[Federal Register Volume 70, Number 17 (Thursday, January 27, 2005)]
[Notices]
[Pages 3952-3959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-311]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51067; File No. SR-PCX-2004-132]


Self-Regulatory Organization; Notice of Filing and Order Granting 
Accelerated Approval of a Proposed Rule Change and Amendment No. 1 by 
the Pacific Exchange, Inc. Relating to Trading, Either by Listing or 
Pursuant to Unlisted Trading Privileges, Commodity-Based Trust Shares 
and Trading, Pursuant to Unlisted Trading Privileges, iShares[supreg] 
COMEX Gold Trust

January 21, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 28, 2004, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. On January 
13, 2005, PCX amended the proposal.\3\ The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons and is approving the proposal on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Amendment No. 1, dated January 13, 2005 (``Amendment No. 
1''). In Amendment No. 1, the Exchange proposed new PCXE Rules 
8.201(g)-(i), which set forth certain restrictions on Equity Trading 
Permit (``ETP'') Holders acting as registered Market Makers in 
Commodity-Based Trust Shares, explained in further detail below. In 
addition, the Exchange proposed changes to Commentary .04 to PCXE 
Rule 8.201 for the purpose of clarifying that the Exchange will 
submit separate rule filings under Section 19(b)(2) of the Act in 
connection with the listing and/or trading of each Commodity-Based 
Trust Shares. Further, in Amendment No. 1 the Exchange represented 
that (1) as provided in the Registration Statement to the Trust, the 
trustee will charge a transaction fee in connection with the 
redemption and/or creation of Baskets; (2) Barclays Capital, Inc., 
the Initial Purchaser, will purchase 150,000 Shares of the Trust to 
compose the initial Baskets; and (3) the Exchange's surveillance 
procedures are adequate to properly monitor the trading of the 
Shares.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly owned subsidiary PCX Equities, 
Inc. (``PCXE'' or ``Corporation''), proposes to amend its rules 
governing the Archipelago Exchange (``ArcaEx''), the equities trading 
facility of PCXE. With this filing, PCX proposes new PCXE Rule 8.201 in 
order to permit trading, either by listing or pursuant to unlisted 
trading privileges (``UTP''), trust issued receipts based on commodity 
interests (``Commodity-Based Trust Shares'') and trading, pursuant to 
UTP, iShares[supreg] COMEX \4\ Gold Trust Shares (``Gold Shares'').\5\ 
The text of the proposed rule change is available at the PCX's Web site 
http://www.pacificex.com/legal/legal_pending.html, the PCX's Office of 
the Secretary, and at the Commission's Public Reference Room.
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    \4\ COMEX is a division of the New York Mercantile Exchange, 
Inc. (``NYMEX'') where gold futures contracts are traded.
    \5\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 21, 2005 (regarding scope of proposed rule change).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, PCX included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. PCX has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to add new PCXE Rule 8.201 in order to permit 
trading, either by listing or pursuant to UTP, of Commodity-Based Trust 
Shares. The Exchange also proposes to trade pursuant to UTP the Gold 
Shares.

Introduction

    PCXE Rule 8.201 will permit ArcaEx to list and trade Commodity-
Based Trust Shares. Under the rule, for each series of Commodity-Based 
Trust Shares, the Exchange will submit for Commission review and 
approval a filing pursuant to

[[Page 3953]]

Section 19(b) of the Act.\6\ Proposed PCXE Rule 8.201(e) sets forth 
initial and continued listing and trading criteria for Commodity-Based 
Trust Shares on ArcaEx.\7\ This rule proposal is based on the rules of 
the American Stock Exchange, LLC (``Amex'').\8\
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    \6\ 15 U.S.C. 78s(b). Because of the nature of the Gold Trust, 
representing an interest in underlying gold, the Exchange's existing 
listing and trading rules that permit the listing and trading of 
TIRs pursuant to Rule 19b-4(e) under the Securities Act of 1934 
(``Act'') (``Generic Listing Standards'') cannot be used to list or 
trade pursuant to UTP this product.
    \7\ Proposed PCXE Rule 8.201 for Commodity-Based Trust Shares 
tracks but is not identical to current PCXE Rule 8.200 relating to 
TIRs. The initial listing standards set forth in PCXE Rule 8.201 
provide that the Exchange establish a minimum number of TIRs 
required to be outstanding at the time of the commencement of 
trading on the Exchange. As set forth in the section ``Criteria for 
Initial and Continued Listing,'' the Exchange represents the minimum 
number of Gold Shares required to be outstanding at the time of 
trading to be 150,000. See Amendment No. 1, supra note 3.
    \8\ See Securities Exchange Act Release No. 50792 (December 3, 
2004) 69 FR 71446 (December 9, 2004) (SR-Amex-2004-38) (``Amex 
Notice''); Securities Exchange Act Release No. 51058 (January 19, 
2005)(''Amex Order'').
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    The Exchange initially proposes to trade, pursuant to UTP, 
iShares[supreg] COMEX Gold Trust Shares that represent beneficial 
ownership interests in the net assets of the Trust consisting primarily 
of gold. As explained further herein, Gold Shares will be issued in 
baskets. Initially, each basket of 50,000 shares will correspond to 
5,000 troy ounces of gold. Thus, each Gold Share will correspond to 
one-tenth of a troy ounce of gold.\9\ The Gold Shares will conform to 
the initial and continued listing criteria under PCXE Rule 8.201(e). 
The Gold Trust will be formed under a depositary trust agreement, among 
Bank of New York (``BNY'') as Trustee, Barclays Global Investors, N.A. 
(``Barclays'') as the Sponsor, all depositors,\10\ and the holders of 
Gold Shares.\11\
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    \9\ The amount of gold associated with each basket (and 
individual Gold Share) is expected to decrease over time as the 
Trust incurs and pays maintenance fees and other expenses.
    \10\ Barclays Capital, Inc., the Initial Purchaser, will 
purchase 150,000 Shares of the Trust to compose the initial Baskets. 
See Amendment No. 1, supra note 3.
    \11\ The Trust is not an investment company as defined in 
Section 3(a) of the Investment Company Act of 1940 (``1940 Act'').
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    In effect, purchasing Gold Shares in the Trust will provide 
investors a new mechanism to participate in the gold market. The 
Trustee will not actively manage the gold held by the Trust. 
Information about the liquidity, depth, and pricing mechanisms of the 
international gold market, management and structure of the Trust, and 
description of the Gold Shares follows below.

Description of the Gold Market

    In its filing with the Commission, the PCX made the following 
representations regarding the worldwide gold market, citing the 
proposal of the Amex to list the Gold Shares.\12\ The gold market is a 
global marketplace consisting of both over-the-counter (``OTC'') 
transactions and exchange-traded products. The OTC market generally 
consists of transactions in spot, forwards, options and other 
derivatives, while exchange-traded transactions consist of futures and 
options on futures.
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    \12\ See Amex Notice.
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(a) The OTC Market
    The OTC market trades on a 24-hour continuous basis and accounts 
for the substantial portion of global gold trading. Liquidity in the 
OTC market can vary from time to time during the course of the 24-hour 
trading day. Fluctuations in liquidity are reflected in adjustments to 
dealing spreads--the differential between a dealer's buy and sell 
prices. The period of greatest liquidity in the gold market is 
typically that time of day when trading in the European time zone 
overlaps with trading in the United States. This occurs when the OTC 
market trading in London, New York, and other centers coincides with 
futures and options trading on the COMEX.\13\ This period lasts for 
approximately four (4) hours each New York business day morning.
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    \13\ The open outcry trading hours of the COMEX gold futures 
contract is from 8:20 a.m. to 1:30 p.m. New York time Monday through 
Friday. NYMEX ACCESS[reg], an electronic trading system, 
is open for trading on COMEX gold futures contracts from 2 p.m. 
Monday afternoon until 8 a.m. Friday morning New York time; and from 
7 p.m. Sunday night until Monday morning at 8 a.m. New York time.
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    The OTC market has no formal structure and no open-outcry meeting 
place. The main centers of the OTC market are in London, New York, and 
Zurich. Bullion dealers have offices around the world, and most of the 
world's major bullion dealers are either members or associate members 
of the London Bullion Market Association (``LBMA''), a trade 
association of participants in the London Bullion market.
    There are no authoritative published figures for overall worldwide 
volume in gold trading. There are published sources that do suggest the 
significant size of the overall market. The LBMA publishes statistics 
compiled from the five (5) members offering clearing services.\14\ The 
monthly average daily volume figures published by the LBMA for 2003 
range from a high of 19 million to a low of 13.6 million troy ounces 
per day. Through September 2004, the monthly average daily volume has 
ranged from a high of 17 million to a low of 12.4 million. The COMEX 
also publishes price and volume statistics for transactions in 
contracts for the future delivery of gold. COMEX figures for 2003 
indicate that the average daily volume for gold futures and options 
contracts was 4.89 million (48,943 contracts) and 1.7 million (17,241 
contracts) troy ounces per day, respectively. Through October 2004, the 
average daily volume for gold futures and options was 6.08 million 
(60,817 contracts) and 2.01 million (20,173 contracts), 
respectively.\15\
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    \14\ Information regarding clearing volume estimates by the LBMA 
can be found at http://www.lbma.org.uk/clearing_table.htm. The 
three measures published by the LBMA are: volume, the amount of 
metal transferred on average each day measured in millions of troy 
ounces; value, measured in U.S. dollars, using the monthly average 
London PM fixing price; and the number of transfers, which is the 
average number recorded each day. The statistics exclude allocated 
and unallocated balance transfers where the sole purpose is for 
overnight credit and physical movements arranged by clearing members 
in locations other than London.
    \15\ Information regarding average daily volume estimates by the 
COMEX can be found at http://www.nymex.com/jsp/markets.md_annual-volume6.jsp#2. The statistics are based on gold futures contracts, 
each of which relates to 100 troy ounces of gold.
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(b) Futures Exchanges
    The most significant gold futures exchanges are the COMEX division 
of the NYMEX and the Tokyo Commodity Exchange (``TOCOM'').\16\ Trading 
on these exchanges is based on fixed delivery dates and transaction 
sizes for the futures and options contracts traded.
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    \16\ There are other gold exchange markets, such as the Istanbul 
Gold Exchange, the Shanghai Gold Exchange and the Hong Kong Chinese 
Gold & Silver Exchange Society.
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    The daily settlement price for COMEX gold futures contracts is 
publicly available on the NYMEX Web site at http://www.nymex.com.\17\ 
The Exchange

[[Page 3954]]

will provide a hyperlink on its Web site (http://www.pacificex.com), 
via the ArcaEx Web site (http://www.archipelago.com), to the NYMEX Web 
site for the purpose of disclosing gold futures contract pricing.\18\ 
In addition, the PCX represents that COMEX gold futures prices, options 
on futures quotes, and last sale information are widely disseminated 
through a variety of market data vendors worldwide, including Bloomberg 
and Reuters. The PCX further represents that complete real-time data 
for COMEX gold futures and options is available by subscription from 
Reuters and Bloomberg. The NYMEX also provides delayed futures and 
options information on current and past trading sessions and market 
news free of charge on its Web site at http://www.nymex.com. The 
contract specifications for COMEX gold futures contracts are also 
available from the NYMEX at its Web site at http://www.nymex.com, as 
well as other financial informational sources.
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    \17\ The COMEX daily settlement price for each gold futures 
contract is established by a subcommittee of COMEX members shortly 
after the close of trading of regular trading on the COMEX. NYMEX 
Rule 3.43 sets forth the composition of the subcommittee requiring 
that it consist of three (3) members that represent the gold market. 
Specifically, the Rule calls for the subcommittee to include a floor 
broker, a floor trader, and one who represents the trade. Rule 3.02 
provides restrictions on Committee members and others who possess 
material, non-public information. A Committee Member is prohibited 
from disclosing for any purpose other than the performance of 
official duties relating to the Committee, material, non-public 
information obtained as a result of such person's participation on 
the Committee. In addition, no person may trade for his own account 
or for or on behalf of any other account, in any commodity interest 
on the basis of any material, non-public information that such 
person knows was obtained from such Committee member in violation of 
Rule 3.02. Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 18, 2005.
    \18\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 19, 2005.
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(c) Gold Market Regulation
    There is no direct regulation of the global OTC market in gold. 
However, indirect regulation of some of the overseas participants does 
occur. In the United Kingdom, responsibility for the regulation of 
financial market participants, including the major participating 
members of the LBMA, falls under the authority of the Financial 
Services Authority (``FSA'') as provided by the Financial Services and 
Market Act of 2000 (``FSM Act''). Under the FSM Act, all UK-based 
banks, together with other investment firms, are subject to a range of 
requirements, including fitness and properness, capital adequacy, 
liquidity, and systems and controls. The FSA is responsible for 
regulating investment products, including derivatives, and those who 
deal in investment products. Regulation of spot, commercial forwards, 
and deposits of gold and silver not covered by the FSM Act is provided 
for by The London Code of Conduct for Non-Investment Products, which 
was established by market participants in conjunction with the Bank of 
England, and is a voluntary code of conduct among market participants.
    Participants in the U.S. OTC market for gold are generally 
regulated by their institutional supervisors, which regulate their 
activities in the other markets in which they operate. For example, 
participating banks are regulated by the banking authorities. In the 
U.S., the Commodity Futures Trading Commission (``CFTC''), an 
independent governmental agency with the mandate to regulate commodity 
futures and options markets in the U.S., regulates market participants 
and has established rules designed to prevent market manipulation, 
abusive trade practices, and fraud.
    TOCOM has authority to perform financial and operational 
surveillance on its members' trading activities, scrutinize positions 
held by members and large-scale customers, and monitor price movements 
of futures markets by comparing them with cash and other derivative 
markets' prices.

Trust Management and Structure

    Initially, the Exchange proposes to trade pursuant to UTP on ArcaEx 
Gold Shares, which represent units of fractional undivided beneficial 
interest in and ownership of the Trust. The purpose of the Trust is to 
hold gold bullion.\19\ The Exchange states that the investment 
objective of the Trust is for the Gold Shares to reflect the 
performance of the price of gold, less the Trust's expenses.
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    \19\ The Commission has previously approved the listing of 
products for which the underlying was a commodity or otherwise was 
not a security trading on a regulated market. See, e.g., Securities 
Exchange Act Release Nos. 19133 (October 14, 1982) (approving the 
listing of standardized options on foreign currencies ); 36505 
(November 22, 1995) (approving the listing of dollar-denominated 
delivery foreign currency options on the Japanese Yen); and 36165 
(August 29, 1995) (approving listing standards for, among other 
things, currency and currency index warrants).
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    The Trust is an investment trust and is not managed like a 
corporation or an active investment vehicle. The Trust has no board of 
directors or officers or persons acting in a similar capacity. The 
Exchange states that the Trust is not a registered investment company 
under the 1940 Act and is not required to register under such Act. The 
Sponsor (Barclays), Trustee (BNY), and Custodian (The Bank of Nova 
Scotia) are not affiliated with one another or with the Exchange.

Trust Expenses and Management Fees

    Generally, the assets of the Trust (e.g., gold bullion) will be 
sold to pay Trust expenses and management fees. These expenses and fees 
will reduce the value of an investor's Share as gold bullion is sold to 
pay such costs. Ordinary operating expenses of the Trust include (1) 
fees paid to the Sponsor, (2) fees paid to the Trustee, (3) fees paid 
to the Custodian, and (4) various Trust administration fees, including 
printing and mailing costs, legal and audit fees, registration fees, 
and Amex listing fees. The Trust's estimated ordinary operating 
expenses are accrued daily and reflected in the net asset value 
(``NAV'') of the Trust.

Description and Characteristics of the Gold Shares

(i) Liquidity
    The Exchange represents that a minimum of 150,000 Gold Shares will 
be outstanding at the start of trading.\20\ The minimum number of 
shares required to be outstanding at the start of trading is comparable 
to requirements that have been applied to previously listed series of 
trust issues receipts, Portfolio Depository Receipts and Index Fund 
Shares.
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    \20\ See Amendment No. 1, supra note 3.
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    While the Gold Shares will trade on the Amex and ArcaEx until 4:15 
p.m. New York time, liquidity in the OTC market for gold will be 
reduced after the close of the COMEX at 1:30 p.m. New York time when 
daily trading at COMEX and other world gold trading counters ends. 
Trading spreads and the resulting premium or discount on the Gold 
Shares may widen as a result of reduced liquidity in the OTC gold 
market. The Exchange does not believe that the Gold Shares will trade 
at a material discount or premium to the value of the underlying gold 
held by the Trust because of arbitrage opportunities.\21\
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    \21\ PCX represents that Gold Shares will only trade on ArcaEx 
during Amex trading hours for this product of 9:30 a.m. to 4:15 
p.m., New York time. These are the hours during which Amex 
disseminates the Indicative Trust Value. Telephone conversation 
between Tania Blanford, Staff Attorney, Regulatory Policy, PCX, and 
Florence Harmon, Senior Special Counsel, Division of Market 
Regulation, Commission, on January 21, 2005.
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(ii) Creation and Redemption of Trust Shares
    Gold Shares will be issued only in baskets of 50,000 shares or 
multiples thereof (such aggregation referred to as the ``Basket 
Aggregation'' or ``Basket''). The Trust will issue and redeem the Gold 
Shares on a continuous basis, by or through participants that have 
entered into participant agreements (each, an ``Authorized 
Participant'') \22\ with the Sponsor, Barclays, and the Trustee, BNY, 
at the NAV per share next

[[Page 3955]]

determined after an order to purchase or redeem Gold Shares in a Basket 
Aggregation is received in proper form. Authorized Participants are the 
only persons that may place orders to create and redeem Baskets. 
Authorized Participants purchasing Baskets will be able to separate a 
Basket into individual Gold Shares for resale.
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    \22\ An ``Authorized Participant'' is a person, who at the time 
of submitting to the trustee an order to create or redeem one or 
more Baskets, (i) is a registered broker-dealer, (ii) is a 
Depository Trust Company (``DTC'') Participant or an Indirect 
Participant, and (iii) has in effect a valid Authorized Participant 
Agreement.
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    Basket Aggregations will be issued in exchange for a corresponding 
amount of gold, measured in fine ounces (the ``Basket Gold Amount''). 
The Basket Gold Amount will be determined at or about 4 p.m. each 
business day by the Trustee, BNY.\23\ Initially, creation of a Basket 
will require delivery of 5,000 fine ounces of gold. This Basket Gold 
Amount will change from day to day and decrease over the life of the 
Trust due to the payment or accrual of fees and other expenses payable 
by the Trust. On each day that the Amex is open for regular trading, 
the BNY will adjust the quantity of gold constituting the Basket Gold 
Amount as appropriate to reflect sales of gold, any loss of gold that 
may occur, and accrued expenses.\24\ The BNY will determine the Basket 
Gold Amount for a given business day by multiplying the NAV for each 
Gold Share by the number of Gold Shares in each Basket (50,000) and 
dividing the resulting product by that day's COMEX settlement price for 
the spot month gold futures contract. Authorized Participants that 
submitted an order prior to 4:00 p.m. to purchase a Basket must 
transfer the Basket Gold Amount to the Trust in exchange for a Basket.
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    \23\ At the same time the BNY will also determine an 
``Indicative Basket Gold Amount'' that Authorized Participants can 
use as an indicative amount of gold to be deposited for issuance of 
the Gold Shares on the next business day. The Trustee will 
disseminate daily the Indicative Basket Gold Amount on the Trust Web 
site. Because the creation/redemption process is based entirely on 
the physical delivery of gold (and does not contemplate a cash 
component), the actual number of fine ounces required for the 
Indicative Basket Gold Amount will not change intraday, even though 
the value of the Indicative Amount may change based on the market 
price of gold.
    \24\ The Trust's expense ratio, in the absence of any 
extraordinary expenses and liabilities, is established at 0.40% of 
the net assets of the Trust. As a result, the amount of gold by 
which the Basket Gold Amount will decrease each day will be 
predictable (i.e. 1/365th of the net asset value of the Trust 
multiplied by 0.40%).
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    Gold Shares are not individually redeemable, and Authorized 
Participants that wish to redeem a Basket (i.e., 50,000 Gold Shares) 
will receive the Basket Gold Amount in exchange for each Basket 
surrendered. Upon the surrender of the Gold Shares and payment of the 
applicable Trustee's fee and any expenses, taxes or charges, the BNY 
will deliver to the redeeming Authorized Participant the amount of gold 
corresponding to the redeemed Baskets. Unless otherwise requested by 
the Authorized Participants, gold will then be delivered to the 
redeeming Authorized Participants in the form of physical bars 
only.\25\ Thus, although Authorized Participants place orders to 
purchase or redeem Gold Shares throughout the trading day, the actual 
Basket Gold Amount is determined at 4 p.m. or shortly thereafter.
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    \25\ If the amount of gold corresponding to the Basket Gold 
Amount results in an amount that is less than a full gold bar 
denomination, the Authorized Participant has the ability to take 
and/or deliver fractional gold bar amounts. Telephone conversation 
between Tania Blanford, Staff Attorney, Regulatory Policy, PCX, and 
Florence Harmon, Senior Special Counsel, Division of Market 
Regulation, Commission, on January 18, 2005.
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    The Bank of Nova Scotia (``BNS'') will be the custodian for the 
Trust and responsible for safekeeping the gold.\26\ Gold deposited with 
BNS must either (a) meet the requirements to be delivered in settlement 
of a COMEX gold futures contract pursuant to the rules adopted by the 
COMEX or (b) meet the specifications for weight, dimensions, fineness 
(or purity), identifying marks and appearance of gold bars as set forth 
in ``The Good Delivery Rules for Gold and Silver Bars'' published by 
the LBMA.
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    \26\ If the total value of the Trust's gold held by the 
custodian exceeds $2 billion, then the custodian will be under no 
obligation to accept additional gold deliveries. In such a case, the 
Trustee will retain an additional custodian.
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    Shortly after 4 p.m. each business day, the BNY will determine the 
NAV for the Trust. The BNY will calculate the NAV by multiplying the 
fine ounces of gold held by the Trust (after gold has been sold for 
that day to pay that day's fees and expenses) by the daily settlement 
value of the COMEX spot month gold futures contract.\27\ At any point 
in time, the spot month contract is the futures contract then closest 
to maturity. If a COMEX settlement price for a spot month gold futures 
contract is not announced, the Trustee will use the most recently 
announced spot month COMEX settlement price, unless the Trustee (BNY), 
in consultation with the Sponsor (Barclays), determines that such price 
is inappropriate. Once the value of the gold is determined, the BNY 
will then subtract all accrued fees (other than the fees to be computed 
by reference to the value of the Trust or its assets), expenses, and 
other liabilities of the Trust from the total value of gold and all 
other assets of the Trust. This adjusted NAV is then used to compute 
all fees (including the Trustee and Sponsor fees) that are calculated 
from the value of Trust assets. To determine the NAV, the BNY will 
subtract from the adjusted NAV the amount of accrued fees from the 
value of Trust assets. The BNY will calculate the NAV per share by 
dividing the NAV by the number of Gold Shares outstanding.
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    \27\ As previously stated, the COMEX daily settlement price for 
each gold futures contract is established by a subcommittee of COMEX 
members shortly after the close of trading in New York. The daily 
settlement price for each contract (delivery month) is derived from 
the daily settlement price for the most active futures contract 
month that is not necessarily the spot month. This settlement price 
is the average of the highest and lowest priced trades reported 
during the last one (1) minute of trading during regular trading 
hours. For all other gold futures contract months (which may include 
the spot month), the settlement prices are determined by COMEX based 
upon differentials reflected in spread trades between adjacent 
months, such differentials being directly or indirectly related to 
the most active month. These differentials are the average of the 
highest and lowest spread trades (trades based upon the differential 
between the prices for two contract months) reported during the last 
fifteen (15) minutes of trading during regular trading hours. In the 
case that there were no such spread trades, the average of the bids 
and offers for spread transactions during that last fifteen (15) 
minute period are used. In the case where there are no bids and 
offers during that time, the contracts are settled at prices 
consistent with the differentials for other contract months that 
were settled by the first or second method. If the third method is 
used, the subcommittee of the COMEX members establishing those 
settlement prices provides a record of the differentials from other 
contract months that formed the basis for those settlements.
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Availability of Information Regarding Gold Shares

    The Web site for the Trust at http://www.ishares.com, which will be 
publicly accessible at no charge, will contain the following 
information about Gold Shares: (a) The prior business day's NAV, Basket 
Gold Amount, the reported closing price, and the present day's 
Indicative Basket Gold Amount; (b) the mid-point of the bid-ask price 
\28\ in relation to the NAV as of the time the NAV is calculated (the 
``Bid-Ask Price''); (c) calculation of the premium or discount of such 
price against such NAV; (d) data in chart form displaying the frequency 
distribution of discounts and premiums of the Bid-Ask Price against the 
NAV, within appropriate ranges for each of the four (4) previous 
calendar quarters; (e) the Prospectus; and (f) other applicable 
quantitative information, such as expense ratios, trading volumes, and 
the total return of the Gold Shares.\29\ The Exchange will provide a 
hyperlink on its Web site (http://www.pacificex.com), via the

[[Page 3956]]

ArcaEx Web site (http://www.archipelago.com), to the Trust's Web site 
at http://www.ishares.com.\30\
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    \28\ The bid-ask price of Gold Shares is determined using the 
highest bid and lowest offer as of the time of calculation of the 
NAV.
    \29\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 19, 2005 (as to examples of ``other quantitative 
information'').
    \30\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 19, 2005.
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    The Exchange will also provide a hyperlink on its Web site (http://www.pacificex.com), via the ArcaEx Web site (http://www.archipelago.com), to the Amex Web site at http://www.amex.com on 
which Amex will make available daily trading volume, closing prices, 
and the NAV from the previous day of Gold Shares.\31\ Amex will also 
disseminate during regular Amex trading hours from 9:30 a.m. to 4:15 
p.m. New York time through the facilities of the Consolidated Tape 
Association (``CTA'') the last sale price for Gold Shares on a real-
time basis.\32\ In addition, Amex will disseminate each day the prior 
day's NAV and shares outstanding through the facilities of the CTA. 
Amex will also disseminate the Indicative Trust Value on a per Gold 
Share basis every 15 seconds through the facilities of the CTA during 
regular Amex trading hours of 9:30 a.m. to 4:15 p.m. New York time.\33\ 
Shortly after 4 p.m. each business day, the BNY, Amex, and Barclays 
(Sponsor) will disseminate the NAV for the Gold Shares, the Basket Gold 
Amount (for orders placed during the day), and the Indicative Basket 
Gold Amount (for use by Authorized Participants contemplating placing 
orders the following business day). The Basket Gold Amount, the 
Indicative Basket Gold Amount, and the NAV are communicated by the BNY 
to all Authorized Participants via facsimile or electronic mail message 
and will be available on the Trust's Web site at http://www.ishares.com.
---------------------------------------------------------------------------

    \31\ Id.
    \32\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 19, 2005 (as to real-time dissemination of last sale price).
    \33\ The Indicative Trust Value will be calculated based on the 
estimated amount of gold required for creations and redemptions on 
that day (e.g., Indicative Basket Gold Amount) and a price of gold 
derived from the most recently reported trade price in the active 
gold futures contract. The prices reported for the active contract 
month will be adjusted based on the prior day's spread differential 
between settlement values for that contract and the spot month 
contract. In the event that the spot month contract is also the 
active contract, the last sale price for the active contract will 
not be adjusted.
    The Indicative Trust Value will not reflect changes to the price 
of gold between the close of trading at the COMEX, typically 1:30 
p.m. New York time, and the open of trading on the NYMEX ACCESS 
market at 2 p.m. New York time. While the market for the gold 
futures is open for trading, the Indicative Trust Value can be 
expected to closely approximate the value per share of the 
Indicative Basket Gold Amount. The Indicative Trust Value on a per 
Gold Share basis disseminated during Amex trading hours should not 
be viewed as a real time update of the NAV, which is calculated only 
once a day.
---------------------------------------------------------------------------

Information about Underlying Gold Holdings

    There is a considerable amount of gold price and gold market 
information available on public Web sites and through professional and 
subscription services. In most instances, real-time information is only 
available for a fee, and information available free of charge is 
subject to delay (typically 20 minutes). The Exchange states that 
investors may obtain on a 24-hour basis gold pricing information based 
on the spot price for a troy ounce of gold from various financial 
information service providers, such as Reuters and Bloomberg. Reuters 
and Bloomberg provide at no charge on their Web sites delayed 
information regarding the spot price of gold and last sale prices of 
gold futures, as well as information about news and developments in the 
gold market. Reuters and Bloomberg also offer a professional service to 
subscribers for a fee that provides information on gold prices directly 
from market participants. In addition, an organization named EBS 
provides an electronic trading platform to institutions such as bullion 
banks and dealers for the trading of spot gold, as well as a feed of 
live streaming prices to Reuters and Moneyline Telerate subscribers.
    As previously stated, the Exchange states that complete real-time 
data for gold futures and options prices traded on the COMEX is 
available by subscription from Reuters and Bloomberg. The closing price 
and settlement prices of the COMEX gold futures contracts are publicly 
available from the NYMEX at http://www.nymex.com, automated quotation 
systems, published or other public sources, or on-line information 
services such as Bloomberg or Reuters. The NYMEX also provides delayed 
futures and options information on current and past trading sessions 
and market news free of charge on its Web site.

Criteria for Initial and Continued Listing

    The Trust will be subject to the criteria in proposed PCXE Rule 
8.201(e) for initial and continued trading of Gold Shares. The 
continued trading criteria provides for the removal from trading of the 
Gold Shares under any of the following circumstances:
    (a) Following the initial twelve (12) month period from the date of 
commencement of trading of the Gold Shares: (i) If the Trust has more 
than sixty (60) days remaining until termination and there are fewer 
than fifty (50) record and/or beneficial holders of the Gold Shares for 
thirty (30) or more consecutive trading days; (ii) if the Trust has 
fewer than 50,000 Gold Shares issued and outstanding; or (iii) if the 
market value of all Gold Shares is less than $1,000,000.
    (b) If the value of the underlying gold is no longer calculated or 
available on at least a 15 second delayed basis from a source 
unaffiliated with the sponsor, trust, custodian or the Exchange or the 
Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated gold value.
    (c) The Indicative Trust Value is no longer made available on at 
least a 15 second delayed basis.
    (d) If such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.

ArcaEx Trading Rules and Policies

    Gold Shares are equity securities subject to Exchange Rules 
governing the trading of equity securities, including among others, 
rules governing priority, parity and precedence of orders, and customer 
suitability (PCXE Rule 9.2). Initial equity margin requirements of 50% 
will apply to transactions in Gold Shares. Gold Shares will trade on 
ArcaEx during the Amex trading hours until 4:15 p.m. New York time, and 
will trade in a minimum price variation of $0.01 pursuant to PCXE Rule 
7.6. Trading rules pertaining to odd-lot trading in Exchange equities 
(PCXE Rule 7.38) will also apply.\34\
---------------------------------------------------------------------------

    \34\ Rules applicable to the Amex Specialist trading of the Gold 
Shares, e.g., Amex Rules 154, Commentary .04(c); 190; and 170, are 
not applicable to ETP Holders, functioning as market makers in the 
Gold Shares. Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 21, 2005.
---------------------------------------------------------------------------

    Gold Shares will be deemed ``Eligible Securities,'' as defined in 
PCXE Rule 7.55(a)(3), for purposes of the Intermarket Trading System 
Plan and therefore will be subject to the trade-through provisions of 
PCXE Rule 7.56, which require that ETP Holders avoid initiating trade-
throughs for ITS securities.
    Unless exemptive or no-action relief is available, Gold Shares will 
be subject to the short sale requirements of Rule 10a-1 and Regulation 
SHO under the Act.\35\ If exemptive or no-action relief is

[[Page 3957]]

provided, the Exchange will issue a notice detailing the terms of the 
exemption or relief.
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    \35\ The Gold Trust has requested exemptive relief in connection 
with the trading of Gold Shares from the operation of certain short 
sale requirements of Rule 10a-1 and may seek no-action relief from 
Rule 200(g) of Regulation SHO under the Act. See 17 CFR 240.10a-1; 
17 CFR 240.200(g). The requested relief is currently pending with 
the Commission staff in the Division of Market Regulation. If 
granted, Gold Shares would be exempt from Rule 10a-1, permitting 
sales without regard to the ``tick'' requirements of Rule 10a-1. 
Rule 10a-1(a)(1)(i) provides that a short sale of an exchange-traded 
security may not be effected (i) below the last regular-way sale 
price (an ``uptick'') or (ii) at such price unless such price is 
above the next preceding different price at which a sale was 
reported (a ``zero-plus tick''). No-action relief from the marking 
requirements of Rule 200(g) of Regulation SHO would permit broker-
dealers, subject to certain conditions, to mark short sales in the 
Gold Shares ``short,'' rather than ``short exempt.''
---------------------------------------------------------------------------

    PCXE has proposed Rule 8.201(g), which addresses potential 
conflicts of interest in connection with acting as a market maker in 
the Gold Shares. Specifically, Rule 8.201(g) will provide that an ETP 
Holder acting as a registered Market Maker in Commodity-Based Trust 
Shares is obligated to comply with PCXE Rule 7.26 pertaining to 
limitations on dealings when such Market Maker, or affiliate, engages 
in certain ``Other Business Activities.'' Such ``Other Business 
Activities'' will be deemed to include trading in an underlying 
commodity, related commodity futures or options on commodity futures, 
or any other related commodity derivatives. Pursuant to PCXE Rule 7.26, 
a Market Maker may engage in ``Other Business Activities'' only if 
there is an information barrier between the market making activities 
and the ``Other Business Activities.'' \36\
---------------------------------------------------------------------------

    \36\ Telephone conversation between Tania Blanford, Staff 
Attorney, Regulatory Policy, PCX, and Florence Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
January 19, 2005.
---------------------------------------------------------------------------

Surveillance

    PCX represents that its surveillance procedures applicable to 
trading of Gold Shares on ArcaEx are adequate to deter manipulation and 
will be similar to those applicable to TIRs, exchange-traded funds 
(``ETFs'') currently trading on ArcaEx. In addition, the Exchange has 
entered into an Information Sharing Agreement with NYMEX for the 
purpose of providing information in connection with trading in or 
related to COMEX gold futures contracts.
    Further, PCX has proposed new PCXE Rules 8.201(g)-(i), which set 
forth certain restrictions on ETP Holders acting as registered Market 
Makers in Commodity-Based Trust Shares to facilitate surveillance.\37\ 
PCXE Rule 8.201(h) will require that the ETP Holder acting as a 
registered Market Maker in the Gold Shares provide the Exchange with 
information relating to its trading in physical gold, gold futures 
contracts, options on gold futures, or any other gold derivative.\38\ 
PCXE Rule 8.201(i) will prohibit the ETP Holder acting as a registered 
Market Maker in the Gold 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 
physical gold, gold futures contracts, options on gold futures, or any 
other gold derivatives (including the Gold Shares).\39\ In addition, as 
stated above, PCXE Rule 8.201(g) will prohibit the ETP Holder acting as 
a registered Market Maker in the Gold Shares from being affiliated with 
a market maker in physical gold, gold futures, or options on gold 
futures unless adequate information barriers are in place, as provided 
in PCXE Rule 7.26.\40\
---------------------------------------------------------------------------

    \37\ See Amendment No. 1, supra note 3. ETP Holders acting as 
registered Market Makers in Commodity-Based Trust Shares are not 
specialists. Nevertheless, to enhance PCX's surveillance 
capabilities, PCX has put in place the additional responsibilities 
set forth in PCXE Rules 8.201(g)-(i) to aid their surveillance of 
trading in this product.
    \38\ Id.
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

Information Circular

    The Exchange will distribute an information circular (``Information 
Circular'') to its ETP Holders in connection with the trading of Gold 
Shares. The Information Circular will discuss the special 
characteristics and risks of trading this type of security. 
Specifically, the Information Circular, among other things, will 
discuss what the Gold Shares are, how a basket is created and redeemed, 
the requirement that ETP Holders deliver a prospectus to investors 
purchasing the Gold Shares prior to or concurrently with the 
confirmation of a transaction, applicable PCXE rules, dissemination 
information regarding the per share Indicative Trust Value, trading 
information, and applicable suitability rules. The Information Circular 
will also explain that the Gold Trust is subject to various fees and 
expenses described in the Registration Statement and that the number of 
ounces of gold required to create a basket or to be delivered upon 
redemption of a basket will gradually decrease over time because the 
Gold Shares comprising a basket will represent a decreasing amount of 
gold due to the sale of the Gold Trust's gold to pay Trust expenses. 
The Information Circular will also reference the fact that there is no 
regulated source of last sale information regarding physical gold and 
that the Commission has no jurisdiction over the trading of gold as a 
physical commodity.
    The Information Circular will also notify ETP Holders about the 
procedures for purchases and redemptions of Gold Shares in baskets and 
that Gold Shares are not individually redeemable but are redeemable 
only in basket size aggregations or multiples thereof. The Information 
Circular will advise ETP Holders of their suitability obligations with 
respect to recommended transactions to customers in Gold Shares. The 
Information Circular will also discuss any relief, if granted, by the 
Commission or the staff from any rules under the Act.
    The Information Circular will disclose that the NAV for Gold Shares 
will be disseminated shortly after 4 p.m. ET each trading day based on 
the COMEX daily settlement value, which is disseminated shortly after 
1:30 p.m. ET each trading day.

Suitability

    As stated, the Information Circular referenced above will inform 
ETP Holders of the characteristics of the Gold Trust and of applicable 
Exchange rules, as well as of the requirements of PCXE Rule 9.2.
    Pursuant to PCXE Rule 9.2(a), every ETP Holder, through a general 
partner, a principal executive officer or a designated authorized 
person, shall use due diligence to learn the essential facts relative 
to every customer, every order, every account accepted or carried by 
such ETP Holder and every person holding power of attorney over any 
account accepted or carried by such ETP Holder.

Trading Halts

    PCXE Rule 7.12 sets forth the trading parameters, i.e., ``circuit 
breakers,'' applicable to Gold Shares during periods of extraordinary 
volatility. In addition to the parameters set forth in PCXE Rule 7.12, 
the Exchange will halt trading in Gold Shares if trading in the 
underlying COMEX gold futures contract is halted or suspended. Third, 
with respect to a halt in trading that is not specified above, the 
Exchange may also consider other relevant factors and the existence of 
unusual conditions or circumstances that may be detrimental to the 
maintenance of a fair and orderly market.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with

[[Page 3958]]

Section 6(b) of the Act,\41\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\42\ in particular, in that it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b).
    \42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-PCX-2004-132 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-PCX-2004-132. 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 (http://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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available on PCX's Web site (http://www.pacificex.com/legal/legal_pending.html) and for inspection and copying at the principal offices 
of PCX. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-PCX-
2004-132 and should be submitted on or before February 17, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the Act \43\ and the rules 
and regulations thereunder applicable to a national securities 
exchange.\44\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78f(b).
    \44\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

A. Surveillance

    Information sharing agreements with markets trading securities 
underlying a derivative product are an important part of a self-
regulatory organization's ability to monitor for trading abuses in 
derivative products. Although an information sharing agreement with the 
OTC gold market is not possible, the Commission believes that the 
unique liquidity and depth of the gold market, together with the 
Exchange's information sharing agreement with NYMEX (of which COMEX is 
a division) and PCXE Rules 8.201(g)-(i) create the basis for PCX to 
monitor for fraudulent and manipulative practices in the trading of the 
Gold Shares.\45\
---------------------------------------------------------------------------

    \45\ The Commission notes that it recently reached a similar 
conclusion with respect to a proposal by the New York Stock Exchange 
to list and trade trust shares that, as in the PCX proposal, 
correspond to a fixed amount of gold. See Securities Exchange Act 
Release No. 50603 (October 28, 2004), 69 FR 64614 (November 5, 
2004). In that recent order, the Commission noted that it had 
previously approved the listing and trading of foreign currency 
options, for which there is no self-regulatory organization or 
Commission surveillance of the underlying markets, on the basis that 
the magnitude of the underlying currency market militated against 
manipulations through inter-market trading activity. See id., at 
64619 (Securities Exchange Act Release Nos. 19133 (October 14, 1982) 
(approving the listing of standardized options on foreign currencies 
); 36505 (November 22, 1995) (approving the listing of dollar-
denominated delivery foreign currency options on the Japanese Yen); 
and 36165 (August 29, 1995) (approving listing standards for, among 
other things, currency and currency index warrants).
---------------------------------------------------------------------------

    The OTC market for gold is extremely deep and liquid. The LBMA 
estimates that the monthly average daily volume figures published by 
the LBMA for 2003 range from a high of 19 million to a low of 13.6 
million troy ounces per day.\46\ In addition, COMEX figures for 2003 
indicate that the average daily volume for gold futures contracts was 
4.9 million ounces per day.\47\
---------------------------------------------------------------------------

    \46\ There are no authoritative published figures for overall 
worldwide volume in gold trading. The LBMA publishes statistics 
compiled from the six members offering clearing services. 
Information regarding clearing volume estimates by the LBMA can be 
found at http://www.lbma.org.uk/clearing_table.htm.
    \47\ Information regarding average daily volume estimates by the 
COMEX (a division of NYMEX) can be found at http://www.nymex.com/jsp/markets/md_annual_volume6.jsp#2. The statistics are based on 
gold futures contracts, each of which relates to 100 ounces of gold.
---------------------------------------------------------------------------

    Finally, PCXE Rule 8.201(h) will require that the ETP Holder acting 
as a registered Market Maker in the Gold Shares provide the Exchange 
with information relating to its trading in physical gold, gold futures 
contracts, options on gold futures, or any other gold derivative.\48\ 
Although registered Market Makers on PCXE do not have the same 
informational advantages as specialists on Amex, the Exchange believes 
these reporting and record-keeping requirements will assist the 
Exchange in identifying situations potentially susceptible to 
manipulation. PCXE Rule 8.201(i) will prohibit the ETP Holder acting as 
a registered Market Maker in the Gold Shares from using any material 
nonpublic information received from any person associated with a member 
or employee of such person regarding trading by such person or employee 
in physical gold, gold futures contracts, options on gold futures, or 
any other gold derivatives (including the Gold Shares).\49\ In 
addition, PCXE Rule 8.201(g) will prohibit the ETP Holder acting as a 
registered Market Maker in the Gold Shares from being affiliated with a 
market maker in physical gold, gold futures, or options on gold futures 
unless adequate information barriers are in place and approved by the 
Exchange.\50\
---------------------------------------------------------------------------

    \48\ See Amendment No. 1, supra note 3.
    \49\ Id.
    \50\ Id.

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[[Page 3959]]

B. Dissemination of Information About the Gold Shares

    The Commission finds that sufficient venues for obtaining reliable 
gold price information exist so that investors in the Gold Shares can 
adequately monitor the underlying spot market in gold relative to the 
NAV of their Gold Shares. As discussed more fully above, the Commission 
notes that there is a considerable amount of gold price and gold market 
information available 24 hours per day on public Web sites and through 
professional and subscription services. The PCX, via the ArcaEx Web 
site, will link to the Amex and Trust Web sites, which will provide 
trading information about the Gold Shares. For example, the Trustee 
will disseminate daily on the Trust Web site an estimated amount 
representing the Basket Gold Amount. The Amex will also disseminate 
through the CTA the Indicative Trust Value on a per share basis every 
15 seconds during regular Amex trading hours of 9:30 a.m. to 4:15 p.m. 
New York time (except between 1:30 p.m. and 2 p.m., the time period 
from the close of regular trading of the COMEX gold futures contract 
and the start of trading of COMEX gold futures contracts on NYMEX 
ACCESS). The last sale price for Gold Shares will also be disseminated 
on a real-time basis through the facilities of CTA.
    The Commission also notes that the Trust's Web site at http://www.ishares.com is and will be publicly accessible at no charge and 
will contain the NAV of the Gold Shares and the Basket Gold Amount as 
of the prior business day, the Bid-Ask Price, and a calculation of the 
premium or discount of the Bid-Ask Price in relation to the closing 
NAV. Additionally, the Trust's Web site will also provide data in chart 
form displaying the frequency distribution of discounts and premiums of 
the Bid-Ask Price against the NAV, within appropriate ranges for each 
of the four previous calendar quarters, the Prospectus, and other 
applicable quantitative information. The Commission believes that 
dissemination of this information will facilitate transparency with 
respect to the Gold Shares and diminish the risk of manipulation or 
unfair informational advantage.

C. Listing and Trading

    Further, the Commission finds that the Exchange's proposed rules 
and procedures for the listing and trading of the proposed Gold Shares 
are consistent with the Act. For example, Gold Shares will be subject 
to PCXE rules governing trading halts, responsibilities of the ETP 
Holders, and customer suitability requirements. In addition, the Gold 
Shares will be subject to PCXE Rule 8.201(e) for initial and continued 
trading of Gold Shares.
    The Commission believes that listing and delisting criteria for the 
Gold Shares should help to maintain a minimum level of liquidity and 
therefore minimize the potential for manipulation of the Gold Shares. 
Finally, the Commission believes that the Exchange's Information 
Circular adequately will inform members and member organizations about 
the terms, characteristics, and risks in trading the Gold Shares.
    The Commission finds good cause for approving the proposed rule 
change prior to the 30th day after the date of publication of the 
notice of filing thereof in the Federal Register. The Exchange has 
requested accelerated approval because this product is similar to 
another product recently approved by the Commission for listing and 
trading on Amex.\51\ The Commission believes that the Gold Shares will 
provide investors with an additional investment choice and that 
accelerated approval of the proposal will allow investors to begin 
trading the Gold Shares promptly. Therefore, the Commission finds good 
cause, consistent with Section 19(b)(2) of the Act,\52\ to approve the 
proposal, as amended, on an accelerated basis.
---------------------------------------------------------------------------

    \51\ See Securities Exchange Act Release No. 51058 (January 19, 
2005) (SR-Amex-2004-38), supra, note 9.
    \52\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\53\ that the proposed rule change (SR-PCX-2004-132), as amended, is 
hereby approved on an accelerated basis.
---------------------------------------------------------------------------

    \53\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\54\
---------------------------------------------------------------------------

    \54\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E5-311 Filed 1-26-05; 8:45 am]
BILLING CODE 8010-01-P