Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Listing and Trading of Four CurrencyShares Trusts, 49522-49529 [E8-19356]
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49522
Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices
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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of the 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–2008–52 and should
be submitted on or before September 11,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.61
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–19357 Filed 8–20–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58365; File No. SR–
NYSEArca–2008–81]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, Relating to
Listing and Trading of Four
CurrencyShares Trusts
mstockstill on PROD1PC66 with NOTICES
August 14, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 30,
2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
‘‘Exchange’’), through its wholly owned
61 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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subsidiary, NYSE Arca Equities, Inc.
(‘‘NYSE Arca Equities’’), filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. On August
11, 2008, the Exchange filed
Amendment No. 1 to the proposed rule
change. The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons and is granting
approval to the proposed rule change, as
modified by Amendment No. 1 thereto,
on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list shares
(‘‘Shares’’) of the following trusts:
CurrencySharesSM Hong Kong Dollar
Trust, CurrencySharesSM Russian Ruble
Trust, CurrencySharesSM Singapore
Dollar Trust, and CurrencySharesSM
South African Rand Trust (‘‘Trusts’’)
under NYSE Arca Equities Rule 8.202.
The text of the proposed rule change is
available on the Exchange’s Web site at
https://www.nyse.com, at the Exchange’s
principal office 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,
NYSE Arca 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 those
statements may be examined at the
places specified in Item III below. NYSE
Arca has prepared summaries, set forth
in sections A, B, and C below, of the
most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under NYSE Arca Equities Rule
8.202, the Exchange may propose to list
and/or trade pursuant to unlisted
trading privileges (‘‘UTP’’) ‘‘Currency
Trust Shares.’’ 3 The Exchange proposes
3 See NYSE Arca Equities Rule 8.202 and
Securities Exchange Act Release No. 53253
(February 8, 2006), 71 FR 8029 (February 15, 2006)
(SR–PCX–2005–123) (order granting accelerated
approval for the Exchange to adopt listing and
trading standards for Currency Trust Shares and
approving the UTP trading of shares of the Euro
Currency Trust (now known as the
PO 00000
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Fmt 4703
Sfmt 4703
to list the Shares of the Trusts under
NYSE Arca Equities Rule 8.202.4
Rydex Specialized Products LLC is
the sponsor of the Trusts (‘‘Sponsor’’);
The Bank of New York is the trustee of
the Trusts (‘‘Trustee’’); JPMorgan Chase
Bank, N.A., London Branch, is the
depository for the Trusts (‘‘Depository’’);
and Rydex Distributors, Inc. is the
distributor for the Trusts (‘‘Distributor’’).
The Sponsor, Trustee, Depository and
Distributor are not affiliated with the
Exchange or one another, with the
exception that the Sponsor and
Distributor are affiliated. For more
information on these entities, see below.
The Shares represent units of
fractional undivided beneficial interest
in, and ownership of, the respective
Trust. The investment objective of the
Trusts is for the Shares issued by the
Trusts to reflect the price of the
applicable foreign currency owned by
the specific Trust, plus accrued interest,
less the expenses and liabilities of such
Trust, according to the Registration
Statements for the Trusts.5 The Shares
‘‘CurrencyShares Euro Trust’’)). E-mail from
Michael Cavalier, Associate General Counsel, NYSE
Group, Inc., to Brian O’Neill, Staff Attorney, and
Edward Cho, Special Counsel, Division of Trading
and Markets, Commission, dated August 4, 2008
(confirming the name change of the Euro Currency
Trust to the CurrencyShares Euro Trust). As defined
in NYSE Arca Equities Rule 8.202(c), the term
‘‘Currency Trust Shares’’ means a security that (a)
Is issued by a trust (‘‘Trust’’) that holds a specified
non-U.S. currency deposited with the Trust; (b)
when aggregated in some specified minimum
number may be surrendered to the Trust by the
beneficial owner to receive the specified non-U.S.
currency; and (c) pays beneficial owners interest
and other distributions on the deposited non-U.S.
currency, if any, declared and paid by the Trust.
4 The Commission has previously approved
listing or UTP trading of issues of CurrencyShares
based on non-US currencies. See Securities
Exchange Act Release No. 52843 (November 28,
2005), 70 FR 72486 (December 5, 2005) (SR–NYSE–
2005–65) (order granting accelerated approval for
the New York Stock Exchange (‘‘NYSE’’) to list and
trade shares of the CurrencyShares Euro Trust);
Securities Exchange Act Release No. 54020 (June
20, 2006), 71 FR 36579 (June 27, 2006) (SR–NYSE–
2006–35) (order granting accelerated approval for
NYSE to list and trade shares of the CurrencyShares
Australian Dollar Trust, CurrencyShares British
Pound Sterling Trust, CurrencyShares Canadian
Dollar Trust, CurrencyShares Mexican Peso Trust,
CurrencyShares Swedish Krona Trust and
CurrencyShares Swiss Franc Trust); Securities
Exchange Act Release No. 55268 (February 9, 2007),
72 FR 7793 (February 20, 2007) (SR–NYSE–2007–
03) (order granting accelerated approval for NYSE
to list and trade shares of the CurrencyShares
Japanese Yen Trust); Securities Exchange Act
Release No. 55320 (February 21, 2007), 72 FR 8828
(February 27, 2007) (SR–NYSEArca–2007–15)
(order granting accelerated approval for the
Exchange to UTP trade shares of the
CurrencyShares Japanese Yen Trust); Securities
Exchange Act Release No. 56131 (July 25, 2007), 72
FR 42212 (August 1, 2007) (SR–NYSEArca–2007–
57) (order granting accelerated approval for
Exchange to list eight CurrencyShares Trusts).
5 See Preliminary Prospectuses for the
CurrencyShares Hong Kong Dollar Trust
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are intended to provide institutional
and retail investors with a simple, costeffective means of hedging their
exposure to a particular foreign
currency and otherwise implement
investment strategies that involve
foreign currency (e.g., diversify more
generally against the risk that the U.S.
Dollar (‘‘USD’’) would depreciate).6
Futures and options on futures on the
Russian Ruble and the South African
Rand are traded on the Chicago
Mercantile Exchange (‘‘CME’’). Futures
on the Russian Ruble are also traded on
the Moscow Interbank Currency
Exchange and the Russian Trading
System. Based upon the Exchange’s
review of information supplied by major
market data vendors, futures or options
are not traded on the Singapore Dollar
or Hong Kong Dollar. Because the
Shares are traded on NYSE Arca,
investors are able to access the
applicable foreign currency market
through a traditional brokerage account
which provides investors with an
efficient means of implementing
investment tactics and strategies that
involve the applicable foreign currency.
mstockstill on PROD1PC66 with NOTICES
Foreign Currency Regulation
Most trading in the global over-thecounter (‘‘OTC’’) foreign currency
markets is conducted by regulated
financial institutions such as banks and
broker-dealers. In addition, in the
United States, the Foreign Exchange
Committee of the New York Federal
Reserve Bank has issued Guidelines for
Foreign Exchange Trading, and centralbank sponsored committees in Japan
and Singapore have published similar
(Registration No. 333–150686), CurrencyShares
Russian Ruble Trust (Registration No. 333–150687),
CurrencyShares Singapore Dollar Trust
(Registration No. 333–150684), and CurrencyShares
South African Rand Trust (Registration No. 333–
150685), each dated July 21, 2008. The Preliminary
Prospectuses listed in this paragraph are
collectively referred to herein as the ‘‘Registration
Statements.’’ All information in this proposed rule
change relating to the Shares and the Trusts is
based on information in the Registration
Statements.
6 For April 2007, the daily average reported
foreign exchange market turnover of the USD
against the Hong Kong Special Administrative
Region (SAR), Russia, Singapore and South Africa
was $175 billion, $50 billion, $231 billion and $14
billion, respectively. (Source: Bank for International
Settlements, Triennial Central Bank Survey,
December 2007, Table B.2 (‘‘Central Bank
Survey’’)). The Central Bank Survey reports that
there appears to have been an increase in total
turnover of emerging market currencies. In April
2007, emerging market currencies were involved in
almost 20% of all transactions. Specifically, the
Hong Kong Dollar, Singapore Dollar, Rand and
Ruble experienced a percentage share of average
daily turnover of 2.8%, 1.2%, 0.9% and 0.8%,
respectively, reflecting slight increases from
previously reported years. (Source: Bank for
International Settlements, Triennial Central Bank
Survey, December 2007, Table B.6)
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17:48 Aug 20, 2008
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best practice guidelines. In the United
Kingdom, the Bank of England has
published the Non-Investment Products
Code, which covers foreign currency
trading. The Financial Markets
Association, whose members include
major international banking
organizations, has also established best
practices guidelines called the Model
Code.
Participants in the U.S. OTC market
for foreign currencies are generally
regulated by their oversight regulators.
For example, participating banks are
regulated by the banking authorities. In
addition, in the U.S. the Commodity
Futures Trading Commission (‘‘CFTC’’)
regulates trading of futures, options and
options on futures on foreign currencies
on regulated futures exchanges.7 The
CFTC has established rules designed to
prevent market manipulation, abusive
trade practices and fraud, as does the
CME.
The CME has authority to perform
surveillance on its members’ trading
activities, review positions held by
members and large-scale customers, and
monitor the price movements of options
and/or futures markets by comparing
them with cash and other derivative
markets’ prices. As noted above, based
upon the Exchange’s review of market
data information, futures or options are
not traded on the Singapore Dollar or
Hong Kong Dollar. Therefore, CME
surveillance and CFTC oversight would
pertain only to futures and options on
futures on the Russian Ruble and South
African Rand.
The Sponsor
The Sponsor of each Trust is a
Delaware limited liability company. The
sole member of the Sponsor is PADCO
Advisors II, Inc., a Maryland
corporation solely owned by Rydex
Holdings, Inc., a Maryland corporation.
Rydex Holdings, Inc. is solely owned by
Rydex NV, Inc., a Nevada corporation
that is privately-held. The Sponsor and
its affiliates collectively do business as
‘‘Rydex Investments.’’
The Sponsor is responsible for
establishing the Trusts and for the
registration of the Shares. The Sponsor
generally oversees the performance of
the Trustee and the Trusts’ principal
service providers, but does not exercise
day-to-day oversight over the Trustee or
7 The CFTC is an independent government agency
with the mandate to regulate commodity futures
and options markets in the United States under the
Commodity Exchange Act. In addition to its
oversight of regulated futures exchanges, the CFTC
has jurisdiction over certain foreign currency
futures, options and options on futures transactions
occurring other than on a regulated exchange and
involving retail customers.
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
49523
such service providers. The Sponsor
regularly communicates with the
Trustee to monitor the overall
performance of the Trusts. The Sponsor,
with assistance and support from Rydex
affiliates who also do business as
‘‘Rydex Investments,’’ the Trustee and
outside professionals, are responsible
for preparing and filing periodic reports
on behalf of the Trusts with the SEC.8
The Sponsor designates the auditors of
the Trusts and may from time to time
employ legal counsel for the Trust.
The Distributor is assisting the
Sponsor in developing a marketing plan
for the Trusts, preparing marketing
materials on the Shares, executing the
marketing plan for the Trusts and
providing strategic and tactical research
on the global foreign exchange markets.
The Sponsor would not enter into an
agreement with the Distributor covering
these services, because the Distributor is
an affiliate and would not be paid any
compensation by the Sponsor for
performing these services.
The Sponsor with the Distributor’s
assistance maintains a public Web site
on behalf of the Trusts, https://
www.currencyshares.com, which
contains information about the Trusts
and the Shares, and oversees certain
Shareholder services, such as a call
center and prospectus delivery.
The Sponsor may direct the Trustee in
the conduct of its affairs, but only as
provided in the Depositary Trust
Agreement. For example, the Sponsor
may direct the Trustee to sell the Trusts’
foreign currency to pay certain
extraordinary expenses, to suspend a
redemption order, postpone a
redemption settlement date, or to
terminate the Trusts if certain criteria
are met. The Sponsor anticipates that, if
the market capitalization of a Trust is
less than $300 million for five
consecutive trading days beginning after
the first anniversary of such Trust’s
inception, then the Sponsor would, in
accordance with the Depositary Trust
Agreement, direct the Trustee to
8 The Sponsor has obtained guidance from the
SEC Division of Corporation Finance with respect
to the Trusts pursuant to which the Sponsor’s
principal executive officer and principal financial
officer will provide any certifications that are
required from a ‘‘registrant’s’’ principal executive
officer and principal financial officer. See letters
from the Office of Chief Counsel, Division of
Corporation Finance, at the Commission dated
March 22, 2006 (with respect to the
CurrencySharesSM Euro Trust ); September 13, 2006
(with respect to the CurrencySharesSM Australian
Dollar Trust, CurrencySharesSM British Pound
Sterling Trust, CurrencySharesSM Canadian Dollar
Trust, CurrencySharesSM Mexican Peso Trust,
CurrencySharesSM Swedish Krona Trust, and
CurrencySharesSM Swiss Franc Trust) and March
27, 2007 (with respect to the CurrencySharesSM
Japanese Yen Trust).
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Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices
terminate and liquidate such Trust. The
Sponsor’s fee accrues daily at an annual
nominal rate of 0.40% of the applicable
foreign currency in the Trust (including
all unpaid interest but excluding unpaid
fees, each as accrued through the
immediately preceding day) and is paid
monthly.
The Trustee
The Trustee is generally responsible
for the day-to-day administration of the
Trusts, including keeping the Trusts’
operational records. The Trustee’s
principal responsibilities include selling
the Trusts’ foreign currency if needed to
pay the Trusts’ expenses, calculating the
Net Asset Value (‘‘NAV’’) of the Trusts
and the NAV per Share, receiving and
processing orders from Authorized
Participants to create and redeem
Baskets (as discussed below) and
coordinating the processing of such
orders with the Depository and DTC.
The Trustee earns a monthly fee that is
paid by the Sponsor.
The Trustee intends to regularly
communicate with the Sponsor to
monitor the overall performance of the
Trusts. The Trustee, along with the
Sponsor, consults with the Trusts’ legal,
accounting and other professional
service providers as needed. The
Trustee assists and supports the
Sponsor with the preparation of all
periodic reports required to be filed
with the SEC on behalf of the Trusts.
Affiliates of the Trustee may from time
to time act as Authorized Participants or
purchase or sell foreign currency or
Shares for their own account.
mstockstill on PROD1PC66 with NOTICES
The Depository
The Depository accepts Trust foreign
currency deposited with it as a banker
by Authorized Participants in
connection with the creation of Baskets.
The Depository facilitates the transfer of
the applicable foreign currency into and
out of the Trust through the primary and
secondary deposit accounts maintained
with it as a banker by the Trust.
The Depository is not paid a fee for
its services to the Trusts. The
Depository may earn a ‘‘spread’’ or
‘‘margin’’ over the rate of interest it pays
to the Trusts on the applicable foreign
currency deposit balances.
The Depository is not a trustee for the
Trusts or the Shareholders. The
Depository and its affiliates may from
time to time act as Authorized
Participants or purchase or sell foreign
currency or Shares for their own
account, as agent for their customers
and for accounts over which they
exercise investment discretion.
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17:48 Aug 20, 2008
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The Distributor
The Distributor is a registered brokerdealer and is a member of FINRA. The
Distributor is assisting the Sponsor in
developing a marketing plan for the
Trusts on an ongoing basis, preparing
marketing materials regarding the
Shares, including the content on the
Trusts’ Web site, https://
www.currencyshares.com, executing the
marketing plan for the Trusts, and
providing strategic and tactical research
on the global foreign exchange market.
The Distributor and the Sponsor are
affiliates of one another. There is no
written agreement between them, and
no compensation is paid by the Sponsor
to the Distributor in connection with
services performed by the Distributor for
the Trusts.
Description of the Trusts
The Trusts holds the applicable
foreign currency and are expected from
time to time to issue Baskets in
exchange for deposits of the foreign
currency and to distribute the foreign
currency in connection with
redemptions of Baskets. The investment
objective of the Trusts is for the Shares
to reflect the price in USD of the
applicable foreign currency. The Shares
represent units of fractional undivided
beneficial interest in, and ownership of,
the respective Trusts. The Trusts are not
managed like business corporations or
active investment vehicles. The foreign
currency held by the Trusts would only
be sold (1) If needed to pay Trust
expenses, (2) in the event a Trust
terminates and liquidates its assets or
(3) as otherwise required by law or
regulation. The sale of foreign currency
by the Trusts is a taxable event to
Shareholders. According to the
Registration Statements, the Trusts are
not registered as investment companies
under the Investment Company Act of
1940 9 and are not required to register
under such Act.
Each of the Trust’s assets consists
primarily of the applicable foreign
currency on demand deposit in two
deposit accounts maintained by the
Depository: A primary deposit account
which earns interest and a secondary
deposit account which does not earn
interest. The secondary deposit account
is used only in connection with midmonth creations and redemptions of
blocks of 50,000 Shares (‘‘Baskets’’). The
secondary account is used to account for
interest that has been earned on the
primary deposit account during the
month but not yet paid and to receive
interest earned on the primary deposit
9 15
PO 00000
U.S.C. 80a.
Frm 00119
Fmt 4703
Sfmt 4703
account, pay Trust expenses and
distribute any excess interest to
shareholders on a monthly basis.
The Trusts do not hold any derivative
products. Each Share represents a
proportional interest, based on the total
number of Shares outstanding, in the
applicable foreign currency owned by
the respective Trusts, plus accrued but
unpaid interest, less the estimated
accrued but unpaid expenses (both
asset-based and non-asset based) of a
Trust. The Sponsor expects that the
price of a Share will fluctuate in
response to fluctuations in the price of
the applicable foreign currency and that
the price of a Share will reflect
accumulated interest as well as the
estimated accrued but unpaid expenses
of a Trust. The Trusts will terminate
upon the occurrence of any of the
termination events listed in the
Depositary Trust Agreement and will
otherwise terminate on a specified date
40 years after formation of the Trusts.
The Sponsor, on behalf of the Trusts,
relies on relief previously granted by the
Division of Market Regulation (now
known as the Division of Trading and
Markets) 10 from certain trading
requirements of the Securities Exchange
Act of 1934 (‘‘Act’’).11 The Sponsor has
received guidance from the Commission
regarding the application of the
certification rules for quarterly and
annual reports adopted pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002.12 In addition, the Trusts will
not be subject to the Exchange’s
corporate governance requirements.13
10 See letter from Racquel L. Russell, Branch
Chief, SEC Division of Market Regulation, to George
T. Simon, Foley & Lardner, dated June 21, 2006
(‘‘June 21, 2006 letter’’) (granting relief from certain
rules under the Act for certain of the Trusts); letter
from James A Brigagliano, Assistant Director, SEC
Division of Market Regulation to Michael
Schmidtberger, Sidley, Austin, Brown & Wood,
dated January 19, 2006 (‘‘January 19, 2006 Letter’’)
(granting relief from certain rules under the Act for
the DB Commodity Index Tracking Master Fund).
The Sponsor is relying on the June 21, 2006 Letter
regarding Rule 10a–1, Rule 200(g) of Regulation
SHO, and Rules 101 and 102 of Regulation M under
the Act, and is relying on the January 19, 2006
Letter regarding Section 11(d)(1) of the Act and
Rule 11d1–2 thereunder.
11 15 U.S.C. 78a.
12 See note 10, supra.
13 See Securities Exchange Act Release No. 48745
(November 4, 2003), 68 FR 64154 (November 12,
2003) (SR–NYSE–2002–33, et al.) (specifically
noting that the corporate governance standards will
not apply to, among others, passive business
organizations in the form of trusts). See also
Securities Exchange Act Release No. 47654 (April
9, 2003), 68 FR 18788 (April 16, 2003) (File No. S7–
02–03) (noting in Section II(F)(3)(c) that ‘‘SROs may
exclude from Exchange Act Rule 10A–3’s
requirements issuers that are organized as trusts or
other unincorporated associations that do not have
a board of directors or persons acting in a similar
capacity and whose activities are limited to
passively owning or holding (as well as
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Liquidity
The amount of the discount or
premium in the trading price relative to
the NAV per Share may be influenced
by non-concurrent trading hours
between the major foreign currency
markets and the Exchange. Because of
the potential for arbitrage inherent in
the structure of the Trusts, the Sponsor
believes that the Shares will not trade at
a material discount or premium to the
value of underlying currency held by a
Trust. The arbitrage process, which in
general provides investors the
opportunity to profit from differences in
prices of assets, increases the efficiency
of the markets, serves to prevent
potentially manipulative efforts and can
be expected to operate efficiently in the
case of the Shares and the foreign
currency. If the price of the Shares
deviates enough from the price of the
foreign currency to create a material
discount or premium, an arbitrage
opportunity is created. If the Shares are
inexpensive compared to foreign
currency that underlies them, an
Authorized Participant, either on its
own behalf or acting as agent for
investors, arbitrageurs or traders, may
buy the Shares at a discount,
immediately redeem them in exchange
for the foreign currency and sell the
foreign currency in the cash market at
a profit. If the Shares are expensive
compared to the foreign currency that
underlies them, an Authorized
Participant may sell the Shares short,
buy enough foreign currency to create
the number of Shares sold short, acquire
the Shares through the creation process
and deliver the Shares to close out the
short position.14 In both instances the
arbitrageur serves efficiently to correct
price discrepancies between the Shares
and the underlying foreign currency.
mstockstill on PROD1PC66 with NOTICES
Issuance of the Shares
Each Trust creates and redeems
Shares in Baskets on a continuous basis.
A Basket is a block of 50,000 Shares.
The creation and redemption of Baskets
requires the delivery to the Trust or the
administering and distributing amounts in respect
of) securities, rights, collateral or other assets on
behalf of or for the benefit of the holders of the
listed securities.’’)
14 The Exchange notes that the Trusts, which will
only hold the applicable foreign currency as an
asset in the normal course of its operations, differs
from index-based exchange-traded funds, which
may involve a trust holding hundreds or even
thousands of underlying component securities,
necessarily involving in the arbitrage process
movements in a large number of security positions.
See, e.g., Securities Exchange Act Release No.
46306 (August 2, 2002), 67 FR 51916 (August 9,
2002) (SR–NYSE–2002–28) (approving the UTP
trading of Vanguard Total Market VIPERs based on
the Wilshire 5000 Total Market Index, among other
funds).
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17:48 Aug 20, 2008
Jkt 214001
distribution by the Trust of the amount
of the applicable foreign currency
represented by the Baskets being created
or redeemed. This amount is based on
the combined NAV per Share of the
number of Shares included in the
Baskets being created or redeemed,
determined on the day the order to
create or redeem Baskets is accepted by
the Trustee.
Additional information regarding an
overview of the foreign exchange
industry, the specific foreign currency
underlying each issue of Shares,
creation and redemption procedures,
risk factors, distributions, fees and
expenses, and clearance and settlement
procedures is available in the
Registration Statements.
Valuation of the Applicable Foreign
Currency, Definition of Net Asset Value
and Adjusted Net Asset Value
The Trustee calculates, and the
Sponsor publishes, each Trust’s NAV
each business day. To calculate the
NAV, the Trustee adds to the amount of
foreign currency in the Trust at the end
of the preceding day accrued but unpaid
interest, the foreign currency receivable
under pending purchase orders and the
value of other Trust assets, and subtracts
the accrued but unpaid Sponsor’s fee,
the foreign currency payable under
pending redemption orders and other
Trust expenses and liabilities, if any.
The result is the NAV of the Trust for
that business day. The Trustee shall also
divide the NAV of each Trust by the
number of Shares outstanding for the
date of the evaluation then being made,
which figure is the ‘‘NAV per Share.’’
The NAV will be expressed in USD
based on the Closing Spot Rate 15 as
determined by WM/Reuters at 4:00 p.m.
(London time). If, on a particular
evaluation day, the Closing Spot Rate
has not been determined and
announced by 6 p.m. (London time),
then the most recent Closing Spot Rate
shall be used to determine the NAV of
the Trust unless the Trustee, in
consultation with the Sponsor,
determines that such price is
inappropriate to use as the basis for
such valuation. In the event that the
Trustee and the Sponsor determine that
the most recent Closing Spot Rate is not
an appropriate basis for valuation of the
Trust’s currency, the Trustee and the
Sponsor shall determine an alternative
basis or such evaluation to be employed
by the Trustee. Such an alternative basis
may include reference to the market
15 Closing Rate is defined in the Registration
Statements as ‘‘the [Foreign Currency]/USD
exchange rate as determined by WM/Reuters at 4:00
PM (London time).’’ WM/Reuters is a joint venture
of The WM Company PLC and Thomson Reuters.
PO 00000
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Fmt 4703
Sfmt 4703
49525
price of futures contracts that reflect the
value of the foreign currency relative to
the USD. The use of any alternative
basis to determine NAV would be
disclosed on the Trust’s Web site. The
Trustee also determines the NAV per
Share, which equals the NAV of the
Trust divided by the number of
outstanding Shares. The Sponsor
publishes the NAV and NAV per Share
for each Trust on each day that the
Exchange is open for regular trading on
the Trusts’ Web site, https://
www.currencyshares.com.16
Availability of Information Regarding
Foreign Currency Prices
Currently, the Consolidated Tape Plan
does not provide for dissemination of
the spot price of a foreign currency over
the Consolidated Tape. However, there
is disseminated over the Consolidated
Tape the last sale price for the Shares,
as is the case for all equity securities
traded on the Exchange (including
exchange-traded funds). In addition,
there is a considerable amount of
foreign currency price and market
information available on public Web
sites and through professional and
subscription services. As is the case
with equity securities generally and
exchange-traded funds specifically, in
most instances, real-time information is
only available for a fee, and information
available free of charge is subject to
delay (typically, 15 to 20 minutes).
Complete real-time data for foreign
currency futures and options on futures
prices traded on the CME are also
available by subscription from
information service providers. The CME
also provides delayed futures and
options information on current and past
trading sessions and market news free of
charge on their respective Web sites.
Investors may obtain, 24 hours a day,
continuously updated every 15 seconds,
foreign exchange pricing information
based on the spot price of the applicable
foreign currency from various financial
information service providers, which
service providers include Bloomberg,
(https://www.bloomberg.com/markets/
currencies/fxc.html), CBS Market Watch
(https://www.marketwatch.com/tools/
stockresearch/globalmarkets), Yahoo!
Finance (https://
www.finance.yahoo.com/currency),
https://www.moneycentral.com, https://
www.cnnfn.com and https://
www.reuters.com. Such service
providers provide spot price or currency
conversion information about the
16 The Exchange will obtain a representation from
the Trusts that the NAV per Share will be
calculated daily and made available to all market
participants at the same time.
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foreign currencies. Many of these sites
offer price quotations drawn from other
published sources, and as the
information is supplied free of charge, it
generally is subject to time delays. In
addition, major market data vendors
regularly report current currency
exchange pricing for a fee for other
currencies.17 In addition, the Trusts’
Web site provides ongoing pricing
information for the applicable foreign
currency spot prices and the Shares.
Market prices for the Shares are
available from a variety of sources,
including brokerage firms, financial
information Web sites and other
information service providers. The NAV
of the Trusts is published by the
Sponsor on each day that the Exchange
is open for regular trading and is posted
on the Trusts’ Web site. Like bond
securities traded in the OTC market
with respect to which pricing
information is available directly from
bond dealers, current foreign currency
spot prices are also generally available
with bid/ask spreads from foreign
currency dealers.18 Quotation and last
sale information for the Shares will be
made available via the Consolidated
Tape.
In addition, the Trusts’ Web site
(https://www.currencyshares.com)
provides the following information: (1)
The spot price for each applicable
foreign currency,19 including the bid
and offer and the midpoint between the
bid and offer for the foreign currency
spot price, updated every 5 to 10
seconds 20 which is an essentially realtime basis; (2) an intraday indicative
value (‘‘IIV’’) per share for the Shares
calculated by multiplying the indicative
spot price of the applicable foreign
currency by the quantity of foreign
currency backing each Share, updated at
17 There may be incremental differences in the
foreign currency spot price among the various
information service sources. While the Exchange
believes the differences in the foreign currency spot
price may be relevant to those entities engaging in
arbitrage or in the active daily trading of the
applicable foreign currency or derivatives thereon,
the Exchange believes such differences are likely of
less concern to individual investors intending to
hold the Shares as part of a long-term investment
strategy.
18 See, e.g., Securities Exchange Act Release No.
46252 (July 24, 2002), 67 FR 49715 (July 31, 2002)
(SR–Amex–2001–35) (noting that quote and trade
information regarding debt securities is widely
available to market participants from a variety of
sources, including broker-dealers, information
service providers, newspapers and Web sites).
19 The Trusts’ Web site’s foreign currency spot
prices will be provided by FactSet Research
Systems (https://www.factset.com). FactSet Research
Systems is not affiliated with the Trusts, Trustee,
Sponsor, Depository, Distributor or the Exchange.
20 The midpoint will be calculated by the
Sponsor. The midpoint is used for purposes of
calculating the premium or discount of the Shares.
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17:48 Aug 20, 2008
Jkt 214001
least every 15 seconds 21; (3) a delayed
indicative value (subject to a 20 minute
delay), which is used for calculating
premium/discount information; (4)
premium/discount information,
calculated on a 20 minute delayed basis;
(5) the NAV of each Trust as calculated
each business day by the Trustee; (6)
accrued interest per Share; (7) the
Basket Amount for each applicable
foreign currency; and (8) the last sale
price of the Shares as traded in the U.S.
market, subject to a 20-minute delay, as
it is provided free of charge.22 On the
Trusts’ Web site, the foreign currency
spot price is available and disseminated
at least every 15 seconds and the IIV per
Share is calculated and disseminated at
least every 15 seconds during NYSE
Arca’s Core Trading Session.23 The
Exchange will provide on its own public
Web site (https://www.nyse.com) a link
to the Trusts’ Web site.
Initial and Continued Listing Criteria
The Shares would be subject to the
criteria for initial and continued listing
of Currency Trust Shares under NYSE
Arca Equities Rules 8.202. A minimum
of two Creation Units (at least 100,000
Shares) would be required to be
outstanding at the start of trading. This
minimum number of Shares required to
be outstanding at the start of trading
would be comparable to requirements
that have been applied to previously
listed series of exchange-traded funds.
The Exchange believes that the
proposed minimum number of Shares
outstanding at the start of trading is
sufficient to provide market liquidity.
The Exchange would remove the Shares
from trading and listing upon
termination of the Trusts.24
21 The intraday indicative value of the Shares is
analogous to the intraday optimized portfolio value
(sometimes referred to as the IOPV), indicative
portfolio value and the intraday indicative value
(sometimes referred to as the IIV) associated with
the trading of exchange-traded funds. See, e.g.,
Securities Exchange Act Release No. 46686 (October
18, 2002), 67 FR 65388 (October 24, 2002) (SR–
NYSE–2002–51) for a discussion of indicative
portfolio value in the context of an exchange-traded
fund.
22 The last sale price of the Shares in the
secondary market is available on a real-time basis
for a fee from regular data vendors.
23 Pursuant to NYSE Arca Equities Rule 7.34(a),
the NYSE Arca Marketplace trading hours for
exchange-traded funds are as follows: (1) Opening
trading session—4:00 a.m. to 9:30 a.m. ET; (2) core
trading session—9:30 a.m. to 4:15 p.m. ET; and (3)
late trading session—4:15 p.m. to 8:00 p.m. ET. The
Sponsor has represented to the Exchange that the
spot price will be available on the Trust’s Web site
without interruption 24 hours a day, seven days a
week.
24 E-mail from Michael Cavalier, Associate
General Counsel, NYSE Group, Inc., to Edward Y.
Cho, Special Counsel, Division of Trading and
Markets, Commission, dated August 14, 2008
(confirming that the Trusts are not required to
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. The trading hours for
the Shares on the Exchange are the same
as those set forth in NYSE Arca Equities
Rule 7.34 (4 a.m. to 8 p.m. Eastern time).
The minimum trading increment for
Shares on the Exchange would be $0.01.
NYSE Arca Equities Rules 8.202(g)–(i)
set forth certain restrictions on ETP
Holders acting as registered Market
Makers in the Shares to facilitate
surveillance. NYSE Arca Equities Rule
8.202(h) requires that the ETP Holder
acting as a registered Market Maker in
the Shares provide the Exchange with
information relating to its trading in the
applicable foreign currency, options,
futures or options on futures on such
currency, or any other derivatives based
on such currency. NYSE Arca Equities
Rule 8.202(i) prohibits the ETP Holder
acting as a registered Market Maker in
the Shares from using any material
nonpublic information received from
any person associated with an ETP
Holder or employee of such person
regarding trading by such person or
employee in the applicable foreign
currency, options, futures or options on
futures on such currency, or any other
derivatives based on such currency
(including the Shares). In addition,
NYSE Arca Equities Rule 8.202(g)
prohibits the ETP Holder acting as a
registered Market Maker in the Shares
from being affiliated with a market
maker in the applicable foreign
currency, options, futures or options on
futures on such currency, or any other
derivatives based on such currency,
unless adequate information barriers are
in place, as provided in NYSE Arca
Equities Rule 7.26.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
a Trust. Trading may be halted because
of market conditions or for reasons that,
in the view of the Exchange, make
trading in the Shares inadvisable. These
may include: (i) The extent to which
trading is not occurring in the
applicable underlying foreign currency;
or (ii) whether other unusual conditions
or circumstances detrimental to the
maintenance of a fair and orderly
market are present. In addition, trading
in the Shares could be halted pursuant
comply with Rule 10A–3 under the Act, 17 CFR
240.10A–3, for the initial and continued listing of
the Shares).
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to the Exchange’s ‘‘circuit breaker’’
rule.25
If the IIV or the value of foreign
currency is not being calculated or
widely disseminated as required, the
Exchange may halt trading during the
day in which the interruption to the
calculation or wide dissemination of the
IIV or the foreign currency value occurs.
If the interruption to the calculation or
wide dissemination of the IIV or the
foreign currency value persists past the
trading day in which it occurred, the
Exchange would halt trading no later
than the beginning of the trading day
following the interruption. Under NYSE
Arca Equities Rule 7.34(a)(5), if the
Exchange becomes aware that the NAV
is not being disseminated to all market
participants at the same time, it will halt
trading in the Shares until such time as
the NAV is available to all market
participants.26
Surveillance
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The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative products,
including Currency Trust Shares, to
monitor trading in the Shares. The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The Exchange’s current trading
surveillance focuses on detecting when
securities trade outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange may obtain information
via the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges who are
members of ISG.27 Specifically, the
Exchange can obtain such information
from the CME in connection with
foreign currency futures and options on
futures trading on the CME pertaining to
futures and options on futures on the
Russian Ruble and South African
Rand.28 Therefore, as noted earlier, CME
surveillance and CFTC oversight would
pertain only to futures and options on
futures on the Russian Ruble and South
African Rand. In addition, the Exchange
also has a general policy prohibiting the
25 See
NYSE Arca Equities Rule 7.12.
26 See Securities Exchange Act Release No. 58111
(July 7, 2008), 73 FR 40643 (July 15, 2008) (SR–
NYSEArca–2008–50).
27 For a list of the current members of ISG, see
https://www.isgportal.org.
28 CME is a member of ISG.
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17:48 Aug 20, 2008
Jkt 214001
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to listing the Shares on the
Exchange, the Exchange would inform
its ETP Holders in an Information
Bulletin (‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Bulletin would discuss the following:
(i) The procedures for purchases and
redemptions of Shares in Baskets (and
that Shares are not individually
redeemable); (ii) NYSE Arca Equities
Rule 9.2(a),29 which imposes a duty of
due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Shares;
(iii) how information regarding the IIV
and applicable foreign currency value is
disseminated; (iv) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; (v) the
risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated IIV will not
be calculated or publicly disseminated;
and (vi) trading information.
The Bulletin would also state that the
number of units of the applicable
foreign currency required to create a
Basket or to be delivered upon
redemption of a Basket may gradually
decrease over time in the event that a
Trust is required to withdraw or sell
units of foreign currency to pay the
Trust’s expenses, and that if done at a
time when the price of the applicable
foreign currency is relatively low, it
could adversely affect the value of the
Shares. In addition, the Bulletin would
reference that the Trusts are subject to
various fees and expenses described in
the Registration Statements. The
Bulletin would also reference the fact
that there is no regulated source of last
sale information regarding foreign
currency, and that the Commission has
no jurisdiction over the trading of
foreign currency. The Bulletin would
also discuss any exemptive, no-action
29 NYSE Arca Equities Rule 9.2(a) provides that
ETP Holders, before recommending a transaction,
must have reasonable grounds to believe that the
recommendation is suitable for the customer based
on any facts disclosed by the customer as to his
other security holdings and as to his financial
situation and needs. Further, the rule provides,
with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional
customer, ETP Holders shall make reasonable
efforts to obtain information concerning the
customer’s financial status, tax status, investment
objectives, and any other information that they
believe would be useful to make a recommendation.
See Securities Exchange Act Release No. 54045
(June 26, 2006), 71 FR 37971 (July 3, 2006) (SR–
PCX–2005–115).
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49527
and interpretive relief granted by the
Commission from Section 11(d)(1) of the
Act 30 and certain rules under the Act.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) 31 of the Act, in general, and
Section 6(b)(5),32 in particular, in that it
is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system. The Exchange believes that the
proposed rule change will facilitate the
listing and trading of additional types of
exchange-traded products that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. In addition, the
listing and trading criteria set forth in
Rule 8.202 are intended to protect
investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NYSE Arca does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. 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–NYSEArca–2008–81 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
30 15
U.S.C. 78k(d)(1).
U.S.C. 78f(b).
32 15 U.S.C. 78f(b)(5).
31 15
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Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2008–81. 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of the filing also will be available
for inspection and copying at the
principal office of the Exchange. 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–NYSEArca–2008–81 and
should be submitted on or before
September 11, 2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.33 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,34 which
requires that the rules of an exchange be
designed, among other things, 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 a national market system, and, in
general, to protect investors and the
33 In approving this rule change, the Commission
notes that it has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
34 15 U.S.C. 78f(b)(5).
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17:48 Aug 20, 2008
Jkt 214001
public interest. The Commission notes
that it previously approved the original
listing and trading of shares of other
CurrencyShares Trusts, and the instant
proposal is substantively identical to the
previous proposals.35
The Commission further believes that
the proposal is consistent with Section
11A(a)(1)(C)(iii) of the Act,36 which sets
forth Congress’ finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for and
transactions in securities. Quotations
and last-sale price information for the
Shares are disseminated over the
Consolidated Tape. The Trust
disseminates the foreign currency spot
prices for each of the Trusts and the IIV
per Share at least every 15 seconds on
its Web site during the Core Trading
Session of the Exchange. In addition,
the Sponsor publishes the NAV and
NAV per Share for each Trust on each
day that the Exchange is open for
regular trading on the Trusts’ Web site.
Investors may obtain on a 24-hour basis
foreign currency pricing information
based on the foreign currency spot price
of each applicable foreign currency from
various financial information service
providers. Current spot prices are also
generally available with bid/ask spreads
from foreign exchange dealers. In
addition, the Trusts’ Web site provides
ongoing pricing information for the
applicable foreign currency spot prices
and the Shares. The Exchange
represents that complete, real-time data
for foreign currency futures and options
prices traded on CME are also available
by subscription from information
service providers. CME also provides
delayed futures and options information
on current and past trading sessions and
market news free of charge on its Web
site. There are a variety of other public
Web sites available at no charge that
provide information on the foreign
currencies underlying the Shares,
including spot price or currency
conversion information about the
foreign currencies. In addition, the
Trusts’ Web site provides the following
information: (1) The spot price for each
applicable foreign currency, including
the bid and offer and the midpoint
between the bid and offer for the foreign
currency spot price, updated every 5 to
10 seconds; (2) IIV, updated at least
every 15 seconds; (3) a delayed
indicative value (subject to a 20 minute
delay), which is used for calculating
35 See
36 15
PO 00000
supra note 4.
U.S.C. 78k–1(a)(1)(C)(iii).
premium/discount information; (4)
premium/discount information,
calculated on a 20 minute delayed basis;
(5) accrued interest per Share; (6) NAV
of each Trust; (7) the Basket amount for
each applicable foreign currency; and
(8) the last-sale price of the Shares as
traded in the U.S. markets, subject to a
20-minute delay. The Exchange states
that it will provide on its own Web site
a link to the Trusts’ Web site.
Furthermore, the Commission
believes that the proposal to list and
trade the Shares is reasonably designed
to promote fair disclosure of
information that may be necessary to
price the Shares appropriately. The
Commission notes that the Exchange
will obtain a representation from the
Trusts that the NAV per Share for each
Trust would be calculated daily and
made available to all market
participants at the same time.37 NYSE
Arca Equities Rule 8.202(i) provides
that, in connection with trading in the
applicable foreign currency, options,
futures or options on futures on such
currency, or any other derivatives based
on such currency, including Currency
Trust Shares, an ETP Holder acting as a
Market Maker (as defined in NYSE Arca
Equities Rule 1.1(u)) in the Shares is
restricted from using any material, nonpublic information received from any
person associated with such ETP Holder
who is trading such foreign currency,
options, futures or options on futures on
such currency, or any other derivatives
based on such currency. In addition,
NYSE Arca Equities Rule 8.202(g)
prohibits an ETP Holder acting as a
registered Market Maker in the Shares
from being affiliated with a market
maker in the applicable foreign
currency, options, futures or options on
futures on such currency, or any other
derivatives based on such currency,
unless adequate information barriers are
in place, as provided in NYSE Arca
Equities Rule 7.26.
The Commission also believes that the
Exchange’s trading halt rules are
reasonably designed to prevent trading
in the Shares when transparency is
impaired. NYSE Arca Equities Rule
8.202(e)(2) provides that, when the
Exchange is the listing market, if the
value of the underlying foreign currency
or IIV is no longer calculated or
available on at least a 15-second delayed
basis, the Exchange would consider
suspending trading in the Shares. NYSE
Arca Equities Rule 8.202(e)(2) also
provides that the Exchange may seek to
delist the Shares in the event the value
of the applicable foreign currency or IIV
is no longer calculated or available as
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37 See
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required. In addition, NYSE Arca
Equities Rule 7.34(a)(5) provides that, if
the Exchange becomes aware that the
NAV is not being disseminated to all
market participants at the same time, it
will halt trading in the Shares until such
time as the NAV is available to all
market participants.38
The Commission further believes that
the trading rules and procedures to
which the Shares will be subject
pursuant to this proposal are consistent
with the Act. The Exchange has
represented that any securities listed
pursuant to this proposal will be
deemed equity securities and be subject
to existing Exchange rules governing the
trading of equity securities.
In support of this proposal, the
Exchange has made the following
representations:
(1) The Exchange represents that it
intends to utilize its existing
surveillance procedures applicable to
derivative products, including Currency
Trust Shares, to monitor trading in the
Shares and that such procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws. The
Exchange may obtain information via
ISG from other exchanges that are
members of ISG. Specifically, the
Exchange can obtain such information
from CME in connection with foreign
currency futures and options on futures
trading on CME pertaining to futures
and options on futures on the Russian
ruble and South African rand.
(2) The Exchange represents that if the
interruption to the calculation or wide
dissemination of the value of the
underlying foreign currency or IIV
persists past the trading day in which it
occurred, the Exchange would halt
trading no later than the beginning of
the trading day following the
interruption.
(3) Prior to listing and trading the
Shares, the Exchange represents that it
will inform its ETP Holders in the
Bulletin of the special characteristics
and risks associated with trading the
Shares.
This approval order is based on the
Exchange’s representations.
The Commission finds good cause for
approving this proposal before the 30th
day after the publication of notice
thereof in the Federal Register. As
noted above, the Commission
previously approved the original listing
and trading, and trading pursuant to
UTP, of shares of other CurrencyShares
38 See
supra note 26 and accompanying text.
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17:48 Aug 20, 2008
Jkt 214001
Trusts.39 The Commission presently is
not aware of any regulatory issue that
should cause it to revisit those findings
or would preclude the listing and
trading of the Shares on the Exchange.
Accelerating approval of this proposed
rule change would allow the Shares to
be listed on the Exchange without
undue delay.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,40 that the
proposed rule change (SR–NYSEArca–
2008–81), as modified by Amendment
No. 1 thereto, be, and it hereby is,
approved on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–19356 Filed 8–20–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58361; File No. SR–Phlx–
2008–50]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Order Approving a Proposed Rule
Change Relating to the Electronic
Handling of Complex Orders
August 14, 2008.
I. Introduction
On July 1, 2008, the Philadelphia
Stock Exchange, Inc. (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposal to adopt Phlx
Rule 1080, Commentary .08, ‘‘Complex
Orders on Phlx XL,’’ to provide for the
electronic handling of certain Complex
Orders on Phlx XL, the Phlx’s electronic
trading platform for options. The
proposed rule change was published for
comment in the Federal Register on July
10, 2008.3 The Commission received no
comments regarding the proposed rule
change. This order approves the
proposed rule change.
39 See
supra notes 3 and 4.
U.S.C. 78s(b)(2).
41 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 58099
(July 3, 2008), 73 FR 39769 (‘‘Notice’’).
40 15
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
49529
II. Description of the Proposal
The Phlx proposes to adopt Phlx Rule
1080, Commentary .08 to provide for the
electronic handling of certain Complex
Orders on Phlx XL.4 Phlx members and
Phlx XL participants quoting and
trading in open outcry will be required
to submit quotes and/or orders
electronically to participate in the
electronic Complex Order system.5
As described briefly below and in
greater detail in the Notice,6 the
proposal establishes a Complex Order
Opening Process (‘‘COOP’’), a Complex
Order Book (‘‘CBOOK’’), and a Complex
Order Live Auction (‘‘COLA’’). In
addition, the proposal includes a
Strategy Price Protection (‘‘SPP’’) feature
that will prevent certain Complex
Orders from trading at prices outside of
specified pre-set limits.
COOP
After trading has opened in each
component of a pending Complex Order
or re-opened following a trading halt,
the Phlx XL system will initiate the
COOP.7 There will be one COOP per
Complex Order Strategy.8 The COOP is
composed of two components: (1) The
COOP Timer, a period ranging from 0 to
600 seconds, as determined by the Phlx,
during which the Complex Order will
not trade; and (2) the COOP Evaluation,
the period following the conclusion of
the COOP Timer during which the Phlx
XL system will determine which
Complex Order on the CBOOK, if any,
will be eligible for a COLA. Complex
Orders received during the COOP Timer
and the COOP Evaluation will reside on
the CBOOK and will be visible to Phlx
XL participants.9
At the conclusion of the COOP Timer,
the Phlx XL system will identify the
‘‘COLA-eligible order,’’ 10 if any, from
4 The ‘‘Complex Orders’’ that may be traded on
Phlx XL are spread orders, as defined in Phlx Rule
1066(f)(1); straddle orders, as defined in Phlx Rule
1066(f)(2); combination orders, as defined in Phlx
Rule 1066(f)(3); ratio orders; and collar (risk
reversal) orders. See Phlx Rule 1080, Commentary
.08(a)(i).
5 See Phlx Rule 1080, Commentary .08(e)(ix).
6 See Notice, supra note 3.
7 See Phlx Rule 1080, Commentary .08(d)(ii).
However, as described in greater detail in the
Notice, supra note 3, a COOP will not be initiated
if any of the conditions in Phlx Rule 1080,
Commentary .08(c)(ii) exist.
8 See Phlx Rule 1080, Commentary .08(d)(i). A
‘‘Complex Order Strategy’’ is any Complex Order
involving any option series that is priced at a net
debit or credit based on the relative prices of each
component. See Phlx Rule 1080, Commentary
.08(a)(ii).
9 See Phlx Rule 1080, Commentary .08(d)(ii)(A)(3)
and (4).
10 A ‘‘COLA-eligible order’’ is a Complex Order
(a) identified by way of a COOP; or (b) that, upon
receipt, improves the cPBBO (i.e., the Phlx best net
E:\FR\FM\21AUN1.SGM
Continued
21AUN1
]]>Agencies
[Federal Register Volume 73, Number 163 (Thursday, August 21, 2008)]
[Notices]
[Pages 49522-49529]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-19356]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58365; File No. SR-NYSEArca-2008-81]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of Proposed Rule Change, as
Modified by Amendment No. 1 Thereto, Relating to Listing and Trading of
Four CurrencyShares Trusts
August 14, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 30, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''),
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE
Arca Equities''), filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
On August 11, 2008, the Exchange filed Amendment No. 1 to the proposed
rule change. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons and is granting approval to the proposed rule change, as
modified by Amendment No. 1 thereto, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list shares (``Shares'') of the following
trusts: CurrencySharesSM Hong Kong Dollar Trust,
CurrencySharesSM Russian Ruble Trust,
CurrencySharesSM Singapore Dollar Trust, and
CurrencySharesSM South African Rand Trust (``Trusts'') under
NYSE Arca Equities Rule 8.202. The text of the proposed rule change is
available on the Exchange's Web site at https://www.nyse.com, at the
Exchange's principal office 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, NYSE Arca 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 those statements may be examined at the places specified in
Item III below. NYSE Arca has prepared summaries, set forth in sections
A, B, and C below, of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Under NYSE Arca Equities Rule 8.202, the Exchange may propose to
list and/or trade pursuant to unlisted trading privileges (``UTP'')
``Currency Trust Shares.'' \3\ The Exchange proposes to list the Shares
of the Trusts under NYSE Arca Equities Rule 8.202.\4\
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\3\ See NYSE Arca Equities Rule 8.202 and Securities Exchange
Act Release No. 53253 (February 8, 2006), 71 FR 8029 (February 15,
2006) (SR-PCX-2005-123) (order granting accelerated approval for the
Exchange to adopt listing and trading standards for Currency Trust
Shares and approving the UTP trading of shares of the Euro Currency
Trust (now known as the ``CurrencyShares Euro Trust'')). E-mail from
Michael Cavalier, Associate General Counsel, NYSE Group, Inc., to
Brian O'Neill, Staff Attorney, and Edward Cho, Special Counsel,
Division of Trading and Markets, Commission, dated August 4, 2008
(confirming the name change of the Euro Currency Trust to the
CurrencyShares Euro Trust). As defined in NYSE Arca Equities Rule
8.202(c), the term ``Currency Trust Shares'' means a security that
(a) Is issued by a trust (``Trust'') that holds a specified non-U.S.
currency deposited with the Trust; (b) when aggregated in some
specified minimum number may be surrendered to the Trust by the
beneficial owner to receive the specified non-U.S. currency; and (c)
pays beneficial owners interest and other distributions on the
deposited non-U.S. currency, if any, declared and paid by the Trust.
\4\ The Commission has previously approved listing or UTP
trading of issues of CurrencyShares based on non-US currencies. See
Securities Exchange Act Release No. 52843 (November 28, 2005), 70 FR
72486 (December 5, 2005) (SR-NYSE-2005-65) (order granting
accelerated approval for the New York Stock Exchange (``NYSE'') to
list and trade shares of the CurrencyShares Euro Trust); Securities
Exchange Act Release No. 54020 (June 20, 2006), 71 FR 36579 (June
27, 2006) (SR-NYSE-2006-35) (order granting accelerated approval for
NYSE to list and trade shares of the CurrencyShares Australian
Dollar Trust, CurrencyShares British Pound Sterling Trust,
CurrencyShares Canadian Dollar Trust, CurrencyShares Mexican Peso
Trust, CurrencyShares Swedish Krona Trust and CurrencyShares Swiss
Franc Trust); Securities Exchange Act Release No. 55268 (February 9,
2007), 72 FR 7793 (February 20, 2007) (SR-NYSE-2007-03) (order
granting accelerated approval for NYSE to list and trade shares of
the CurrencyShares Japanese Yen Trust); Securities Exchange Act
Release No. 55320 (February 21, 2007), 72 FR 8828 (February 27,
2007) (SR-NYSEArca-2007-15) (order granting accelerated approval for
the Exchange to UTP trade shares of the CurrencyShares Japanese Yen
Trust); Securities Exchange Act Release No. 56131 (July 25, 2007),
72 FR 42212 (August 1, 2007) (SR-NYSEArca-2007-57) (order granting
accelerated approval for Exchange to list eight CurrencyShares
Trusts).
---------------------------------------------------------------------------
Rydex Specialized Products LLC is the sponsor of the Trusts
(``Sponsor''); The Bank of New York is the trustee of the Trusts
(``Trustee''); JPMorgan Chase Bank, N.A., London Branch, is the
depository for the Trusts (``Depository''); and Rydex Distributors,
Inc. is the distributor for the Trusts (``Distributor''). The Sponsor,
Trustee, Depository and Distributor are not affiliated with the
Exchange or one another, with the exception that the Sponsor and
Distributor are affiliated. For more information on these entities, see
below.
The Shares represent units of fractional undivided beneficial
interest in, and ownership of, the respective Trust. The investment
objective of the Trusts is for the Shares issued by the Trusts to
reflect the price of the applicable foreign currency owned by the
specific Trust, plus accrued interest, less the expenses and
liabilities of such Trust, according to the Registration Statements for
the Trusts.\5\ The Shares
[[Page 49523]]
are intended to provide institutional and retail investors with a
simple, cost-effective means of hedging their exposure to a particular
foreign currency and otherwise implement investment strategies that
involve foreign currency (e.g., diversify more generally against the
risk that the U.S. Dollar (``USD'') would depreciate).\6\
---------------------------------------------------------------------------
\5\ See Preliminary Prospectuses for the CurrencyShares Hong
Kong Dollar Trust (Registration No. 333-150686), CurrencyShares
Russian Ruble Trust (Registration No. 333-150687), CurrencyShares
Singapore Dollar Trust (Registration No. 333-150684), and
CurrencyShares South African Rand Trust (Registration No. 333-
150685), each dated July 21, 2008. The Preliminary Prospectuses
listed in this paragraph are collectively referred to herein as the
``Registration Statements.'' All information in this proposed rule
change relating to the Shares and the Trusts is based on information
in the Registration Statements.
\6\ For April 2007, the daily average reported foreign exchange
market turnover of the USD against the Hong Kong Special
Administrative Region (SAR), Russia, Singapore and South Africa was
$175 billion, $50 billion, $231 billion and $14 billion,
respectively. (Source: Bank for International Settlements, Triennial
Central Bank Survey, December 2007, Table B.2 (``Central Bank
Survey'')). The Central Bank Survey reports that there appears to
have been an increase in total turnover of emerging market
currencies. In April 2007, emerging market currencies were involved
in almost 20% of all transactions. Specifically, the Hong Kong
Dollar, Singapore Dollar, Rand and Ruble experienced a percentage
share of average daily turnover of 2.8%, 1.2%, 0.9% and 0.8%,
respectively, reflecting slight increases from previously reported
years. (Source: Bank for International Settlements, Triennial
Central Bank Survey, December 2007, Table B.6)
---------------------------------------------------------------------------
Futures and options on futures on the Russian Ruble and the South
African Rand are traded on the Chicago Mercantile Exchange (``CME'').
Futures on the Russian Ruble are also traded on the Moscow Interbank
Currency Exchange and the Russian Trading System. Based upon the
Exchange's review of information supplied by major market data vendors,
futures or options are not traded on the Singapore Dollar or Hong Kong
Dollar. Because the Shares are traded on NYSE Arca, investors are able
to access the applicable foreign currency market through a traditional
brokerage account which provides investors with an efficient means of
implementing investment tactics and strategies that involve the
applicable foreign currency.
Foreign Currency Regulation
Most trading in the global over-the-counter (``OTC'') foreign
currency markets is conducted by regulated financial institutions such
as banks and broker-dealers. In addition, in the United States, the
Foreign Exchange Committee of the New York Federal Reserve Bank has
issued Guidelines for Foreign Exchange Trading, and central-bank
sponsored committees in Japan and Singapore have published similar best
practice guidelines. In the United Kingdom, the Bank of England has
published the Non-Investment Products Code, which covers foreign
currency trading. The Financial Markets Association, whose members
include major international banking organizations, has also established
best practices guidelines called the Model Code.
Participants in the U.S. OTC market for foreign currencies are
generally regulated by their oversight regulators. For example,
participating banks are regulated by the banking authorities. In
addition, in the U.S. the Commodity Futures Trading Commission
(``CFTC'') regulates trading of futures, options and options on futures
on foreign currencies on regulated futures exchanges.\7\ The CFTC has
established rules designed to prevent market manipulation, abusive
trade practices and fraud, as does the CME.
---------------------------------------------------------------------------
\7\ The CFTC is an independent government agency with the
mandate to regulate commodity futures and options markets in the
United States under the Commodity Exchange Act. In addition to its
oversight of regulated futures exchanges, the CFTC has jurisdiction
over certain foreign currency futures, options and options on
futures transactions occurring other than on a regulated exchange
and involving retail customers.
---------------------------------------------------------------------------
The CME has authority to perform surveillance on its members'
trading activities, review positions held by members and large-scale
customers, and monitor the price movements of options and/or futures
markets by comparing them with cash and other derivative markets'
prices. As noted above, based upon the Exchange's review of market data
information, futures or options are not traded on the Singapore Dollar
or Hong Kong Dollar. Therefore, CME surveillance and CFTC oversight
would pertain only to futures and options on futures on the Russian
Ruble and South African Rand.
The Sponsor
The Sponsor of each Trust is a Delaware limited liability company.
The sole member of the Sponsor is PADCO Advisors II, Inc., a Maryland
corporation solely owned by Rydex Holdings, Inc., a Maryland
corporation. Rydex Holdings, Inc. is solely owned by Rydex NV, Inc., a
Nevada corporation that is privately-held. The Sponsor and its
affiliates collectively do business as ``Rydex Investments.''
The Sponsor is responsible for establishing the Trusts and for the
registration of the Shares. The Sponsor generally oversees the
performance of the Trustee and the Trusts' principal service providers,
but does not exercise day-to-day oversight over the Trustee or such
service providers. The Sponsor regularly communicates with the Trustee
to monitor the overall performance of the Trusts. The Sponsor, with
assistance and support from Rydex affiliates who also do business as
``Rydex Investments,'' the Trustee and outside professionals, are
responsible for preparing and filing periodic reports on behalf of the
Trusts with the SEC.\8\ The Sponsor designates the auditors of the
Trusts and may from time to time employ legal counsel for the Trust.
---------------------------------------------------------------------------
\8\ The Sponsor has obtained guidance from the SEC Division of
Corporation Finance with respect to the Trusts pursuant to which the
Sponsor's principal executive officer and principal financial
officer will provide any certifications that are required from a
``registrant's'' principal executive officer and principal financial
officer. See letters from the Office of Chief Counsel, Division of
Corporation Finance, at the Commission dated March 22, 2006 (with
respect to the CurrencySharesSM Euro Trust ); September
13, 2006 (with respect to the CurrencySharesSM Australian
Dollar Trust, CurrencySharesSM British Pound Sterling
Trust, CurrencySharesSM Canadian Dollar Trust,
CurrencySharesSM Mexican Peso Trust,
CurrencySharesSM Swedish Krona Trust, and
CurrencySharesSM Swiss Franc Trust) and March 27, 2007
(with respect to the CurrencySharesSM Japanese Yen
Trust).
---------------------------------------------------------------------------
The Distributor is assisting the Sponsor in developing a marketing
plan for the Trusts, preparing marketing materials on the Shares,
executing the marketing plan for the Trusts and providing strategic and
tactical research on the global foreign exchange markets. The Sponsor
would not enter into an agreement with the Distributor covering these
services, because the Distributor is an affiliate and would not be paid
any compensation by the Sponsor for performing these services.
The Sponsor with the Distributor's assistance maintains a public
Web site on behalf of the Trusts, https://www.currencyshares.com, which
contains information about the Trusts and the Shares, and oversees
certain Shareholder services, such as a call center and prospectus
delivery.
The Sponsor may direct the Trustee in the conduct of its affairs,
but only as provided in the Depositary Trust Agreement. For example,
the Sponsor may direct the Trustee to sell the Trusts' foreign currency
to pay certain extraordinary expenses, to suspend a redemption order,
postpone a redemption settlement date, or to terminate the Trusts if
certain criteria are met. The Sponsor anticipates that, if the market
capitalization of a Trust is less than $300 million for five
consecutive trading days beginning after the first anniversary of such
Trust's inception, then the Sponsor would, in accordance with the
Depositary Trust Agreement, direct the Trustee to
[[Page 49524]]
terminate and liquidate such Trust. The Sponsor's fee accrues daily at
an annual nominal rate of 0.40% of the applicable foreign currency in
the Trust (including all unpaid interest but excluding unpaid fees,
each as accrued through the immediately preceding day) and is paid
monthly.
The Trustee
The Trustee is generally responsible for the day-to-day
administration of the Trusts, including keeping the Trusts' operational
records. The Trustee's principal responsibilities include selling the
Trusts' foreign currency if needed to pay the Trusts' expenses,
calculating the Net Asset Value (``NAV'') of the Trusts and the NAV per
Share, receiving and processing orders from Authorized Participants to
create and redeem Baskets (as discussed below) and coordinating the
processing of such orders with the Depository and DTC. The Trustee
earns a monthly fee that is paid by the Sponsor.
The Trustee intends to regularly communicate with the Sponsor to
monitor the overall performance of the Trusts. The Trustee, along with
the Sponsor, consults with the Trusts' legal, accounting and other
professional service providers as needed. The Trustee assists and
supports the Sponsor with the preparation of all periodic reports
required to be filed with the SEC on behalf of the Trusts. Affiliates
of the Trustee may from time to time act as Authorized Participants or
purchase or sell foreign currency or Shares for their own account.
The Depository
The Depository accepts Trust foreign currency deposited with it as
a banker by Authorized Participants in connection with the creation of
Baskets. The Depository facilitates the transfer of the applicable
foreign currency into and out of the Trust through the primary and
secondary deposit accounts maintained with it as a banker by the Trust.
The Depository is not paid a fee for its services to the Trusts.
The Depository may earn a ``spread'' or ``margin'' over the rate of
interest it pays to the Trusts on the applicable foreign currency
deposit balances.
The Depository is not a trustee for the Trusts or the Shareholders.
The Depository and its affiliates may from time to time act as
Authorized Participants or purchase or sell foreign currency or Shares
for their own account, as agent for their customers and for accounts
over which they exercise investment discretion.
The Distributor
The Distributor is a registered broker-dealer and is a member of
FINRA. The Distributor is assisting the Sponsor in developing a
marketing plan for the Trusts on an ongoing basis, preparing marketing
materials regarding the Shares, including the content on the Trusts'
Web site, https://www.currencyshares.com, executing the marketing plan
for the Trusts, and providing strategic and tactical research on the
global foreign exchange market. The Distributor and the Sponsor are
affiliates of one another. There is no written agreement between them,
and no compensation is paid by the Sponsor to the Distributor in
connection with services performed by the Distributor for the Trusts.
Description of the Trusts
The Trusts holds the applicable foreign currency and are expected
from time to time to issue Baskets in exchange for deposits of the
foreign currency and to distribute the foreign currency in connection
with redemptions of Baskets. The investment objective of the Trusts is
for the Shares to reflect the price in USD of the applicable foreign
currency. The Shares represent units of fractional undivided beneficial
interest in, and ownership of, the respective Trusts. The Trusts are
not managed like business corporations or active investment vehicles.
The foreign currency held by the Trusts would only be sold (1) If
needed to pay Trust expenses, (2) in the event a Trust terminates and
liquidates its assets or (3) as otherwise required by law or
regulation. The sale of foreign currency by the Trusts is a taxable
event to Shareholders. According to the Registration Statements, the
Trusts are not registered as investment companies under the Investment
Company Act of 1940 \9\ and are not required to register under such
Act.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 80a.
---------------------------------------------------------------------------
Each of the Trust's assets consists primarily of the applicable
foreign currency on demand deposit in two deposit accounts maintained
by the Depository: A primary deposit account which earns interest and a
secondary deposit account which does not earn interest. The secondary
deposit account is used only in connection with mid-month creations and
redemptions of blocks of 50,000 Shares (``Baskets''). The secondary
account is used to account for interest that has been earned on the
primary deposit account during the month but not yet paid and to
receive interest earned on the primary deposit account, pay Trust
expenses and distribute any excess interest to shareholders on a
monthly basis.
The Trusts do not hold any derivative products. Each Share
represents a proportional interest, based on the total number of Shares
outstanding, in the applicable foreign currency owned by the respective
Trusts, plus accrued but unpaid interest, less the estimated accrued
but unpaid expenses (both asset-based and non-asset based) of a Trust.
The Sponsor expects that the price of a Share will fluctuate in
response to fluctuations in the price of the applicable foreign
currency and that the price of a Share will reflect accumulated
interest as well as the estimated accrued but unpaid expenses of a
Trust. The Trusts will terminate upon the occurrence of any of the
termination events listed in the Depositary Trust Agreement and will
otherwise terminate on a specified date 40 years after formation of the
Trusts.
The Sponsor, on behalf of the Trusts, relies on relief previously
granted by the Division of Market Regulation (now known as the Division
of Trading and Markets) \10\ from certain trading requirements of the
Securities Exchange Act of 1934 (``Act'').\11\ The Sponsor has received
guidance from the Commission regarding the application of the
certification rules for quarterly and annual reports adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.\12\ In addition, the
Trusts will not be subject to the Exchange's corporate governance
requirements.\13\
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\10\ See letter from Racquel L. Russell, Branch Chief, SEC
Division of Market Regulation, to George T. Simon, Foley & Lardner,
dated June 21, 2006 (``June 21, 2006 letter'') (granting relief from
certain rules under the Act for certain of the Trusts); letter from
James A Brigagliano, Assistant Director, SEC Division of Market
Regulation to Michael Schmidtberger, Sidley, Austin, Brown & Wood,
dated January 19, 2006 (``January 19, 2006 Letter'') (granting
relief from certain rules under the Act for the DB Commodity Index
Tracking Master Fund). The Sponsor is relying on the June 21, 2006
Letter regarding Rule 10a-1, Rule 200(g) of Regulation SHO, and
Rules 101 and 102 of Regulation M under the Act, and is relying on
the January 19, 2006 Letter regarding Section 11(d)(1) of the Act
and Rule 11d1-2 thereunder.
\11\ 15 U.S.C. 78a.
\12\ See note 10, supra.
\13\ See Securities Exchange Act Release No. 48745 (November 4,
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33, et al.)
(specifically noting that the corporate governance standards will
not apply to, among others, passive business organizations in the
form of trusts). See also Securities Exchange Act Release No. 47654
(April 9, 2003), 68 FR 18788 (April 16, 2003) (File No. S7-02-03)
(noting in Section II(F)(3)(c) that ``SROs may exclude from Exchange
Act Rule 10A-3's requirements issuers that are organized as trusts
or other unincorporated associations that do not have a board of
directors or persons acting in a similar capacity and whose
activities are limited to passively owning or holding (as well as
administering and distributing amounts in respect of) securities,
rights, collateral or other assets on behalf of or for the benefit
of the holders of the listed securities.'')
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[[Page 49525]]
Liquidity
The amount of the discount or premium in the trading price relative
to the NAV per Share may be influenced by non-concurrent trading hours
between the major foreign currency markets and the Exchange. Because of
the potential for arbitrage inherent in the structure of the Trusts,
the Sponsor believes that the Shares will not trade at a material
discount or premium to the value of underlying currency held by a
Trust. The arbitrage process, which in general provides investors the
opportunity to profit from differences in prices of assets, increases
the efficiency of the markets, serves to prevent potentially
manipulative efforts and can be expected to operate efficiently in the
case of the Shares and the foreign currency. If the price of the Shares
deviates enough from the price of the foreign currency to create a
material discount or premium, an arbitrage opportunity is created. If
the Shares are inexpensive compared to foreign currency that underlies
them, an Authorized Participant, either on its own behalf or acting as
agent for investors, arbitrageurs or traders, may buy the Shares at a
discount, immediately redeem them in exchange for the foreign currency
and sell the foreign currency in the cash market at a profit. If the
Shares are expensive compared to the foreign currency that underlies
them, an Authorized Participant may sell the Shares short, buy enough
foreign currency to create the number of Shares sold short, acquire the
Shares through the creation process and deliver the Shares to close out
the short position.\14\ In both instances the arbitrageur serves
efficiently to correct price discrepancies between the Shares and the
underlying foreign currency.
---------------------------------------------------------------------------
\14\ The Exchange notes that the Trusts, which will only hold
the applicable foreign currency as an asset in the normal course of
its operations, differs from index-based exchange-traded funds,
which may involve a trust holding hundreds or even thousands of
underlying component securities, necessarily involving in the
arbitrage process movements in a large number of security positions.
See, e.g., Securities Exchange Act Release No. 46306 (August 2,
2002), 67 FR 51916 (August 9, 2002) (SR-NYSE-2002-28) (approving the
UTP trading of Vanguard Total Market VIPERs based on the Wilshire
5000 Total Market Index, among other funds).
---------------------------------------------------------------------------
Issuance of the Shares
Each Trust creates and redeems Shares in Baskets on a continuous
basis. A Basket is a block of 50,000 Shares. The creation and
redemption of Baskets requires the delivery to the Trust or the
distribution by the Trust of the amount of the applicable foreign
currency represented by the Baskets being created or redeemed. This
amount is based on the combined NAV per Share of the number of Shares
included in the Baskets being created or redeemed, determined on the
day the order to create or redeem Baskets is accepted by the Trustee.
Additional information regarding an overview of the foreign
exchange industry, the specific foreign currency underlying each issue
of Shares, creation and redemption procedures, risk factors,
distributions, fees and expenses, and clearance and settlement
procedures is available in the Registration Statements.
Valuation of the Applicable Foreign Currency, Definition of Net Asset
Value and Adjusted Net Asset Value
The Trustee calculates, and the Sponsor publishes, each Trust's NAV
each business day. To calculate the NAV, the Trustee adds to the amount
of foreign currency in the Trust at the end of the preceding day
accrued but unpaid interest, the foreign currency receivable under
pending purchase orders and the value of other Trust assets, and
subtracts the accrued but unpaid Sponsor's fee, the foreign currency
payable under pending redemption orders and other Trust expenses and
liabilities, if any. The result is the NAV of the Trust for that
business day. The Trustee shall also divide the NAV of each Trust by
the number of Shares outstanding for the date of the evaluation then
being made, which figure is the ``NAV per Share.'' The NAV will be
expressed in USD based on the Closing Spot Rate \15\ as determined by
WM/Reuters at 4:00 p.m. (London time). If, on a particular evaluation
day, the Closing Spot Rate has not been determined and announced by 6
p.m. (London time), then the most recent Closing Spot Rate shall be
used to determine the NAV of the Trust unless the Trustee, in
consultation with the Sponsor, determines that such price is
inappropriate to use as the basis for such valuation. In the event that
the Trustee and the Sponsor determine that the most recent Closing Spot
Rate is not an appropriate basis for valuation of the Trust's currency,
the Trustee and the Sponsor shall determine an alternative basis or
such evaluation to be employed by the Trustee. Such an alternative
basis may include reference to the market price of futures contracts
that reflect the value of the foreign currency relative to the USD. The
use of any alternative basis to determine NAV would be disclosed on the
Trust's Web site. The Trustee also determines the NAV per Share, which
equals the NAV of the Trust divided by the number of outstanding
Shares. The Sponsor publishes the NAV and NAV per Share for each Trust
on each day that the Exchange is open for regular trading on the
Trusts' Web site, https://www.currencyshares.com.\16\
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\15\ Closing Rate is defined in the Registration Statements as
``the [Foreign Currency]/USD exchange rate as determined by WM/
Reuters at 4:00 PM (London time).'' WM/Reuters is a joint venture of
The WM Company PLC and Thomson Reuters.
\16\ The Exchange will obtain a representation from the Trusts
that the NAV per Share will be calculated daily and made available
to all market participants at the same time.
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Availability of Information Regarding Foreign Currency Prices
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a foreign currency over the
Consolidated Tape. However, there is disseminated over the Consolidated
Tape the last sale price for the Shares, as is the case for all equity
securities traded on the Exchange (including exchange-traded funds). In
addition, there is a considerable amount of foreign currency price and
market information available on public Web sites and through
professional and subscription services. As is the case with equity
securities generally and exchange-traded funds specifically, in most
instances, real-time information is only available for a fee, and
information available free of charge is subject to delay (typically, 15
to 20 minutes).
Complete real-time data for foreign currency futures and options on
futures prices traded on the CME are also available by subscription
from information service providers. The CME also provides delayed
futures and options information on current and past trading sessions
and market news free of charge on their respective Web sites.
Investors may obtain, 24 hours a day, continuously updated every 15
seconds, foreign exchange pricing information based on the spot price
of the applicable foreign currency from various financial information
service providers, which service providers include Bloomberg, (https://
www.bloomberg.com/markets/currencies/fxc.html), CBS Market Watch
(https://www.marketwatch.com/tools/stockresearch/globalmarkets), Yahoo!
Finance (https://www.finance.yahoo.com/currency), https://
www.moneycentral.com, https://www.cnnfn.com and https://www.reuters.com.
Such service providers provide spot price or currency conversion
information about the
[[Page 49526]]
foreign currencies. Many of these sites offer price quotations drawn
from other published sources, and as the information is supplied free
of charge, it generally is subject to time delays. In addition, major
market data vendors regularly report current currency exchange pricing
for a fee for other currencies.\17\ In addition, the Trusts' Web site
provides ongoing pricing information for the applicable foreign
currency spot prices and the Shares. Market prices for the Shares are
available from a variety of sources, including brokerage firms,
financial information Web sites and other information service
providers. The NAV of the Trusts is published by the Sponsor on each
day that the Exchange is open for regular trading and is posted on the
Trusts' Web site. Like bond securities traded in the OTC market with
respect to which pricing information is available directly from bond
dealers, current foreign currency spot prices are also generally
available with bid/ask spreads from foreign currency dealers.\18\
Quotation and last sale information for the Shares will be made
available via the Consolidated Tape.
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\17\ There may be incremental differences in the foreign
currency spot price among the various information service sources.
While the Exchange believes the differences in the foreign currency
spot price may be relevant to those entities engaging in arbitrage
or in the active daily trading of the applicable foreign currency or
derivatives thereon, the Exchange believes such differences are
likely of less concern to individual investors intending to hold the
Shares as part of a long-term investment strategy.
\18\ See, e.g., Securities Exchange Act Release No. 46252 (July
24, 2002), 67 FR 49715 (July 31, 2002) (SR-Amex-2001-35) (noting
that quote and trade information regarding debt securities is widely
available to market participants from a variety of sources,
including broker-dealers, information service providers, newspapers
and Web sites).
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In addition, the Trusts' Web site (https://www.currencyshares.com)
provides the following information: (1) The spot price for each
applicable foreign currency,\19\ including the bid and offer and the
midpoint between the bid and offer for the foreign currency spot price,
updated every 5 to 10 seconds \20\ which is an essentially real-time
basis; (2) an intraday indicative value (``IIV'') per share for the
Shares calculated by multiplying the indicative spot price of the
applicable foreign currency by the quantity of foreign currency backing
each Share, updated at least every 15 seconds \21\; (3) a delayed
indicative value (subject to a 20 minute delay), which is used for
calculating premium/discount information; (4) premium/discount
information, calculated on a 20 minute delayed basis; (5) the NAV of
each Trust as calculated each business day by the Trustee; (6) accrued
interest per Share; (7) the Basket Amount for each applicable foreign
currency; and (8) the last sale price of the Shares as traded in the
U.S. market, subject to a 20-minute delay, as it is provided free of
charge.\22\ On the Trusts' Web site, the foreign currency spot price is
available and disseminated at least every 15 seconds and the IIV per
Share is calculated and disseminated at least every 15 seconds during
NYSE Arca's Core Trading Session.\23\ The Exchange will provide on its
own public Web site (https://www.nyse.com) a link to the Trusts' Web
site.
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\19\ The Trusts' Web site's foreign currency spot prices will be
provided by FactSet Research Systems (https://www.factset.com).
FactSet Research Systems is not affiliated with the Trusts, Trustee,
Sponsor, Depository, Distributor or the Exchange.
\20\ The midpoint will be calculated by the Sponsor. The
midpoint is used for purposes of calculating the premium or discount
of the Shares.
\21\ The intraday indicative value of the Shares is analogous to
the intraday optimized portfolio value (sometimes referred to as the
IOPV), indicative portfolio value and the intraday indicative value
(sometimes referred to as the IIV) associated with the trading of
exchange-traded funds. See, e.g., Securities Exchange Act Release
No. 46686 (October 18, 2002), 67 FR 65388 (October 24, 2002) (SR-
NYSE-2002-51) for a discussion of indicative portfolio value in the
context of an exchange-traded fund.
\22\ The last sale price of the Shares in the secondary market
is available on a real-time basis for a fee from regular data
vendors.
\23\ Pursuant to NYSE Arca Equities Rule 7.34(a), the NYSE Arca
Marketplace trading hours for exchange-traded funds are as follows:
(1) Opening trading session--4:00 a.m. to 9:30 a.m. ET; (2) core
trading session--9:30 a.m. to 4:15 p.m. ET; and (3) late trading
session--4:15 p.m. to 8:00 p.m. ET. The Sponsor has represented to
the Exchange that the spot price will be available on the Trust's
Web site without interruption 24 hours a day, seven days a week.
---------------------------------------------------------------------------
Initial and Continued Listing Criteria
The Shares would be subject to the criteria for initial and
continued listing of Currency Trust Shares under NYSE Arca Equities
Rules 8.202. A minimum of two Creation Units (at least 100,000 Shares)
would be required to be outstanding at the start of trading. This
minimum number of Shares required to be outstanding at the start of
trading would be comparable to requirements that have been applied to
previously listed series of exchange-traded funds. The Exchange
believes that the proposed minimum number of Shares outstanding at the
start of trading is sufficient to provide market liquidity. The
Exchange would remove the Shares from trading and listing upon
termination of the Trusts.\24\
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\24\ E-mail from Michael Cavalier, Associate General Counsel,
NYSE Group, Inc., to Edward Y. Cho, Special Counsel, Division of
Trading and Markets, Commission, dated August 14, 2008 (confirming
that the Trusts are not required to comply with Rule 10A-3 under the
Act, 17 CFR 240.10A-3, for the initial and continued listing of the
Shares).
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The trading hours for
the Shares on the Exchange are the same as those set forth in NYSE Arca
Equities Rule 7.34 (4 a.m. to 8 p.m. Eastern time). The minimum trading
increment for Shares on the Exchange would be $0.01.
NYSE Arca Equities Rules 8.202(g)-(i) set forth certain
restrictions on ETP Holders acting as registered Market Makers in the
Shares to facilitate surveillance. NYSE Arca Equities Rule 8.202(h)
requires that the ETP Holder acting as a registered Market Maker in the
Shares provide the Exchange with information relating to its trading in
the applicable foreign currency, options, futures or options on futures
on such currency, or any other derivatives based on such currency. NYSE
Arca Equities Rule 8.202(i) prohibits the ETP Holder acting as a
registered Market Maker in the Shares from using any material nonpublic
information received from any person associated with an ETP Holder or
employee of such person regarding trading by such person or employee in
the applicable foreign currency, options, futures or options on futures
on such currency, or any other derivatives based on such currency
(including the Shares). In addition, NYSE Arca Equities Rule 8.202(g)
prohibits the ETP Holder acting as a registered Market Maker in the
Shares from being affiliated with a market maker in the applicable
foreign currency, options, futures or options on futures on such
currency, or any other derivatives based on such currency, unless
adequate information barriers are in place, as provided in NYSE Arca
Equities Rule 7.26.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of a Trust. Trading may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (i) The
extent to which trading is not occurring in the applicable underlying
foreign currency; or (ii) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. In addition, trading in the Shares could be halted
pursuant
[[Page 49527]]
to the Exchange's ``circuit breaker'' rule.\25\
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\25\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
If the IIV or the value of foreign currency is not being calculated
or widely disseminated as required, the Exchange may halt trading
during the day in which the interruption to the calculation or wide
dissemination of the IIV or the foreign currency value occurs. If the
interruption to the calculation or wide dissemination of the IIV or the
foreign currency value persists past the trading day in which it
occurred, the Exchange would halt trading no later than the beginning
of the trading day following the interruption. Under NYSE Arca Equities
Rule 7.34(a)(5), if the Exchange becomes aware that the NAV is not
being disseminated to all market participants at the same time, it will
halt trading in the Shares until such time as the NAV is available to
all market participants.\26\
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\26\ See Securities Exchange Act Release No. 58111 (July 7,
2008), 73 FR 40643 (July 15, 2008) (SR-NYSEArca-2008-50).
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, including Currency Trust
Shares, to monitor trading in the Shares. The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillance focuses on detecting
when securities trade outside their normal patterns. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges who are members of
ISG.\27\ Specifically, the Exchange can obtain such information from
the CME in connection with foreign currency futures and options on
futures trading on the CME pertaining to futures and options on futures
on the Russian Ruble and South African Rand.\28\ Therefore, as noted
earlier, CME surveillance and CFTC oversight would pertain only to
futures and options on futures on the Russian Ruble and South African
Rand. In addition, the Exchange also has a general policy prohibiting
the distribution of material, non-public information by its employees.
---------------------------------------------------------------------------
\27\ For a list of the current members of ISG, see https://
www.isgportal.org.
\28\ CME is a member of ISG.
---------------------------------------------------------------------------
Information Bulletin
Prior to listing the Shares on the Exchange, the Exchange would
inform its ETP Holders in an Information Bulletin (``Bulletin'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the Bulletin would discuss the following: (i) The
procedures for purchases and redemptions of Shares in Baskets (and that
Shares are not individually redeemable); (ii) NYSE Arca Equities Rule
9.2(a),\29\ which imposes a duty of due diligence on its ETP Holders to
learn the essential facts relating to every customer prior to trading
the Shares; (iii) how information regarding the IIV and applicable
foreign currency value is disseminated; (iv) the requirement that ETP
Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
(v) the risks involved in trading the Shares during the Opening and
Late Trading Sessions when an updated IIV will not be calculated or
publicly disseminated; and (vi) trading information.
---------------------------------------------------------------------------
\29\ NYSE Arca Equities Rule 9.2(a) provides that ETP Holders,
before recommending a transaction, must have reasonable grounds to
believe that the recommendation is suitable for the customer based
on any facts disclosed by the customer as to his other security
holdings and as to his financial situation and needs. Further, the
rule provides, with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional customer, ETP
Holders shall make reasonable efforts to obtain information
concerning the customer's financial status, tax status, investment
objectives, and any other information that they believe would be
useful to make a recommendation. See Securities Exchange Act Release
No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR-PCX-2005-
115).
---------------------------------------------------------------------------
The Bulletin would also state that the number of units of the
applicable foreign currency required to create a Basket or to be
delivered upon redemption of a Basket may gradually decrease over time
in the event that a Trust is required to withdraw or sell units of
foreign currency to pay the Trust's expenses, and that if done at a
time when the price of the applicable foreign currency is relatively
low, it could adversely affect the value of the Shares. In addition,
the Bulletin would reference that the Trusts are subject to various
fees and expenses described in the Registration Statements. The
Bulletin would also reference the fact that there is no regulated
source of last sale information regarding foreign currency, and that
the Commission has no jurisdiction over the trading of foreign
currency. The Bulletin would also discuss any exemptive, no-action and
interpretive relief granted by the Commission from Section 11(d)(1) of
the Act \30\ and certain rules under the Act.
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78k(d)(1).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \31\ of the Act, in general, and Section 6(b)(5),\32\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that the
proposed rule change will facilitate the listing and trading of
additional types of exchange-traded products that will enhance
competition among market participants, to the benefit of investors and
the marketplace. In addition, the listing and trading criteria set
forth in Rule 8.202 are intended to protect investors and the public
interest.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE Arca does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. 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 rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2008-81 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 49528]]
Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-81. 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, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. 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-NYSEArca-2008-81 and should
be submitted on or before September 11, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\33\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\34\ which
requires that the rules of an exchange be designed, among other things,
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 a national market
system, and, in general, to protect investors and the public interest.
The Commission notes that it previously approved the original listing
and trading of shares of other CurrencyShares Trusts, and the instant
proposal is substantively identical to the previous proposals.\35\
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\33\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\34\ 15 U.S.C. 78f(b)(5).
\35\ See supra note 4.
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The Commission further believes that the proposal is consistent
with Section 11A(a)(1)(C)(iii) of the Act,\36\ which sets forth
Congress' finding that it is in the public interest and appropriate for
the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities. Quotations and last-sale price information for the Shares
are disseminated over the Consolidated Tape. The Trust disseminates the
foreign currency spot prices for each of the Trusts and the IIV per
Share at least every 15 seconds on its Web site during the Core Trading
Session of the Exchange. In addition, the Sponsor publishes the NAV and
NAV per Share for each Trust on each day that the Exchange is open for
regular trading on the Trusts' Web site. Investors may obtain on a 24-
hour basis foreign currency pricing information based on the foreign
currency spot price of each applicable foreign currency from various
financial information service providers. Current spot prices are also
generally available with bid/ask spreads from foreign exchange dealers.
In addition, the Trusts' Web site provides ongoing pricing information
for the applicable foreign currency spot prices and the Shares. The
Exchange represents that complete, real-time data for foreign currency
futures and options prices traded on CME are also available by
subscription from information service providers. CME also provides
delayed futures and options information on current and past trading
sessions and market news free of charge on its Web site. There are a
variety of other public Web sites available at no charge that provide
information on the foreign currencies underlying the Shares, including
spot price or currency conversion information about the foreign
currencies. In addition, the Trusts' Web site provides the following
information: (1) The spot price for each applicable foreign currency,
including the bid and offer and the midpoint between the bid and offer
for the foreign currency spot price, updated every 5 to 10 seconds; (2)
IIV, updated at least every 15 seconds; (3) a delayed indicative value
(subject to a 20 minute delay), which is used for calculating premium/
discount information; (4) premium/discount information, calculated on a
20 minute delayed basis; (5) accrued interest per Share; (6) NAV of
each Trust; (7) the Basket amount for each applicable foreign currency;
and (8) the last-sale price of the Shares as traded in the U.S.
markets, subject to a 20-minute delay. The Exchange states that it will
provide on its own Web site a link to the Trusts' Web site.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
Furthermore, the Commission believes that the proposal to list and
trade the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately.
The Commission notes that the Exchange will obtain a representation
from the Trusts that the NAV per Share for each Trust would be
calculated daily and made available to all market participants at the
same time.\37\ NYSE Arca Equities Rule 8.202(i) provides that, in
connection with trading in the applicable foreign currency, options,
futures or options on futures on such currency, or any other
derivatives based on such currency, including Currency Trust Shares, an
ETP Holder acting as a Market Maker (as defined in NYSE Arca Equities
Rule 1.1(u)) in the Shares is restricted from using any material, non-
public information received from any person associated with such ETP
Holder who is trading such foreign currency, options, futures or
options on futures on such currency, or any other derivatives based on
such currency. In addition, NYSE Arca Equities Rule 8.202(g) prohibits
an ETP Holder acting as a registered Market Maker in the Shares from
being affiliated with a market maker in the applicable foreign
currency, options, futures or options on futures on such currency, or
any other derivatives based on such currency, unless adequate
information barriers are in place, as provided in NYSE Arca Equities
Rule 7.26.
---------------------------------------------------------------------------
\37\ See supra note 16.
---------------------------------------------------------------------------
The Commission also believes that the Exchange's trading halt rules
are reasonably designed to prevent trading in the Shares when
transparency is impaired. NYSE Arca Equities Rule 8.202(e)(2) provides
that, when the Exchange is the listing market, if the value of the
underlying foreign currency or IIV is no longer calculated or available
on at least a 15-second delayed basis, the Exchange would consider
suspending trading in the Shares. NYSE Arca Equities Rule 8.202(e)(2)
also provides that the Exchange may seek to delist the Shares in the
event the value of the applicable foreign currency or IIV is no longer
calculated or available as
[[Page 49529]]
required. In addition, NYSE Arca Equities Rule 7.34(a)(5) provides
that, if the Exchange becomes aware that the NAV is not being
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants.\38\
---------------------------------------------------------------------------
\38\ See supra note 26 and accompanying text.
---------------------------------------------------------------------------
The Commission further believes that the trading rules and
procedures to which the Shares will be subject pursuant to this
proposal are consistent with the Act. The Exchange has represented that
any securities listed pursuant to this proposal will be deemed equity
securities and be subject to existing Exchange rules governing the
trading of equity securities.
In support of this proposal, the Exchange has made the following
representations:
(1) The Exchange represents that it intends to utilize its existing
surveillance procedures applicable to derivative products, including
Currency Trust Shares, to monitor trading in the Shares and that such
procedures are adequate to properly monitor Exchange trading of the
Shares in all trading sessions and to deter and detect violations of
Exchange rules and applicable federal securities laws. The Exchange may
obtain information via ISG from other exchanges that are members of
ISG. Specifically, the Exchange can obtain such information from CME in
connection with foreign currency futures and options on futures trading
on CME pertaining to futures and options on futures on the Russian
ruble and South African rand.
(2) The Exchange represents that if the interruption to the
calculation or wide dissemination of the value of the underlying
foreign currency or IIV persists past the trading day in which it
occurred, the Exchange would halt trading no later than the beginning
of the trading day following the interruption.
(3) Prior to listing and trading the Shares, the Exchange
represents that it will inform its ETP Holders in the Bulletin of the
special characteristics and risks associated with trading the Shares.
This approval order is based on the Exchange's representations.
The Commission finds good cause for approving this proposal before
the 30th day after the publication of notice thereof in the Federal
Register. As noted above, the Commission previously approved the
original listing and trading, and trading pursuant to UTP, of shares of
other CurrencyShares Trusts.\39\ The Commission presently is not aware
of any regulatory issue that should cause it to revisit those findings
or would preclude the listing and trading of the Shares on the
Exchange. Accelerating approval of this proposed rule change would
allow the Shares to be listed on the Exchange without undue delay.
---------------------------------------------------------------------------
\39\ See supra notes 3 and 4.
---------------------------------------------------------------------------
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\40\ that the proposed rule change (SR-NYSEArca-2008-81), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved on
an accelerated basis.
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\40\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19356 Filed 8-20-08; 8:45 am]
BILLING CODE 8010-01-P
