[Federal Register Volume 71, Number 31 (Wednesday, February 15, 2006)]
[Notices]
[Pages 8029-8035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-2128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53253; File No. SR-PCX-2005-123]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule Change 
and Amendment Nos. 1 and 2 Thereto Relating to Currency Trust Shares.

 February 8, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 11, 2005, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange''), through its wholly owned subsidiary PCX Equities, Inc. 
(``PCXE'' or ``Corporation''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On January 13, 2006, PCX filed Amendment No. 1 to the proposed rule 
change.\3\ On January 13, 2006, PCX filed Amendment No. 2 to the 
proposed rule change.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons and is approving the proposal on an accelerated 
basis.
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    \1\ 15 U.S.C 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 3 In Amendment No. 1, the Exchange clarified and 
supplemented certain aspects of its proposal. Amendment No. 1 
replaces and supplements the information provided in various 
sections of the Exchange's Form 19b-4.
    \4\ In Amendment No. 2, the Exchange further clarified and 
supplemented certain aspects of its proposal.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through PCXE, proposes to amend its rules governing 
the Archipelago Exchange (``ArcaEx''), the equities trading facility of 
PCXE. The Exchange proposes new PCXE Rule 8.202 in order to permit 
trading, either by listing or pursuant to unlisted trading privileges 
(``UTP''), shares issued by a trust that holds a specified non-U.S. 
currency (``Currency Trust Shares''). In addition, the Exchange 
proposes to trade, pursuant to UTP, Euro Shares (``Shares'' or ``Euro 
Shares''), which represent units of fractional undivided beneficial 
interest in and ownership of the Euro Currency Trust (the ``Trust''), 
which is sponsored by Rydex Specialized Products LLC.
    The text of the proposed rule change appears below. Additions are 
in italics. Deleted items are in [brackets].
* * * * *
Rule 8.202.
Currency Trust Shares
    (a) The Corporation will consider for trading, whether by listing 
or pursuant to unlisted trading privileges, Currency Trust Shares that 
meet the criteria of this Rule.
    (b) Applicability. This Rule is applicable only to Currency Trust 
Shares. Except to the extent inconsistent with this Rule, or unless the 
context otherwise requires, the provisions of the trust issued receipts 
rules, Bylaws, and all other rules and procedures of the Board of 
Directors shall be applicable to the trading on the Corporation of such 
securities. Currency Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Bylaws and 
Rules of the Corporation.
    (c) Currency Trust Shares. The term ``Currency Trust Shares'' as 
used in the Rules shall, unless the context otherwise requires, mean a 
security that (a) is issued by a trust (``Trust'') that holds a 
specified non-U.S. currency deposited with the Trust; (b) when 
aggregated in some specified minimum number may be surrendered to the 
Trust by the beneficial owner to receive the specified non-U.S. 
currency; and (c) pays beneficial owners interest and other 
distributions on the deposited non-U.S. currency, if any, declared and 
paid by the Trust.
    (d) Designation of Non-U.S. Currency. The Corporation may trade, 
either by listing or pursuant to unlisted trading privileges, Currency 
Trust Shares that hold a specified non-U.S. currency. Each issue of 
Currency Trust Shares shall be designated as a separate series and 
shall be identified by a unique symbol.
    (e) Initial and Continued Listing. Currency Trust Shares will be 
listed and traded on the Corporation subject to application of the 
following criteria:
    (1) Initial Listing --the Corporation will establish a minimum 
number of Currency Trust Shares required to be outstanding at the time 
of commencement of trading on the Corporation.
    (2) Continued Listing --following the initial 12 month period 
following commencement of trading on the Corporation of Currency Trust 
Shares, the Corporation will consider the suspension of trading in or 
removal from listing of such series under any of the following 
circumstances:
    (i) if the Trust has more than 60 days remaining until termination 
and there are fewer than 50 record and/or beneficial holders of 
Currency Trust Shares for 30 or more consecutive trading days; or
    (ii) if the Trust has fewer than 50,000 Currency Trust Shares 
issued and outstanding; or
    (iii) if the market value of all Currency Trust Shares issued and 
outstanding is less than $1,000,000; or
    (iv) if the value of the applicable non-U.S. currency is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, Trust, custodian or the Exchange 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated applicable non-U.S. currency value;
    (v) if the Indicative Trust Value is no longer made available on at 
least a 15-second delayed basis; or

[[Page 8030]]

    (vi) if such other event shall occur or condition exists which in 
the opinion of the Corporation makes further dealings on the 
Corporation inadvisable.
    Upon termination of a Trust, the Corporation requires that Currency 
Trust Shares issued in connection with such entity Trust be removed 
from Corporation listing. A Trust may terminate in accordance with the 
provisions of the Trust prospectus, which may provide for termination 
if the value of the Trust falls below a specified amount.
    (3) Term --The stated term of the Trust shall be as stated in the 
Trust prospectus. However, a Trust may be terminated under such earlier 
circumstances as may be specified in the Trust prospectus.
    (4) Trustee --The following requirements apply:
    (i) The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
    (ii) No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Corporation.
    (5) Voting --Voting rights shall be as set forth in the applicable 
Trust prospectus.
    (f) Limitation of Corporation Liability. Neither the Corporation 
nor any agent of the Corporation shall have any liability for damages, 
claims, losses or expenses caused by any errors, omissions, or delays 
in calculating or disseminating any applicable non-U.S. currency value; 
the current value of the applicable non-U.S. currency required to be 
deposited to the Trust in connection with issuance of Currency Trust 
Shares; net asset value; or any other information relating to the 
purchase, redemption, or trading of the Currency Trust Shares, 
resulting from any negligent act or omission by the Corporation, or any 
agent of the Corporation; or any act, condition or cause beyond the 
reasonable control of the Corporation, its agent, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission or delay in the reports of 
transactions in an applicable non-U.S. currency.
    (g) Information Barrier. An ETP Holder acting as a registered 
Market Maker or Market Maker Authorized Trader in Currency Trust Shares 
is obligated to comply with PCXE Rule 7.26 pertaining to limitations on 
dealings when such Market Maker or Market Maker Authorized Trader, or 
affiliate of such persons, engages in Other Business Activities. For 
purposes of Currency Trust Shares only, Other Business Activities shall 
include trading in the applicable non-U.S. currency, options, futures 
or options on futures on such currency, or any other derivatives based 
on such currency.
    (h) Market Maker Accounts. An ETP Holder acting as a registered 
Market Maker in Currency Trust Shares must file with the Exchange in a 
manner prescribed by the Exchange and keep current a list identifying 
all accounts for trading in the applicable non-U.S. currency, options, 
futures or options on futures on such currency, or any other 
derivatives based on such currency, which the Market Maker may have or 
over which it may exercise investment discretion. No Market Maker shall 
trade in the applicable non-U.S. currency, options, futures or options 
on futures on such currency, or any other derivatives based on such 
currency, in an account in which a Market Maker, directly or 
indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to the 
Exchange as required by this Rule.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records, the ETP Holder acting as 
a Market Maker in Currency Trust Shares shall make available to the 
Exchange such books, records or other information pertaining to 
transactions by such entity or registered or non-registered employee 
affiliated with such entity for its or their own accounts for trading 
the applicable non-U.S. currency, options, futures or options on 
futures on such currency, or any other derivatives based on such 
currency, as may be requested by the Exchange.
    (i) In connection with trading the applicable non-U.S. currency, 
options, futures or options on futures on such currency, or any other 
derivatives based on such currency (including Currency Trust Shares), 
the ETP Holder acting as a Market Maker in Currency Trust Shares shall 
not use any material nonpublic information received from any person 
associated with an ETP Holder or employee of such person regarding 
trading by such person or employee in the applicable non-U.S. currency, 
options, futures or options on futures on such currency, or any other 
derivatives based on such currency.
    Commentary:
    .01 A Currency Trust Share is a Trust Issued Receipt that holds a 
specified non-U.S. currency deposited with the Trust.
    .02 The Corporation requires that ETP Holders provide all 
purchasers of newly issued Currency Trust Shares a prospectus for the 
series of Currency Trust Shares.
    .03 Transactions in Currency Trust Shares will occur during the 
trading hours specified in PCXE Rule 7.34.
    .04 The Corporation will file separate proposals under Section 
19(b) of the Securities Exchange Act of 1934 before trading, either by 
listing or pursuant to unlisted trading privileges, Currency Trust 
Shares.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below, and is set forth in Sections A, B, and C below.

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

1. Purpose
    The Exchange proposes to add new PCXE Rule 8.202 in order to permit 
trading, either by listing or pursuant to UTP, of Currency Trust 
Shares.\5\ The Exchange also proposes to trade the Shares of the Trust 
pursuant to UTP. The New York Stock Exchange, Inc. (the ``NYSE'') has 
recently proposed to list and trade the Shares.\6\ The Commission

[[Page 8031]]

previously approved the original listing and trading of the Shares by 
the New York Stock Exchange, Inc. (``NYSE'').\7\
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    \5\ Currency Trust Shares are securities issued by a trust that 
represent investors' discrete identifiable and undivided beneficial 
ownership interest in the non-U.S. currency deposited into the 
trust. The Exchange notes that the Commission has approved the 
listing and trading pursuant to UTP of other securities products for 
which the underlying interest was not a security trading on a 
regulated market. See Securities Exchange Act Release Nos. 51067 
(January 21, 2005), 70 FR 3952-01 (January 27, 2005) (approving 
general standards for the listing and trading of Commodity-Based 
Trust Shares and trading of shares of the iShares COMEX Gold Trust 
pursuant to UTP); and 51245 (February 23, 2005), 70 FR 10731-01 
(March 4, 2005) (approving the trading of shares of the streetTRACKS 
Gold Trust pursuant to UTP). Unlike Commodity-Based Trust Shares 
under PCXE Rule 8.201, which hold one or more physical commodities, 
Currency Trust Shares hold non-U.S. currency.
    \6\ See Securities Exchange Act Release No. 52843 (November 28, 
2005), 70 FR 72486 (December 5, 2005) (order granting accelerated 
approval to SR-NYSE-2005-65) (``NYSE Order'').
    \7\ Id.
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    The investment objective of the Trust is for the Shares to reflect 
the value of the euro. The Shares represent beneficial ownership 
interests in the net assets of the Trust consisting only of euro on 
demand deposit in a euro-denominated, interest-bearing account, less 
the expenses of the Trust.
(a) Currency Trust Shares
    PCXE Rule 8.202 is intended to accommodate possible future listing 
and trading of trusts based on non-U.S. currencies in addition to the 
euro. Any new listing or trading of an issue of Currency Trust Shares 
will be subject to approval of a proposed rule change by the Commission 
pursuant to Section 19(b)(2) \8\ of the Securities Exchange Act of 1934 
(the ``Act'') and Rule 19b-4 thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 17 CFR 240.19b-4.
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    A description of the euro, foreign exchange industry, foreign 
currency regulation, operation of the Trust, and the Shares is set 
forth in the NYSE Order. Issuances of Shares will be made only in 
baskets of 50,000 Shares or multiples thereof (``Basket''). The Trust 
will issue and redeem the Shares on a continuous basis, by or through 
participants that have entered into participant agreements (each, an 
``Authorized Participant'') \10\ with the trustee, the Bank of New York 
(``Trustee''), at the net asset value (``NAV'') per Share next 
determined after an order to purchase a Basket is received in proper 
form.
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    \10\ An ``Authorized Participant'' is a person, who at the time 
of submitting to the trustee an order to create or redeem one or 
more Baskets, (i) Is a registered broker-dealer, (ii) is a 
Depository Trust Company Participant or an Indirect Participant, and 
(iii) has in effect a valid Authorized Participant Agreement.
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    When calculating NAV, the Trustee will value the euros held by the 
Trust on the basis of the day's announced Noon Buying Rate, as 
determined by the Federal Reserve Bank of New York. If the Noon Buying 
Rate is not announced by 2 p.m. (Eastern time (``ET'')), the Trustee 
will use the most recently announced Noon Buying Rate, unless the 
Trustee, in consultation with the Sponsor, determines to apply an 
alternative basis for evaluation as a result of extraordinary 
circumstances. The calculation methodology for the NAV is described in 
more detail in the NYSE Order.
    Baskets will be issued in exchange for an amount of euros (``Basket 
Euro Amount'') based on the combined NAV per Share of the number of 
Shares included in the Baskets being created. The Basket Euro Amount 
and NAV will be determined by the Trustee ``as promptly as 
practicable'' after the Federal Reserve announces the Noon Buying Rate 
and published on the Trust's Web site on each Business Day.\11\ 
Authorized Participants that wish to purchase a Basket must transfer 
the Basket Euro Amount to the Trust in exchange for a Basket. Baskets 
are then separable upon issuance into the Shares that will be traded on 
ArcaEx on a UTP basis.\12\
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    \11\ Ordinarily no later than 2 p.m. (ET).
    \12\ Shares are separate and distinct from the underlying euro 
comprising the portfolio of the Trust. The Exchange expects that the 
number of outstanding Shares will increase and decrease as a result 
of in-kind deposits and withdrawals of the underlying euro.
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    The Shares will not be individually redeemable but will only be 
redeemable in Baskets. To redeem, an Authorized Participant will be 
required to accumulate enough Shares to constitute a Basket (i.e., 
50,000 Shares). Authorized Participants that wish to redeem a Basket 
will receive the Basket Euro Amount in exchange for each Basket 
surrendered. The operation of the Trust and creation and redemption 
process is described in more detail in the NYSE Order.
(b) Dissemination of Information About the Fund Shares and Underlying 
Euro
    Although the spot price of a foreign currency, such as the euro, is 
not disseminated over the facilities of Consolidated Tape Association 
(``CTA''), the last sale price for the Shares, as is the case for all 
equity securities traded on the Exchange, will be disseminated over the 
CTA. Investors may obtain on a 24-hour basis euro pricing information 
based on the euro spot price from various financial information service 
providers. The foreign exchange market is an over-the-counter dealer 
marketplace, and current spot prices are also generally available with 
bid/ask spreads from foreign exchange dealers. Complete real-time data 
for euro futures and options prices traded on the Chicago Mercantile 
Exchange (``CME'') and the Philadelphia Stock Exchange (``Phlx'') are 
also available by subscription from information service providers. The 
CME and Phlx also provide delayed futures and options information on 
current and past trading sessions and market news free of charge on 
their respective Web sites. There are a variety of other public Web 
sites that provide information on foreign currency and the euro, such 
as Bloomberg (http://www.bloomberg.com/markets/currencies/ eurafr--
currencies.html), which regularly reports current foreign exchange 
pricing for a fee. Other service providers include CBS Market Watch 
(http://www.marketwatch.com/tools/ stockresearch/globalmarkets) and 
Yahoo! Finance (http://finance.yahoo.com/currency). Many of these sites 
offer price quotations drawn from other published sources, and as the 
information is supplied free of charge, it generally is subject to time 
delays.\13\ The Exchange states that, like bond securities traded in 
the over-the-counter market with respect to which pricing information 
is available directly from bond dealers, current euro spot prices are 
also generally available with bid/ask spreads from foreign currency 
dealers. In addition, there is a considerable amount of euro price and 
euro market information available on public Web sites and through 
professional and subscription services. Current spot prices are also 
generally available from foreign exchange dealers.
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    \13\ There may be incremental differences in the euro spot price 
among the various information service sources. While the Exchange 
believes the differences in the euro spot price may be relevant to 
those entities engaging in arbitrage or in the active daily trading 
of euro or foreign currency derivatives, the Exchange believes such 
differences are likely of less concern to individual investors 
intending to hold the Shares as part of a long-term investment 
strategy.
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    The Trust's Web site at (http://www.currencyshares.com) (to which 
the Exchange will provide a hyperlink) will be publicly accessible at 
no charge and will contain the following information: (1) The euro spot 
price,\14\ including the bid and offer and the midpoint between the bid 
and offer for the euro spot price, updated every 5 to 10 seconds; (2) 
an intraday indicative value (``IIV'') per Share calculated by 
multiplying the indicative spot price of euro by the quantity of euro 
backing each Share, on a 5 to 10-second delayed basis; (3) a 20-minute 
delayed basis indicative value, which is used for calculating premium/
discount information; (4) premium/discount information, calculated on a 
20-minute delayed basis; (5) the NAV of the Trust as calculated each 
Business Day; (6) accrued interest per Share; (7)

[[Page 8032]]

the daily Noon Buying Rate; (8) the Basket Euro Amount; and (9) the 
last sale price of the Shares as traded in the U.S. market, subject to 
a 20-minute delay. The euro spot price and IIV per Share are provided 
on an essentially real-time basis and are available during ArcaEx's 
early and late trading sessions, in addition to ArcaEx's core trading 
session.\15\
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    \14\ The Trust Web site's euro spot price will be provided by 
The Bullion Desk (http://www.thebulliondesk.com), and the time of 
each calculation is noted on the Trust's Web site. The Exchange will 
provide a hyperlink to the Trust Web site. The Bullion Desk is not 
affiliated with the Trust, Trustee, Sponsor, Depository, 
Distributor, or the Exchange. In the event that the Trust's Web site 
should cease to provide this euro spot price information from an 
unaffiliated source and the intraday indicative value of the Shares, 
the NYSE will halt trading in the Shares and commence delisting 
proceedings for the Shares.
    \15\ Telephone Conference between David Strandberg, Attorney, 
Archipelago, and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on February 6, 2006.
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    Between 12 p.m. and 2 p.m. (ET) each business day, the Trustee will 
calculate NAV and Basket Euro Amount based on the combined NAV per 
Share of the number of Shares included in the Baskets being created of 
the Shares and will post NAV on the Trust's Web site as soon as 
valuation of the euro held by the Trust is complete (ordinarily by 2 
p.m. (ET)). Ordinarily, it will be posted no more than thirty minutes 
after the Noon Buying Rate is published by the Federal Reserve Bank of 
New York. In the NYSE Order, NYSE represented that all market 
participants will have access to this data at the same time and, 
therefore, no market participant will have a time advantage in using 
such data.
(c) Continued Listing and UTP Criteria
    While the Exchange immediately seeks to UTP the Euro Currency 
Shares, the Exchange is also adopting general initial and continued 
listing standards applicable to all Currency Trust Shares in the event 
the Exchange were to list such Currency Trust Shares. In such an event, 
the Exchange would still file a Form 19b-4\16\ to list such Currency 
Trust Shares. When the Exchange is the primary listing exchange, the 
Trust will be subject to the continued trading criteria under proposed 
PCXE Rule 8.202(e). In particular, the proposed criteria provides that 
the Currency Trust Shares may be removed from trading following the 
initial 12-month period from the date of commencement of trading of the 
Currency Trust Shares on the Exchange under any of the following 
circumstances:
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    \16\ 17 CFR 249.819.
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     If the Trust has more than 60 days remaining until 
termination and there are fewer than 50 record and/or beneficial 
holders of the Currency Trust Shares for 30 or more consecutive trading 
days;
     If the Trust has fewer than 50,000 Currency Trust Shares 
issued and outstanding;
     If the market value of all the Currency Trust Shares is 
less than $1,000,000;
     If the value of the applicable non-U.S. currency is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the Sponsor, Trust, Custodian or the 
Exchange or the Exchange stops providing a hyperlink on its Web site to 
any such unaffiliated applicable non-U.S. currency value;
     If the Indicative Trust Value (``ITV'' or ``IIV'') is no 
longer made available on at least a 15-second delayed basis; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    In addition, the Exchange will remove Currency Trust Shares from 
listing and trading upon termination of the Trust.
    If the Exchange is only trading the Shares pursuant to UTP, then 
the Exchange will cease trading in the Shares if: (1) the primary 
market stops trading the Shares because of a regulatory halt similar to 
a halt based on PCXE Rule 7.12 and/or a halt because calculation and 
dissemination of the IIV and/or the underlying value (the spot 
price)\17\ of the applicable non-U.S. currency has ceased; or (2) the 
primary market delists the Shares. Additionally, the Exchange may cease 
trading the Currency Trust Shares if such other event shall occur or 
condition exists which in the opinion of the Exchange makes further 
dealings on the Exchange inadvisable.
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    \17\ For the purposes of trading the Euro Shares pursuant to 
UTP, the applicable value would be the Euro Spot price provided by 
The Bullion Desk at http://www.thebulliondesk.com and at http://www.currencyshares.com (to which the Exchange will hyperlink). 
Telephone Conference between David Strandberg, Attorney, 
Archipelago, and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on February 6, 2006.
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(d) Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares of the Trust subject to the Exchange's 
existing rules governing the trading of equity securities. Trading in 
the Shares on the Exchange will occur in accordance with PCXE Rule 
7.34(a). The minimum trading increment for Shares on the Exchange will 
be $0.01.
    Further, the Exchange has proposed new PCXE Rules 8.202(g)--(i), 
which set forth certain restrictions on equity trading permit holders 
(``ETP Holders'') acting as registered Market Makers in Currency Trust 
Shares to facilitate surveillance. PCXE Rule 8.202(h) will require that 
the ETP Holder acting as a registered Market Maker in the Shares 
provide the Exchange with information relating to its trading in the 
applicable non-U.S. currency, options, futures or options on futures on 
such currency, or any other derivatives based on such currency. PCXE 
Rule 8.202(i) will prohibit the ETP Holder acting as a registered 
Market Maker in the Shares from using any material nonpublic 
information received from any person associated with an ETP Holder or 
employee of such person regarding trading by such person or employee in 
the applicable non-U.S. currency, options, futures or options on 
futures on such currency, or any other derivatives based on such 
currency (including the Shares). In addition, as stated above, PCXE 
Rule 8.202(g) will prohibit the ETP Holder acting as a registered 
Market Maker in the Shares from being affiliated with a market maker in 
the applicable non-U.S. currency, options, futures or options on 
futures on such currency, or any other derivatives based on such 
currency unless adequate information barriers are in place, as provided 
in PCXE Rule 7.26.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in euros, or 
(2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule \18\ or by the halt or suspension of the trading of 
futures contracts based on the euro. If the Exchange is the listing 
market for Currency Trust Shares, the Exchange will halt trading in the 
Shares if the Trust Web site (to which the PCX will hyperlink) ceases 
to provide: (1) The value of the euro updated at least every 15 seconds 
from a source not affiliated with the Sponsor, Trust, Custodian, or the 
Exchange (or this value is not displayed on the appropriate Web site), 
or (2) the IIV per Share updated at least every 15 seconds. If the 
Exchange is trading the shares pursuant to UTP, such as the Euro 
Currency Shares, the Exchange will cease trading the Shares if: (1) The 
primary market stops trading the Shares because of a regulatory halt 
similar to PCXE Rule 7.12 and/or a halt because of dissemination of the 
IIV and/or because the underlying spot price has ceased, or (2) the 
primary market delists

[[Page 8033]]

the shares. Because ArcaEx will be trading the Shares during its early 
and late trading sessions, when the primary market is closed, the 
Exchange will monitor the dissemination of the euro spot price and IIV 
during these trading sessions and cease trading the Shares if these 
values are not disseminated at least every 15 seconds and such values 
are not displayed on the Exchange Web site via a hyperlink with the 
Trust's Web site.\19\
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    \18\ See PCXE Rule 7.12.
    \19\ Telephone Conference between David Strandberg, Attorney, 
Archipelago, and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on February 6, 2006. In such case, the 
Exchange would immediately contact the Commission's staff.
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    Currency Trust Shares will be deemed ``Eligible Listed 
Securities,'' as defined in PCXE Rule 7.55, for purposes of the 
Intermarket Trading System (``ITS'') Plan and therefore will be subject 
to the trade through provisions of PCXE Rule 7.56, which require that 
ETP Holders avoid initiating trade-throughs for ITS securities.
    The Commission exempted the Currency Trust Shares from the short 
sale requirements of Rule 10a-1 under the Act and gave no-action relief 
from Rule 200(g) of Regulation SHO under the Act.\20\
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    \20\ Currency Trust Shares are exempt from Rule 10a-1 under the 
Act permitting sales without regard to the ``tick'' requirements of 
Rule 10a-1 under the Act. Rule 10a-1(a)(1)(i) under the Act provides 
that a short sale of an exchange-traded security may not be effected 
(i) below the last regular-way sale price (an ``uptick'') or (ii) at 
such price unless such price is above the next preceding different 
price at which a sale was reported (a ``zero-plus tick''). See 
letter dated December 5, 2005 from James A. Brigagliano, Division of 
Market Regulation, Commission, to George T. Simon, Foley and 
Lardner.
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(e) Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products and shares of the 
streetTRACKS Gold Trust \21\ to monitor trading in the Shares. The 
Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions.
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    \21\ See streetTRACKS Gold approval order, supra note 5.
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    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. The Exchange is able to 
obtain information regarding trading in the Shares, euro options, and 
euro futures through ETP Holders, in connection with such ETP Holders' 
proprietary or customer trades which they effect on any relevant 
market. In addition, the Exchange may obtain trading information via 
the Intermarket Surveillance Group (``ISG'') from other exchanges who 
are members or affiliates of the ISG. Specifically, the Exchange can 
obtain such information from the Phlx in connection with euro options 
trading on the Phlx and from the CME and the London International 
Financial Futures Exchange (``LIFFE'') in connection with euro futures 
trading on those exchanges.
(f) Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Baskets; (2) PCXE Rule 9.2(a), 
which imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
\22\ (3) how information regarding the IIV is disseminated; and (4) 
trading information. The Information Bulletin will also note to members 
their obligations regarding prospectus delivery requirements for the 
Shares. The Exchange notes that investors purchasing Shares directly 
from the Trust (by delivery of the Basket Euro Amount) will receive a 
prospectus. Exchange members purchasing Shares from the Trust for 
resale to investors will deliver a prospectus to such investors.
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    \22\ The Exchange has proposed to amend PCXE Rule 9.2(a) 
(``Diligence as to Accounts'') to provide that ETP Holders, before 
recommending a transaction, must have reasonable grounds to believe 
that the recommendation is suitable for the customer based on any 
facts disclosed by the customer as to his other security holdings 
and as to his financial situation and needs. Further, the proposed 
rule amendment provides that prior to the execution of a transaction 
recommended to a non-institutional customer, the ETP Holders should 
make reasonable efforts to obtain information concerning the 
customer's financial status, tax status, investment objectives and 
any other information that they believe would be useful to make a 
recommendation. See Amendment No. 1 to SR-PCX-2005-115 (November 21, 
2005). Telephone Conference between David Strandberg, Attorney, 
Archipelago, and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on February 8, 2006.
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    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement, and that the number of euros required to create a Basket or 
to be delivered upon a redemption of a Basket may gradually decrease 
over time in the event that the Trust is required to sell euros to pay 
the Trust's expenses, and that if done at a time when the price of the 
euro is relatively low, it could adversely affect the value of the 
Shares. Finally, Information Bulletin will also reference the fact that 
there is no regulated source of last sale information regarding the 
euro, and that the Commission has no jurisdiction over the trading of 
the euro.
2. Statutory Basis
    The proposed rule change, as amended, is consistent with Section 
6(b) of the Act \23\ in general and furthers the objectives of Section 
6(b)(5),\24\ in particular, in that it is designed to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transaction in securities, to 
remove impediments and perfect the mechanisms of a free and open 
market, and, in general, to protect investors and the public interest.
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    \23\ 15 U.S.C. 78s(b).
    \24\ 15 U.S.C. 78s(b)(5).
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    In addition, the Exchange believes that the proposal is consistent 
with Rule 12f-5 under the Act \25\ because it deems the Shares to be 
equity securities, thus rendering the Shares subject to the Exchange's 
existing rules governing the trading of equity securities.
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    \25\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

III. Solicitation of Comments

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

Electronic comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-PCX-2005-123 on the subject line.

[[Page 8034]]

Paper comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-PCX-2005-123. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (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 Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the PCX. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-PCX-2005-123 and should be submitted on or before March 
8, 2006.

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

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\26\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\27\ which 
requires that an exchange have rules designed, among other things, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and in general to protect investors and the public 
interest.
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    \26\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \27\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\28\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\29\ The Commission notes that it previously approved the 
listing and trading of the Shares on the NYSE.\30\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\31\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. PCXE rules deem the Shares to be equity securities, thus 
trading in the Shares will be subject to the Exchange's existing rules 
governing the trading of equity securities.
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    \28\ 15 U.S.C. 78l(f).
    \29\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \30\ See NYSE Order, supra note 6.
    \31\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\32\ which sets forth 
Congress's finding that it is in the public interest and appropriate 
for the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities.
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    \32\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In connection with the Exchange's UTP of the Euro Shares, the 
Exchange will cease trading in the Shares if: (1) The primary market 
stops trading the Shares because of a regulatory trading halt similar 
to a halt based on PCXE Rule 7.12; or (2) the primary market stops 
trading the Shares because the value of the euro is no longer 
calculated or available on at least a 15 second delayed basis from a 
source unaffiliated with the Sponsor, Trust, Custodian or the Exchange, 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated euro value; or the IIV is no longer made available on at 
least a 15 second delayed basis \33\ or if such other event occurs or 
condition exists which, in the opinion of the Exchange, makes further 
dealings on the Exchange inadvisable; or (3) if the primary market 
delists the Shares.
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    \33\ Because the Exchange is trading the Shares in its early and 
late trading sessions, the Exchange will ensure that trading of the 
Shares on ArcaEx will cease during these trading sessions if the 
unaffiliated value of the euro and the IIV per Share are no longer 
calculated and disseminated at least every 15 seconds during these 
trading sessions, or the Exchange stops providing a hyperlink on the 
Exchange's Web site to such unaffiliated euro value or IIV per 
Shares. Telephone Conference between David Strandberg, Attorney, 
Archipelago, and Florence E. Harmon, Senior Special Counsel, 
Division, Commission, on February 6, 2006.
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    In support of the portion of the proposed rule change regarding UTP 
of the Euro Shares, the Exchange has made the following 
representations:
    1. PCX has appropriate rules to facilitate transactions in this 
type of security in all trading sessions.
    2. PCX surveillance procedures are adequate to properly monitor the 
trading of the Shares on the Exchange.
    3. PCX will distribute an Information Bulletin to its members prior 
to the commencement of trading of the Shares on the Exchange that 
explains the terms, characteristics, and risks of trading such shares.
    4. PCX will require a member with a customer who purchases newly 
issued Shares on the Exchange to provide that customer with a product 
prospectus and will note this prospectus delivery requirement in the 
Information Bulletin.
    5. The Exchange will cease trading in the Shares if: (1) the 
primary market stops trading the shares because of a regulatory halt 
similar to a halt based on PCX Rule 7.12 and/or a halt because 
dissemination of the IIV and/or the underlying value (spot price on the 
euro) of the applicable non-U.S. currency has ceased;\34\ or (2) the 
primary market delists the Shares.
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    \34\ Id.
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    This approval order is conditioned on PCX's adherence to these 
representations.
    The Commission finds good cause for approving this proposed rule 
change, as amended, before the thirtieth day after the publication of 
notice thereof in the Federal Register. As noted previously, the 
Commission previously found that the listing and trading of these 
Shares on the NYSE is consistent with the Act.\35\ The Commission 
presently is not aware of any issue that would cause it to revisit that 
earlier finding or preclude the trading of these funds on the Exchange 
pursuant to UTP. Therefore, accelerating approval of this proposed rule 
change should benefit investors by creating, without undue delay, 
additional competition in the market for these Shares.
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    \35\ See NYSE Order, supra note 6.

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[[Page 8035]]

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-PCX-2005-123), is hereby approved on 
an accelerated basis.\36\
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    \36\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\37\
J. Lynn Taylor,
Assistant Secretary.
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    \37\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-2128 Filed 2-14-06; 8:45 am]
BILLING CODE 8010-01-P