on the average of the daily contract reference prices on
the last day of each month during the period.
(7) A contract that is already included in the GSCI[supreg] at the
time of determination and that is the only contract on the relevant
commodity included in the GSCI[supreg] must, in order to continue to be
included in the GSCI[supreg] after such time, have a total dollar value
traded, over the relevant period, as the case may be and annualized, of
at least U.S. $5 billion and at least U.S. $10 billion during at least
one of the three most recent annual periods used in making the
determination.
(8) A contract that is not included in the GSCI[supreg] at the time
of determination and that is based on a commodity on which there are
one or more contracts already included in the GSCI[supreg] at such time
must, in order to be added to the GSCI[supreg] at such time, have a
total dollar value traded, over the relevant period, as the case may be
and annualized, of at least U.S. $30 billion.
(9) A contract that is already included in the GSCI[supreg] at the
time of determination and that is based on a commodity on which there
are one or more contracts already included in the GSCI[supreg] at such
time must, in order to continue to be included in the GSCI[supreg]
after such time, have a total dollar value traded, over the relevant
period, as the case may be and annualized, of at least U.S. $10 billion
and at least U.S. $20 billion during at least one of the three most
recent annual periods used in making the determination.
(10) A contract that is already included in the GSCI[supreg] at the
time of determination must, in order to continue to be included after
such time, have a reference percentage dollar weight of at least 0.10%.
The reference percentage dollar weight of a contract is determined by
multiplying the CPW (defined below) of a contract by the average of its
daily contract reference prices on the last day of each month during
the relevant period. These amounts are summed for all contracts
included in the GSCI[supreg] and each contract's percentage of the
total is then determined.
(11) A contract that is not included in the GSCI[supreg] at the
time of determination must, in order to be added to the GSCI[supreg] at
such time, have a reference percentage dollar weight of at least 1.00%.
(12) In the event that two or more contracts on the same commodity
satisfy the eligibility criteria, such contracts will be included in
the GSCI[supreg] in the order of their respective total quantity traded
during the relevant period (determined as the total quantity of the
commodity underlying transactions in the relevant contract), with the
contract having the highest total quantity traded being included first,
provided that no further contracts will be included if such inclusion
would result in the portion of the GSCI[supreg] attributable to such
commodity exceeding a particular level. If additional contracts could
be included with respect to several commodities at the same time, that
procedure is first applied with respect to the commodity that has the
smallest portion of the GSCI[supreg] attributable to it at
[[Page 21070]]
the time of determination. Subject to the other eligibility criteria
set forth above, the contract with the highest total quantity traded on
such commodity will be included. Before any additional contracts on the
same commodity or on any other commodity are included, the portion of
the GSCI[supreg] attributable to all commodities is recalculated. The
selection procedure described above is then repeated with respect to
the contracts on the commodity that then has the smallest portion of
the GSCI[supreg] attributable to it.
Currently, 24 contracts meet the eligibility requirement for
inclusion on the GSCI[supreg].
Contracts Included in the GSCI[supreg] for 2006, as of March 2, 2006
------------------------------------------------------------------------
2006 Reference
Trading facility Commodity price dollar
(contract) weight (percent)
------------------------------------------------------------------------
CBOT............................ Wheat (Chicago 2.51
Wheat).
KCBOT........................... Wheat (Kansas 1.00
Wheat).
CBOT............................ Corn............... 2.35
CBOT............................ Soybeans........... 1.53
CSCE............................ Coffee ``C''....... 0.73
CSCE............................ Sugar 11.. 2.06
CSCE............................ Cocoa.............. 0.19
NYBOT........................... Cotton 2.. 0.93
CME............................. Lean Hogs.......... 1.49
CME............................. Cattle (Live 2.50
Cattle).
CME............................. Cattle (Feeder .68
Cattle).
NYMEX........................... Oil (No. 2 Heating 8.28
Oil, NY).
ICE............................. Oil (Gasoil)....... 4.49
NYMEX........................... Oil (Unleaded Reg 7.55
Gas, NY).
NYMEX........................... Oil (WTI Crude Oil) 30.59
ICE............................. Oil (Brent Crude 14.79
Oil).
NYMEX........................... Natural Gas........ 7.98
LME............................. High Grade Primary 3.18
Aluminum.
LME............................. Copper--Grade A.... 3.09
LME............................. Standard Lead...... 0.33
LME............................. Primary Nickel..... 0.70
LME............................. Special High Grade 0.88
Zinc.
COMEX........................... Gold............... 1.94
COMEX........................... Silver............. 0.24
------------------------------------------------------------------------
Copyright 2006, The Goldman Sachs Group, Inc. Used by permission.
The quantity of each of the contracts included in the GSCI[supreg]
is determined on the basis of a five-year average (referred to as the
``world production average'') of the production quantity of the
underlying commodity as published by the United Nations Statistical
Yearbook, the Industrial Commodity Statistics Yearbook and other
official sources. However, if a commodity is primarily a regional
commodity, based on its production, use, pricing, transportation or
other factors, the Index Sponsor may calculate the weight of such
commodity based on regional, rather than world, production data.
The five-year moving average is updated annually for each commodity
included in the GSCI[supreg], based on the most recent five-year period
(ending approximately two years prior to the date of calculation and
moving backwards) for which complete data for all commodities is
available. The contract production weights (the ``CPW'') used in
calculating the GSCI[supreg] are derived from world or regional
production averages, as applicable, of the relevant commodities, and
are calculated based on the total quantity traded for the relevant
contract and the world or regional production average, as applicable,
of the underlying commodity.
However, if the volume of trading in the relevant contract, as a
multiple of the production levels of the commodity, is below specified
thresholds, the CPW of the contract is reduced until the threshold is
satisfied. This is designed to ensure that trading in each such
contract is sufficiently liquid relative to the production of the
commodity.
In addition, the Index Sponsor performs this calculation on a
monthly basis and, if the multiple of any contract is below the
prescribed threshold, the composition of the GSCI[supreg] is
reevaluated, based on the criteria and weighting procedure described
above. This procedure is undertaken to allow the GSCI[supreg] to shift
from contracts that have lost substantial liquidity into more liquid
contracts during the course of a given year. As a result, it is
possible that the composition or weighting of the GSCI[supreg] will
change on one or more of these monthly Valuation Dates. In addition,
regardless of whether any changes have occurred during the year, the
Index Sponsor reevaluates the composition of the GSCI[supreg] at the
conclusion of each year, based on the above criteria. Other commodities
that satisfy such criteria, if any, will be added to the GSCI[supreg].
Commodities included in the GSCI[supreg] which no longer satisfy such
criteria, if any, will be deleted.
The Index Sponsor also determines whether modifications in the
selection criteria or the methodology for determining the composition
and weights of and for calculating the GSCI[supreg] are necessary or
appropriate in order to assure that the GSCI[supreg] represents a
measure of commodity market performance. The Index Sponsor has the
discretion to make any such modifications.
Contract Expirations
Because the GSCI[supreg] is comprised of actively traded contracts
with scheduled expirations, it can only be calculated by reference to
the prices of contracts for specified expiration, delivery or
settlement periods, referred to as ``contract expirations.'' The
contract expirations included in the GSCI[supreg] for each commodity
during a given year are designated by the Index Sponsor, provided that
each such contract must be an ``active contract.'' An ``active
contract'' for this purpose is a liquid, actively traded contract
expiration, as defined or identified by the relevant trading facility
or, if no such definition or identification is provided by the relevant
trading facility, as defined by standard custom and practice in the
industry. The relative liquidity of the various active contracts is one
of the factors that may be taken into consideration in determining
which of them the Index Sponsor includes in the GSCI (and thus the
Index).
If a trading facility deletes one or more contract expirations, the
GSCI[supreg] will be calculated during the remainder of the year in
which such deletion occurs on the basis of the remaining contract
expirations designated by the Index Sponsor. If a trading facility
ceases trading in all contract expirations relating to a particular
contract, the Index Sponsor may designate a replacement contract on the
commodity. The replacement contract must satisfy the eligibility
criteria for inclusion in the GSCI[supreg]. To the extent practicable,
the replacement will be effected during the next monthly review of the
composition of the index. If that timing is not practicable, the Index
Sponsor will determine the date of the replacement and will consider a
number of factors, including the differences between the existing
contract and the replacement contract with respect to contractual
specifications and contract expirations.
Value of the GSCI[supreg]
The value of the GSCI[supreg] on any given day is equal to the
total dollar weight of the GSCI[supreg] divided by a normalizing
constant that assures the continuity of the GSCI[supreg] over time. The
total dollar weight of the GSCI[supreg] is the sum of the dollar weight
of each index component. The dollar weight of each such index component
on any given day is equal to:
The daily contract reference price,
[[Page 21071]]
Multiplied by the appropriate CPWs, and
During a roll period, the appropriate ``roll weights''
(discussed below).
The daily contract reference price used in calculating the dollar
weight of each index component on any given day is the most recent
daily contract reference price made available by the relevant trading
facility, except that the daily contract reference price for the most
recent prior day will be used if the exchange is closed or otherwise
fails to publish a daily contract reference price on that day. In
addition, if the trading facility fails to make a daily contract
reference price available or publishes a daily contract reference price
that, in the reasonable judgment of the Index Sponsor, reflects
manifest error, the relevant calculation will be delayed until the
price is made available or corrected. However, if the price is not made
available or corrected by 4 p.m. New York time, the Index Sponsor, if
it deems such action to be appropriate under the circumstances, will
determine the appropriate daily contract reference price for the
applicable futures contract in its reasonable judgment for purposes of
the relevant GSCI[supreg] calculation.\31\
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\31\ If such actions by the Index Sponsor are implemented on
more than a temporary basis, the Exchange will contact the
Commission Staff and, as necessary, file a proposed rule change
pursuant to Rule 19b-4 seeking Commission approval to continue to
trade the Shares. Unless approved for continued trading, the
Exchange would commence delisting proceedings. See ``Continued
Listing Criteria,'' infra. April 10 Telephone Conference.
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Contract Daily Return
The contract daily return on any given day is equal to the sum, for
each of the commodities included in the GSCI[supreg], of the applicable
daily contract reference price on the relevant contract multiplied by
the appropriate CPW and the appropriate ``roll weight,'' divided by the
total dollar weight of the GSCI[supreg] on the preceding day, minus
one.
The ``roll weight'' of each commodity reflects the fact that the
positions in contracts must be liquidated or rolled forward into more
distant contract expirations as they approach expiration. If actual
positions in the relevant markets were rolled forward, the roll would
likely need to take place over a period of days. Since the GSCI[supreg]
is designed to replicate the performance of actual investments in the
underlying contracts, the rolling process incorporated in the
GSCI[supreg] also takes place over a period of days at the beginning of
each month (referred to as the ``roll period''). On each day of the
roll period, the ``roll weights'' of the first nearby contract
expirations on a particular commodity and the more distant contract
expiration into which it is rolled are adjusted, so that the
hypothetical position in the contract on the commodity that is included
in the GSCI[supreg] is gradually shifted from the first nearby contract
expiration to the more distant contract expiration.
If on any day during a roll period any of the following conditions
exists, the portion of the roll that would have taken place on that day
is deferred until the next day on which such conditions do not exist:
No daily contract reference price is available for a given
contract expiration;
Any such price represents the maximum or minimum price for
such contract month, based on exchange price limits (referred to as a
``Limit Price'');
The daily contract reference price published by the
relevant trading facility reflects manifest error, or such price is not
published by 4 p.m., New York time. In that event, the Index Sponsor
may, but is not required to, determine a daily contract reference price
and complete the relevant portion of the roll based on such price;
provided, that, if the trading facility publishes a price before the
opening of trading on the next day, the Index Sponsor will revise the
portion of the roll accordingly; or
Trading in the relevant contract terminates prior to its
scheduled closing time.
If any of these conditions exist throughout the roll period, the
roll with respect to the affected contract, will be effected in its
entirety on the next day on which such conditions no longer exist.
Value of the Index
The Exchange now describes the value of the Index (as opposed to
the above description of the GSCI) which the Notes are designed to
track. The value of the Index on any GSCI Business Day is equal to the
product of (1) the value of the Index on the immediately preceding GSCI
Business Day multiplied by (2) one plus the sum of the contract daily
return and the Treasury Bill return on the GSCI Business Day on which
the calculation is made multiplied by (3) one plus the Treasury Bill
return for each non-GSCI Business Day since the immediately preceding
GSCI Business Day. The Treasury Bill return is the return on a
hypothetical investment in the GSCI[supreg] at a rate equal to the
interest rate on a specified U.S. Treasury Bill. The initial value of
the GSCI[supreg] was normalized such that the hypothetical level of the
Index on January 2, 1970 was 100.
Historical Performance
While the following historical performance table is based on the
selection criteria and methodology described herein, the Index was not
actually calculated and published prior to May 1, 1991. Accordingly,
the following table illustrates:
(i) On a hypothetical basis, how the Index would have performed
from January 2, 1970 to January 2, 1991 based on the selection criteria
and methodology described above; and
(ii) On an actual basis, how the Index has performed from January
2, 1992 onwards.
January 2, 1970.............................................. 100.00
January 4, 1971.............................................. 115.78
January 3, 1972.............................................. 138.90
January 2, 1973.............................................. 198.45
January 2, 1974.............................................. 354.32
January 2, 1975.............................................. 478.50
January 2, 1976.............................................. 400.02
January 3, 1977.............................................. 351.05
January 3, 1978.............................................. 390.02
January 2, 1979.............................................. 515.25
January 2, 1980.............................................. 692.40
January 2, 1981.............................................. 764.66
January 4, 1982.............................................. 593.61
January 3, 1983.............................................. 657.98
January 3, 1984.............................................. 747.23
January 3, 1985.............................................. 760.67
January 2, 1986.............................................. 833.67
January 2, 1987.............................................. 868.83
January 4, 1988.............................................. 1,105.18
January 3, 1989.............................................. 1,371.33
January 2, 1990.............................................. 1,937.46
January 2, 1991.............................................. 2,346.03
January 2, 1992.............................................. 2,304.20
January 4, 1993.............................................. 2,371.27
January 3, 1994.............................................. 2,111.22
January 3, 1995.............................................. 2,185.21
January 2, 1996.............................................. 2,711.25
January 2, 1997.............................................. 3,591.15
January 2, 1998.............................................. 3,019.39
January 4, 1999.............................................. 1,992.32
January 3, 2000.............................................. 2,766.77
January 2, 2001.............................................. 4,022.43
January 2, 2002.............................................. 2,891.27
January 2, 2003.............................................. 3,819.38
January 2, 2004.............................................. 4,520.70
January 3, 2005.............................................. 5,173.25
January 3, 2006.............................................. 6,729.99
The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that
the value of the Index will increase sufficiently to cause holders of
the Note receive a payment at maturity or upon redemption equal to or
in excess of the principal amount of such Notes.
Continued Listing Criteria
The Exchange prohibits the initial and/or continued listing of any
security
[[Page 21072]]
that is not in compliance with Rule 10A-3 under the Act.\32\
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\32\ 17 CFR 240.10A-3; see also 15 U.S.C. 78a.
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The Exchange will delist the Notes:
If, following the initial twelve month period from the
date of commencement of trading of the Notes, the Notes have more than
60 days remaining until maturity and (i) there are fewer than 50
beneficial holders of the Notes for 30 or more consecutive trading
days; (ii) if fewer than 50,000 Notes remain issued and outstanding; or
(iii) if the market value of all outstanding Notes is less than
$1,000,000;
If the Index value ceases to be calculated or available
during the time the Notes trade on the Exchange on at least every 15
second basis through one or more major market data vendors; \33\
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\33\ The Exchange confirmed that the Index value (along with the
GSCI index value) will be disseminated at le
