[Federal Register Volume 71, Number 123 (Tuesday, June 27, 2006)]
[Notices]
[Pages 36579-36591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5703]



[[Page 36579]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54020; File No. SR-NYSE-2006-35]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment No. 
1 Thereto Relating to Listing and Trading the Shares of Six 
CurrencyShares Trusts

June 20, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on May 16, 2006 the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes as described in Items I and 
II below, which items have been substantially prepared by the Exchange. 
On June 19, 2006, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons, and is granting accelerated approval to the proposed rule 
change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Partial Amendment No. 1.
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1. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the following under Rules 
1300A and 1301A et seq.: CurrencySharesTM Australian Dollar 
Trust, which issues Australian Dollar Shares; 
CurrencySharesTM British Pound Sterling Trust, which issues 
British Pound Sterling Shares; CurrencySharesTM Canadian 
Dollar Trust, which issues Canadian Dollar Shares; 
CurrencySharesTM Mexican Peso Trust, which issues Mexican 
Peso Shares; CurrencySharesTM Swedish Krona Trust, which 
issues Swedish Krona Shares; and CurrencySharesTM Swiss 
Franc Trust, which issues Swiss Franc Shares. Each of these trusts 
(``Trusts'') issues Shares (as identified above) that represent units 
of fractional undivided beneficial interest in and ownership of their 
respective Trust.

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

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

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

1. Purpose
    As noted above, the Exchange proposes to list and trade the Shares, 
which represent units of fractional undivided beneficial interest in 
and ownership of their respective Trust. According to the Exchange, the 
investment objective of the Trusts is for the Shares issued by the 
Trusts to reflect the price of their respective currency.\4\ The sole 
assets of the Trusts will be the applicable foreign currency deposited 
into the Deposit Account \5\ upon the creation of Baskets of 50,000 
Shares each (as described below) and the applicable foreign currency 
earned as interest on the Deposit Account. The Trusts will not hold or 
trade in any currency swaps, options, futures or other currency 
derivative products, or engage in any foreign exchange market 
transactions.
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    \4\ The Sponsor, on behalf of the Trusts, filed a Form S-1 for 
each Trust on March 10, 2006 (collectively, ``Registration 
Statements''). See Registration No. 333-132362 for the 
CurrencyShares Australian Dollar Trust; Registration No. 333-132361 
for the CurrencyShares British Pound Sterling Trust; Registration 
No. 333-132363 for the CurrencyShares Canadian Dollar Trust; 
Registration No. 333-132367 for the CurrencyShares Mexican Peso 
Trust; Registration No. 333-132366 for the CurrencyShares Swedish 
Krona Trust; and Registration No. 333-132364 for the Swiss Franc 
Trust.
    \5\ The Deposit Account is the applicable foreign currency 
account of the Trust established with the Depository (the London 
branch of JP Morgan Chase Bank, N.A.) by the Deposit Account 
Agreement. The Deposit Account holds the currency deposited with the 
Trust.
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    The Exchange states that Shares are intended to provide 
institutional and retail investors with a simple, cost-effective means 
of hedging their exposure to a particular foreign currency and 
otherwise implement investment strategies that involve foreign currency 
(e.g., diversify more generally against the risk that the U.S. Dollar 
(``USD'') will depreciate). According to the Exchange, the Sponsor 
believes that, for many investors, the Shares will represent a cost-
effective investment relative to traditional means of investing in the 
foreign exchange market. Because the Shares will be traded on the NYSE, 
investors will be able to access the applicable foreign currency market 
through a traditional brokerage account, which the Exchange believes 
will provide investors with an efficient means of implementing 
investment tactics and strategies that involve the applicable foreign 
currency.
    Overview of the Foreign Exchange Industry.\6\ The Exchange 
represents that the foreign exchange market is the largest and most 
liquid financial market in the world. The Exchange states that, as of 
April 2004, the foreign exchange market experienced average daily 
turnover of approximately $1.88 trillion, which was a 57% increase (at 
current exchange rates) from 2001 daily averages. The foreign exchange 
market is predominantly an over-the-counter market, with no fixed 
location and it operates 24 hours a day, seven days a week. London, New 
York, and Tokyo are the principal geographic centers of the world-wide 
foreign exchange market, with approximately 58% of all foreign exchange 
business executed in the U.K., U.S. and Japan. Other, smaller markets 
include Singapore, Zurich, and Frankfurt.\7\
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    \6\ The Exchange represents that, except as otherwise 
specifically noted, the information provided in the Form 19b-4 
filing relating to the Shares, foreign currency markets, movements 
in foreign currency pricing, and related information is based 
entirely on information included in the Registration Statements.
    \7\ For April 2004, the daily average foreign exchange turnover 
of the U.S. dollar against the Pound Sterling, Swiss Franc, Canadian 
dollar, and Australian dollar was approximately $245 billion, $78 
billion, $71 billion, and $89 billion, respectively. See Bank for 
International Settlements, Triennial Central Bank Survey, March 
2005, Statistical Annex Tables, Table E-2. In April 2004, the daily 
average foreign exchange turnover in USD of the Mexican Peso and 
Swedish Krona against all other currencies was approximately $20 
billion and $40 billion, respectively. See id at Statistical Annex 
Tables, Table E-1.
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    The Exchange states that there are three major kinds of 
transactions in the traditional foreign exchange markets: spot 
transactions, outright forwards and foreign exchange swaps.\8\ There 
also are transactions in currency options, which trade both over-the-
counter and, in the U.S., on the Philadelphia Stock

[[Page 36580]]

Exchange (``Phlx''). Currency futures \9\ are traded on a number of 
regulated markets, including the International Monetary Market division 
of the Chicago Mercantile Exchange (``CME''), the Singapore Exchange 
Derivatives Trading Limited (``SGX,'' formerly the Singapore 
International Monetary Exchange or SIMEX) and the London International 
Financial Futures Exchange (``LIFFE''). Over 85% of currency derivative 
products (swaps, options and futures) are traded over-the-counter.\10\
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    \8\ ``Spot'' trades are foreign exchange transactions that 
settle typically within two business days with the counterparty to 
the trade. Spot transactions account for approximately 35% of 
reported daily volume in the traditional foreign exchange markets. 
``Forward'' trades, which are transactions that settle on a date 
beyond spot, account for 12% of the reported daily volume, and 
``swap'' transactions, in which two parties exchange two currencies 
on one or more specified dates over an agreed period and exchange 
them again when the period ends, account for the remaining 53% of 
volume.
    \9\ Currency futures are transactions in which an institution 
buys or sells a standardized amount of foreign currency on an 
organized exchange for delivery on one of several specified dates.
    \10\ See Bank for International Settlements, Triennial Central 
Bank Survey of Foreign Exchange and Derivatives Market Activity in 
April 2004, September 2004 (Tables 2 and 6).
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    Futures on the Australian Dollar, British Pound, Canadian Dollar, 
Mexico Peso, Swedish Krona, and Swiss Franc as well as options on such 
futures (except for the Swedish Krona) are traded on the CME (both 
exchange pit trading and GLOBEX trading, except for Swedish Krona 
futures, which trade on GLOBEX only). Standardized options on the 
Australian Dollar, British Pound, Canadian Dollar, and Swiss Franc 
trade on Phlx. Phlx also offers more customized options on certain 
currency pairs.\11\ According to the Exchange, these U.S. markets are 
the primary trading markets in the world for exchange-traded futures, 
options and options on futures on these currencies.\12\ Based on the 
Exchange's review of information supplied by major market data vendors, 
exchange-traded options are not traded on the Mexican Peso or the 
Swedish Krona.
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    \11\ For the period May 2005 through April 2006, futures 
contract volume on the CME was as follows: Australian Dollar, 56,611 
(Pit) and 203,073 (Globex); British Pound, 69,580 (Pit) and 486,136 
(Globex); Canadian Dollar, 78,618 (Pit) and 335,586 (Globex); 
Mexican Peso, 86,614 (Pit) and 78,884 (Globex); Swiss Franc, 62,685 
(Pit) and 378,208 (Globex); Swedish Krona, 53 (Globex). For the 
period January through March 2006, Australian Dollar, British Pound, 
Canadian Dollar, and Swiss Franc options volume on the Phlx was 
2,162 contracts, 399 contracts, 8,032 contracts, and 479 contracts, 
respectively.
    \12\ The London International Financial Futures Exchange trades 
Euro futures and options and not derivatives on the currencies that 
are the subject of this filing.
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    According to the Exchange, participants in the foreign exchange 
market have various reasons for participating. Multinational 
corporations and importers need foreign currency to acquire materials 
or goods from abroad. Banks and multinational corporations sometimes 
require specific wholesale funding for their commercial loan or other 
foreign investment portfolios. Some participants hedge open currency 
exposure through off-balance-sheet products.
    The Exchange further represents that the primary market 
participants in foreign exchange are banks (including government-
controlled central banks), investment banks, money managers, 
multinational corporations, and institutional investors. The most 
significant participants are the major international commercial banks 
that act both as brokers and as dealers. In their dealer role, these 
banks maintain long or short positions in a currency and seek to profit 
from changes in exchange rates. In their broker role, the banks handle 
buy and sell orders from commercial customers, such as multinational 
corporations. The banks earn commissions when acting as agent. They 
profit from the spread between the rates at which they buy and sell 
currency for customers when they act as principal.
    In its filing, the Exchange represents that, typically, banks 
engage in transactions ranging from $5 million to $50 million in 
amount. Although banks will engage in smaller transactions, the fees 
that they charge have made the foreign currency markets relatively 
inaccessible to individual investors. Some banks allow individual 
investors to engage in spot trades without paying traditional 
commissions on the trades. Such trading is often not profitable for 
individual investors, however, because the banks charge the investor 
the spread between the bid and the ask price maintained by the bank on 
all purchases and sales. The overall effect of this fee structure 
depends on the spread maintained by the bank and the frequency with 
which the investor trades. Generally, this fee structure is 
particularly disadvantageous to active traders.
    Foreign Currency Regulation. Most trading in the global over-the-
counter (OTC) foreign currency markets is conducted by regulated 
financial institutions such as banks and broker-dealers. In addition, 
in the U.S., the Foreign Exchange Committee of the New York Federal 
Reserve Bank has issued Guidelines for Foreign Exchange Trading, and 
central-bank sponsored committees in Japan and Singapore have published 
similar best practice guidelines. In the United Kingdom, the Bank of 
England has published the Non-Investment Products Code, which covers 
foreign currency trading. The Financial Markets Association, whose 
members include major international banking organizations, has also 
established best practices guidelines called the Model Code.
    Participants in the U.S. OTC market for foreign currencies are 
generally regulated by their oversight regulators. For example, 
participating banks are regulated by the banking authorities. In 
addition, in the U.S., the Commission regulates trading of options on 
foreign currencies on the Phlx and the Commodity Futures Trading 
Commission (``CFTC'') regulates trading of futures, options, and 
options on futures on foreign currencies on regulated futures 
exchanges.\13\
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    \13\ The CFTC is an independent government agency with the 
mandate to regulate commodity futures and options markets in the 
U.S. under the Commodity Exchange Act. In addition to its oversight 
of regulated futures exchanges, the CFTC has jurisdiction over 
certain foreign currency futures, options and options on futures 
transactions occurring other than on a regulated exchange and 
involving retail customers. Both the Commission and CFTC have 
established rules designed to prevent market manipulation, abusive 
trade practices, and fraud, as have the exchanges on which the 
foreign currency products trade.
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    The Exchange states that the Phlx and CME have authority to perform 
surveillance on their members' trading activities, review positions 
held by members and large-scale customers, and monitor the price 
movements of options and/or futures markets by comparing them with cash 
and other derivative markets' prices.
    Foreign Exchange Markets.\14\ The Exchange represents that the 
average daily turnover of the USD in the foreign exchange market is 
approximately $1.57 trillion, which makes it the most-traded currency 
in the world, accounting for approximately 89% of global foreign 
exchange transactions.
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    \14\ According to the Exchange, the primary source of the 
statistical information in this section is the Bank of International 
Settlements Survey, supra at note 7. The Exchange further represents 
that other information came from the Web sites of the central banks 
for the applicable countries and other sources the Sponsor believes 
to be reliable.
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    The Australian Dollar is the national currency of Australia and the 
currency of the accounts of the Reserve Bank of Australia, the 
Australian central bank. The official currency code for the Australian 
Dollar is ``AUD.'' As with U.S. currency, 100 Australian cents are 
equal to one Australian Dollar. According to the Exchange, the average 
daily turnover of the Australian Dollar in the foreign exchange market 
is approximately $97.1 billion, which makes it the sixth-most-traded 
currency in the world, accounting for approximately 5.5% of global 
foreign exchange transactions. The Exchange further represents that the 
USD/ Australian Dollar pair has an average daily turnover of 
approximately $89.8 billion, which makes it the fourth-most-traded 
currency pair, accounting for

[[Page 36581]]

approximately 5% of the global foreign exchange transactions. Within 
the past five years, the value of the Australian Dollar reached a 
record low of $0.4773 and a record high of $0.8005. As of March 10, 
2006, the Australian Dollar was worth $0.7429.
    The British Pound Sterling is the official currency of the United 
Kingdom and has been the currency of the accounts of the Bank of 
England since 1694. The British Pound Sterling is also referred to as 
the British Pound and its official currency code is ``GBP'' (Great 
Britain Pound). The Exchange represents that the average daily turnover 
of the British Pound Sterling in the foreign exchange market is 
approximately $299 billion, which makes it the fourth-most-traded 
currency in the world, accounting for approximately 17% of global 
foreign exchange transactions. According to the Exchange, the USD/
British Pound Sterling pair has an average daily turnover of 
approximately $245 billion, which makes it the third-most-traded 
currency pair, accounting for approximately 14% of the global foreign 
exchange transactions. The United Kingdom has not entered into the 
Second European Exchange Rate Mechanism (ERM II), a necessary condition 
before a country can adopt the Euro as its currency. Within the past 
five years, the value of the British Pound Sterling reached a record 
low of $1.3677 and a record high of $1.955. As of March 1, 2006, the 
British Pound Sterling was worth $1.7473.
    The Canadian Dollar is the national currency of Canada and the 
currency of the accounts of the Bank of Canada, the Canadian central 
bank. The official currency code for the Canadian Dollar is ``CAD.'' As 
with U.S. currency, 100 Canadian cents are equal to one Canadian 
Dollar. The Exchange represents that the average daily turnover of the 
Canadian Dollar in the foreign exchange market is approximately $74.6 
billion, which makes it the seventh-most-traded currency in the world, 
accounting for approximately 4% of global foreign exchange 
transactions. The Exchange further represents that the USD/Canadian 
Dollar pair has an average daily turnover of approximately $71.1 
billion, which makes it the sixth-most-traded currency pair, accounting 
for approximately 4% of the global foreign exchange transactions. 
Within the past five years, the value of the Canadian Dollar reached a 
record low of $0.6175 and a record high of $0.8821. As of March 1, 
2006, the Canadian Dollar was worth $0.8799.
    The Mexican Peso is the national currency of Mexico and the 
currency of the accounts of the Bank of Mexico. Subsequent to the 
redenomination of the Mexican Peso in 1993, the official currency code 
for the Mexican Peso is ``MXN.'' One hundred ``centavos'' comprise one 
Mexican Peso. Average daily turnover of the Mexican Peso in the foreign 
exchange market is approximately $20.3 billion, which makes it the 
twelfth-most-traded currency in the world, accounting for approximately 
1.1% of global foreign exchange transactions. Within the past five 
years, the value of the Mexican Peso reached a record low of USD 
0.08507 and a record high of USD 0.11205. As of March 1, 2006, the 
Mexican Peso was worth USD 0.09558.
    The Swedish Krona is the national currency of Sweden and the 
currency of the accounts of the Swedish central bank, the Riksbank. The 
official currency code for the Swedish Krona is ``SEK.'' One hundred 
``[ouml]re'' comprise one Swedish Krona. According to the Exchange, the 
average daily turnover of the Swedish Krona in the foreign exchange 
market is approximately $40.6 billion, which makes it the eighth-most-
traded currency in the world, accounting for approximately 2.3% of 
global foreign exchange transactions. Within the past five years, the 
value of the Swedish Krona reached a record low of $0.09046 and a 
record high of $0.15200. As of March 1, 2006, the Swedish Krona was 
worth $0.12586.
    The Swiss Franc is the national currency of Switzerland and 
Liechtenstein and the currency of the accounts of the Swiss National 
Bank, the central bank of Switzerland. The official currency code for 
the Swiss Franc is ``CHF.'' Each Swiss Franc is equal to 100 Swiss 
centimes. The Exchange represents that the average daily turnover of 
the Swiss Franc in the foreign exchange market is approximately $108 
billion, which makes it the fifth-most-traded currency in the world, 
accounting for approximately 6.1% of global foreign exchange 
transactions. The Exchange further represents that the USD/Swiss Franc 
pair has an average daily turnover of approximately $78.2 billion, 
which makes it the fifth-most-traded currency pair, accounting for 
approximately 4% the global foreign exchange transactions. Within the 
past five years, the value of the Swiss Franc reached a record low of 
$0.5487 and a record high of $0.8879. As of March 1, 2006, the Swiss 
Franc was worth $0.7596.
    As members of the European Union, the United Kingdom and Sweden 
have the option to adopt the Euro as their official currency in lieu of 
their national currencies. Switzerland could join the European Union 
and adopt the Euro as its currency as well. If a country adopts the 
Euro as its currency, the value of national currency could depreciate, 
depending on, among other things, the relative value of the national 
currency and the Euro, the conversion ratio of the national currency 
per Euro, and the timing of the adoption of the Euro. If the national 
currencies lose value, the value of the respective shares would also 
depreciate. Furthermore, if the United Kingdom, Sweden or Switzerland 
adopts the Euro as its currency, then the respective Trust will 
terminate and liquidate.
    The Sponsor. The Sponsor of each Trust is Rydex Specialized 
Products LLC, a Delaware limited liability company that is wholly-owned 
by PADCO Advisors II, Inc., a Maryland corporation, a privately-held 
company owned by Rydex Holdings, Inc., a Maryland Corporation, which is 
controlled by two irrevocable trusts. The Sponsor and its affiliates 
collectively do business as ``Rydex Investments.''
    The Sponsor is responsible for establishing the Trusts and for the 
registration of the Shares. The Sponsor generally oversees the 
performance of the Trustee and the Trusts' principal service providers, 
but does not exercise day-to-day oversight over the Trustee or such 
service providers. The Sponsor regularly communicates with the Trustee 
to monitor the overall performance of the Trusts. The Sponsor, with 
assistance and support from Rydex affiliates who also do business as 
``Rydex Investments,'' the Trustee and outside professionals, are 
responsible for preparing and filing periodic reports on behalf of the 
Trusts with the Commission.\15\ The Sponsor will designate the auditors 
of the Trusts and may from time to time employ legal counsel for the 
Trusts.
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    \15\ The Sponsor has obtained a no-action letter from the 
Commission's Division of Corporation Finance with respect to the 
Euro Currency Trust pursuant to which the Sponsor's principal 
executive officer and principal financial officer will provide any 
certifications that are required from a ``registrant's'' principal 
executive officer and principal financial officer. See Letter from 
Charles Kwon, Special Counsel, Division of Corporation Finance, 
Commission, dated March 22, 2006. The Exchange states that the 
Sponsor plans to request the same type of no-action relief for the 
Trusts. See telephone conversation between Michael Cavalier, 
Assistant General Counsel, NYSE, Geoffrey Pemble, Special Counsel, 
Commission, and Christopher Chow, Special Counsel, Commission, 
during the morning of June 13, 2006 (``June 13 AM Telephone 
Conversation'').
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    The Distributor is assisting the Sponsor in developing a marketing 
plan for the Trusts, preparing marketing

[[Page 36582]]

materials on the Shares, executing the marketing plan for the Trusts 
and providing strategic and tactical research on the global foreign 
exchange markets. The Sponsor will not enter into an agreement with the 
Distributor covering these services, because the Distributor is an 
affiliate and will not be paid any compensation by the Sponsor for 
performing these services.
    The Sponsor with the Distributor's assistance maintains a public 
Web site on behalf of the Trusts, http://www.currencyshares.com. which 
contains information about the Trusts and the Shares, and oversees 
certain Shareholder services, such as a call center and prospectus 
delivery.
    The Sponsor may direct the Trustee in the conduct of its affairs, 
but only as provided in the Depositary Trust Agreement. For example, 
the Sponsor may direct the Trustee to sell the Trusts' foreign currency 
to pay certain extraordinary expenses, to suspend a redemption order or 
postpone a redemption settlement date, or to terminate the Trusts if 
certain criteria are met. The Sponsor anticipates that, if the market 
capitalization of a Trust is less than $300 million at any time after 
the first anniversary of such Trust's inception, then the Sponsor will, 
in accordance with the Depositary Trust Agreement, direct the Trustee 
to terminate and liquidate such Trust.
    Fees are paid to the Sponsor as compensation for services performed 
under the Depositary Trust Agreement and for services performed in 
connection with maintaining the Trusts' Web site and marketing the 
Shares. The Sponsor's fee is the only ordinary recurring expense that 
will be borne by the Trusts and, ultimately, by the Shareholders.\16\
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    \16\ See infra section entitled ``Trust Expenses and Management 
Fees.''
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    The Trustee. The Bank of New York, the Trustee, is generally 
responsible for the day-to-day administration of the Trusts, including 
keeping the Trusts' operational records. The Trustee's principal 
responsibilities include selling the Trusts' foreign currency if needed 
to pay the Trusts' expenses, calculating the net asset value (``NAV'') 
of the Trusts and the NAV per Share, receiving and processing orders 
from Authorized Participants to create and redeem Baskets (as discussed 
below), and coordinating the processing of such orders with the 
Depository and DTC. The Trustee will earn a monthly fee that will be 
paid by the Sponsor.
    The Trustee intends to regularly communicate with the Sponsor to 
monitor the over-all performance of the Trusts. The Trustee, along with 
the Sponsor, consults with the Trusts' legal, accounting and other 
professional service providers as needed. The Trustee assists and 
supports the Sponsor with the preparation of all periodic reports 
required to be filed with the Commission on behalf of the Trusts.
    Affiliates of the Trustee may from time to time act as Authorized 
Participants or purchase or sell foreign currency or Shares for their 
own account, as agent for their customers, and for accounts over which 
they exercise investment discretion.
    The Depository. The Depository accepts Trust foreign currency 
deposited with it as a banker by Authorized Participants in connection 
with the creation of Baskets. The Depository facilitates the transfer 
of the applicable foreign currency into and out of the Trusts through 
the applicable foreign currency deposit account maintained with it as a 
banker by the Trusts. The Depository will not be paid a fee for its 
services to the Trusts. The Depository may earn a ``spread'' or 
``margin'' over the rate of interest it pays to the Trusts on the 
foreign currency deposit balances. The Depository is not a trustee for 
the Trusts or the Shareholders. The Depository and its affiliates may 
from time to time act as Authorized Participants or purchase or sell 
the foreign currency or Shares for their own account, as agent for 
their customers, and for accounts over which they exercise investment 
discretion.
    The Distributor. Rydex Distributors, Inc., the Distributor, assists 
the Sponsor in developing a marketing plan for the Trusts on an ongoing 
basis, preparing marketing materials regarding the Shares, including 
the content on the Trusts' Web site, http://www.currencyshares.com. 
executing the marketing plan for the Trusts, and providing strategic 
and tactical research on the global foreign exchange market. The 
Distributor and its affiliates may from time to time act as Authorized 
Participants or purchase or sell foreign currency or Shares for their 
own account, as agent for their customers and for accounts over which 
they exercise investment discretion.
    Description of the Trusts' Management and Structure. Rydex 
Specialized Products LLC is the sponsor of the Trusts (``Sponsor''), 
The Bank of New York is the trustee of the Trusts (``Trustee''), 
JPMorgan Chase Bank, N.A., London Branch (``Bank''), is the depository 
for the Trusts (``Depository''), and Rydex Distributors, Inc. is the 
distributor for the Trusts (``Distributor''). The Sponsor, Trustee, 
Depository and Distributor are not affiliated with the Exchange or one 
another, with the exception that the Sponsor and Distributor are 
affiliated. The Exchange currently lists and trades shares of the Euro 
Currency Trust, which has the same Sponsor, Trustee, Depository and 
Distributor as the Trusts.\17\
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    \17\ See Securities Exchange Act Release No. 52843 (November 28, 
2005), 70 FR 72486 (December 5, 2005) (SR-NYSE-2005-65).
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    According to the Exchange, the Trusts will be formed under the laws 
of the State of New York as of the date the Sponsor and the Trustee 
sign the Depositary Trust Agreement and the Initial Purchaser makes the 
initial deposit for the issuance of three Baskets.\18\ The Shares 
represent units of fractional undivided beneficial interest in, and 
ownership of, the respective Trusts. The investment objective of each 
Trust is for the Shares to reflect the price of the applicable foreign 
currency.
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    \18\ A Basket is a block of 50,000 Shares.
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    Each Trust's assets will consist only of foreign currency on demand 
deposit in a foreign currency-denominated, interest-bearing account at 
JPMorgan Chase, London Branch.\19\ The Trusts will not hold any 
derivative products. Each Share represents a proportional interest, 
based on the total number of Shares outstanding, in the applicable 
foreign currency owned by the specific Trust, less the estimated 
accrued but unpaid expenses (both asset-based and non-asset based) of 
such Trust. The Sponsor expects that the price of a Share will 
fluctuate in response to fluctuations in the price of the applicable 
foreign currency and that the price of a Share will reflect accumulated 
interest as well as the estimated accrued but unpaid expenses of the 
specific Trust. A Trust will terminate upon the occurrence of any of 
the termination events listed in the Depositary Trust Agreement and 
will otherwise terminate on a specified date in 2045.
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    \19\ The Exchange notes that, in addition to the Euro Currency 
Trust (see supra at note 17), the Commission has permitted the 
listing of prior securities 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. 50603 
(October 28, 2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) 
(approving listing and trading on NYSE of StreetTRACKS[supreg] Gold 
Shares); 19133 (October 14, 1982) (approving the listing of 
standardized options on foreign currencies); 36505 (November 22, 
1995), 60 FR 61277 (November 29, 1995) (SR-Phlx-95-42) (approving 
the listing of dollar-denominated delivery foreign currency options 
on the Japanese Yen); and 36165 (August 29, 1995), 60 FR 46653 
(September 7, 1995) (SR-NYSE-94-41) (approving listing standards 
for, among other things, currency and currency index warrants).
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    The Trusts are not managed like a business corporation or an active 
investment vehicle. The foreign

[[Page 36583]]

currency held by each Trust will only be sold: (1) If needed to pay 
Trust expenses; (2) in the event the Trust terminates and liquidates 
its assets; or (3) as otherwise required by law or regulation. The sale 
of foreign currency by the Trusts is a taxable event to Shareholders. 
According to the Exchange, the Trusts are not registered as investment 
companies under the Investment Company Act and are not required to 
register under such Act.
    The Sponsor, on behalf of the Trusts, has requested relief from 
certain trading requirements of the Act.\20\ In addition, the Exchange 
represents that the Trusts will not be subject to the Exchange's 
corporate governance requirements, including the Exchange's audit 
committee requirements.\21\
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    \20\ See infra note 52.
    \21\ See Securities Exchange Act Release No. 48745 (November 4, 
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33, SR-NASD-
2002-77, et al.) (specifically noting that the corporate governance 
standards will not apply to, among others, passive business 
organizations in the form of trusts). See also Securities Exchange 
Act Release No. 47654 (April 9, 2003), 68 FR 18787 (April 16, 2003) 
(noting in Section II(F)(3)(c) that ``SROs may exclude from Exchange 
Act Rule 10A-3's requirements issuers that are organized as trusts 
or other unincorporated associations that do not have a board of 
directors or persons acting in a similar capacity and whose 
activities are limited to passively owning or holding (as well as 
administering and distributing amounts in respect of) securities, 
rights, collateral or other assets on behalf of or for the benefit 
of the holders of the listed securities'').
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    Trusts' Expenses and Management Fees. Each Trust will use interest 
earned on its respective Deposit Account to pay the Sponsor's fee and 
any other Trust expenses that may arise from time to time.\22\ If that 
interest is not sufficient to fully pay the Sponsor's fee and Trust 
expenses, then the Trustee will sell deposited foreign currency as 
needed. In either case, the applicable foreign currency will be 
converted to USD at the prevailing market rate at the time of 
conversion. In estimating the amount of the Sponsor's fee and any other 
Trust expenses that are accrued but unpaid, the Trusts will use the 
Noon Buying Rate in effect at the time the estimate is made. The USD 
amount estimated for accrued but unpaid expenses at any time may be 
more or less than the USD amount actually paid when such expenses 
become due and payable.
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    \22\ Interest on the Deposit Account will accrue daily at an 
initial annual nominal rate that may vary for each Trust. The 
Depository may change the rate for a Trust based upon changes to the 
applicable London InterBank Offer Rate (``LIB OR'') overnight rate 
set by the British Bankers' Association, other market conditions or 
the liquidity needs of the Bank.
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    The Trusts' only ordinary recurring expense is expected to be the 
Sponsor's fee.\23\ The Sponsor in turn is obligated under the 
Depositary Trust Agreement to pay the following administrative and 
marketing expenses for each of the Trusts: The Trustee's monthly fee; 
the Distributor's fee; NYSE listing fees; Commission registration fees; 
printing and mailing costs; audit fees and expenses; and up to $100,000 
per annum in legal fees and expenses. The Sponsor also is obligated to 
pay the costs of the Trusts' organization and the costs of the initial 
sale of the Shares, including the applicable Commission registration 
fees.
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    \23\ The Sponsor's fee accrues daily at an annual nominal rate 
of 0.40% of the NAV of the Trusts, compounds daily on the basis of a 
365- or 366-day year, and is paid monthly in arrears.
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    Under the Deposit Account Agreement, the Depository is entitled to 
invoice the Trustee or debit the Deposit Account for out-of-pocket 
expenses. The Trust has also agreed to reimburse the Depository for any 
taxes, levies, imposts, deductions, charges, stamp, transaction and 
other duties and withholdings in connection with the Deposit Account, 
except for such items imposed on the overall net income of the 
Depository. Except for the reimbursable expenses just described, the 
Depository will not be paid a fee for its services to the Trust. The 
Depository may earn a ``spread'' or ``margin'' on the foreign currency 
deposit balances it holds.
    The following additional expenses may be charged to the Trusts: (1) 
Expenses and costs of any extraordinary services performed by the 
Trustee or the Sponsor on behalf of the Trusts or action taken by the 
Trustee or the Sponsor to protect the Trusts or interests of 
Shareholders; (2) indemnification of the Sponsor; (3) taxes and other 
governmental charges; and (4) expenses of the Trusts other than those 
the Sponsor is obligated to pay pursuant to the Depositary Trust 
Agreement.
    In order to pay a Trust's expenses, the Trustee will make payments 
using the applicable foreign currency held in the Depositary Account. 
For expenses not payable in the applicable foreign currency, if any, 
the Trustee shall convert the applicable foreign currency to other 
currencies as necessary to pay the Trust's expenses. The Trustee shall 
withdraw the smallest amount of foreign currency required to purchase 
amounts of another currency sufficient to pay Trust expenses and the 
costs of currency conversion. The Trustee will place foreign currency 
sale orders with dealers (which may include the 20 Depository) through 
which the Trustee expects to receive a commercially reasonable price 
and good execution of orders. Neither the Trustee nor the Sponsor is 
liable for depreciation or loss incurred by reason of any conversion.
    Liquidity. The Exchange states that the amount of the discount or 
premium in the trading price relative to the NAV per Share may be 
influenced by non-concurrent trading hours between the major foreign 
currency markets and the NYSE. The period of greatest liquidity in the 
British Pound, Swiss Franc and Swedish Krona market, for example, is 
typically that time of the day when trading in the European time zones 
overlaps with trading in the U.S., which is when OTC market trading in 
London, New York, and other centers coincides with futures and options 
trading on those currencies. While the Shares will trade on the NYSE 
until 4:15 p.m. (New York time), liquidity in the OTC market for the 
British Pound, Swiss Franc, and Swedish Krona will be slightly reduced 
after the close of the London foreign currency markets.
    Because of the potential for arbitrage inherent in the structure of 
the Trusts, the Sponsor believes that the Shares will not trade at a 
material discount or premium to the value of underlying currency held 
by the Trust. The Exchange states that the arbitrage process, which in 
general provides investors the opportunity to profit from differences 
in prices of assets, increases the efficiency of the markets, serves to 
prevent potentially manipulative efforts and can be expected to operate 
efficiently in the case of the Shares and the applicable foreign 
currency. If the price of the Shares deviates enough from the price of 
the foreign currency to create a material discount or premium, an 
arbitrage opportunity is created. If the Shares are inexpensive 
compared to the foreign currency that underlies them, an Authorized 
Participant, either on its own behalf or acting as agent for investors, 
arbitrageurs or traders, may buy the Shares at a discount, immediately 
redeem them in exchange for the foreign currency and sell the foreign 
currency in the cash market at a profit. If the Shares are expensive 
compared to the foreign currency that underlies them, an Authorized 
Participant may sell the Shares short, buy enough foreign currency to 
create the number of Shares sold short, acquire the Shares through the 
creation process and deliver the Shares to close out the short 
position.\24\ According to the

[[Page 36584]]

Exchange, in both instances the arbitrageur serves efficiently to 
correct price discrepancies between the Shares and the underlying 
foreign currency.
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    \24\ The Exchange notes that the Trusts, which will only hold 
foreign currency as an asset in the normal course of their 
operations, differ from index-based exchange-traded funds, which may 
involve a trust holding hundreds or even thousands of underlying 
component securities, necessarily involving in the arbitrage process 
movements in a large number of security positions. See, e.g., 
Securities Exchange Act Release No. 46306 (August 2, 2002), 67 FR 
51916 (August 9, 2002) (SR-NYSE-2002-28) (approving the UTP trading 
of Vanguard Total Market VIPERs based on the Wilshire 5000 Total 
Market Index).
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    Description of the Shares. According to the Exchange, the Shares 
are not a traditional investment. They are dissimilar from the 
``shares'' of a corporation operating a business enterprise, with 
management and a board of directors. Trust Shareholders do not have 
rights normally associated with owning shares of a business 
corporation, including, for example, the right to bring ``oppression'' 
or ``derivative'' actions. Shareholders have only those rights 
explicitly set forth in the Depositary Trust Agreement.\25\ All Shares 
are of the same class with equal rights and privileges. Each Share is 
transferable, is fully paid and non-assessable, and entitles the holder 
to vote on the limited matters upon which Shareholders may vote under 
the Depositary Trust Agreement. The Shares do not entitle their holders 
to any conversion or pre-emptive rights or, except as provided in the 
Registration Statement, any redemption or distribution rights.
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    \25\ Shareholders have no voting rights under the Depositary 
Trust Agreement, except in limited circumstances. If the holders of 
at least 25% of the Shares outstanding for a Trust determine that 
the Trustee is in material breach of its obligations under the 
Depositary Trust Agreement, they may provide written notice to the 
Trustee (or require the Sponsor to do so) specifying the default and 
requiring the Trustee to cure such default. If the Trustee fails to 
cure such breach within 30 days after receipt of the notice, the 
Sponsor, acting on behalf of the Registered Owners, may remove the 
Trustee for such Trust. The holders of at least 66\2/3\% of the 
Shares outstanding may vote to remove the Trustee. The Trustee must 
terminate the Trust at the request of the holders of at least 75% of 
the outstanding Shares.
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    Distributions. The Depositary Trust Agreement requires the Trustee 
to promptly distribute ``Surplus Property'' that is in USD and sell or 
convert all other Surplus Property into USD and distribute the 
proceeds. ``Surplus Property'' includes, among other things, interest 
on the foreign currency in the Deposit Account that the Trustee 
determines is not required to pay estimated Trust expenses within the 
following month. In addition, if a Trust is terminated and liquidated, 
then the Trustee will distribute to the Shareholders upon surrender of 
their Shares any amounts remaining after the satisfaction of all 
outstanding liabilities of the Trust and the establishment of such 
reserves for applicable taxes, other governmental charges and 
contingent or future liabilities as the Trustee shall determine. All 
distributions will be made monthly in USD. The Trustee will effectuate 
the conversion and will determine the exchange rate, which will be 
proximate to the Noon Buying Rate on the record date for the 
distribution. Shareholders of record on the record date fixed by the 
Trustee for any distribution will be entitled to receive their pro-rata 
portion of the distribution.\26\
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    \26\ On the last calendar day of each month, the Depository will 
deposit into the Deposit Account the accrued but unpaid interest for 
that month and pay the accrued Sponsor's fee for the month plus any 
other Trust expenses. If the last calendar day of the month is not a 
business day, the deposit of interest and payment of the Sponsor's 
fee and expenses will be made on the next following business day. In 
the event that the interest deposited exceeds the sum of the 
Sponsor's fees for the month plus other Trust expenses, if any, then 
the Trustee shall convert the excess into dollars based on the Noon 
Buying Rate and distribute the dollars promptly to Shareholders of 
record on the last calendar day of the month, on a pro rata basis 
(in accordance with the number of Shares that they own). The 
distribution per Share shall be rounded down to the nearest penny, 
and any excess remaining after the rounding shall be retained by the 
Trust in the applicable foreign currency.
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    Creation and Redemption of Shares. Each Trust will create Shares on 
a continuous basis only in aggregations of 50,000 Shares (each such 
aggregation referred to as a ``Basket'') in exchange for deposits of 
the applicable foreign currency, and will distribute the applicable 
foreign currency in connection with the redemption of one or more 
Baskets. As discussed further below, the creation and redemption of 
Baskets requires the delivery to the Trust or the distribution by the 
Trust of the amount of foreign currency represented by the Baskets 
being created or redeemed. This amount is based on the combined NAV per 
Share of the number of Shares included in the Baskets being created or 
redeemed, determined on the day the order to create or redeem Baskets 
is properly received. The number of Shares outstanding is expected to 
increase and decrease from time to time as a result of the creation and 
redemption of Baskets. Authorized Participants pay for Baskets with the 
applicable foreign currency. Shareholders pay for Shares with U.S. 
dollars.
    Authorized Participants are the only persons that may place orders 
to create and redeem Baskets.\27\ An Authorized Participant is a DTC 
Participant that is a registered broker-dealer or other securities 
market participant such as a bank or other financial institution that 
is not required to register as a broker-dealer to engage in securities 
transactions and has entered into a Participant Agreement with the 
Trustee. Before initiating a creation or redemption order, an 
Authorized Participant must have entered into a Participant Agreement 
with the Sponsor and the Trustee. The Participant Agreement provides 
the procedures for the creation and redemption of Baskets and for the 
delivery of foreign currency required for creations and redemptions. 
The Participant Agreements may be amended by the Trustee, the Sponsor 
and the relevant Authorized Participant.
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    \27\ Authorized Participants may sell to other investors all or 
part of the Shares included in the Baskets that they purchase from 
the Trusts.
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    Authorized Participants will pay a transaction fee of $500 to the 
Trustee for each order that they place to create or redeem one or more 
Baskets.\28\ Authorized Participants who make deposits with the Trust 
in exchange for Baskets receive no fees, commissions or other form of 
compensation or inducement of any kind from either the Sponsor or the 
Trust. No Authorized Participant has any obligation or responsibility 
to the Sponsor or the Trust to effect any sale or resale of Shares.
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    \28\ The transaction fee may be reduced or, with the consent of 
the Sponsor, increased. The Trustee shall notify DTC of any 
agreement to change the transaction fee and will not implement any 
increase in the fee for the redemption of Baskets until 30 days 
after the date of the notice.
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    The Exchange states that certain Authorized Participants are 
expected to have the facility to participate directly in the global 
foreign exchange market. In some cases, an Authorized Participant may 
acquire foreign currency from, or sell foreign currency to, an 
affiliated foreign exchange trading desk, which may profit in these 
instances. The Sponsor believes that the size and operation of the 
foreign exchange markets make it unlikely that an Authorized 
Participant's direct activities in the foreign exchange and securities 
markets will impact the price of foreign currency or the price of 
Shares.\29\ The Exchange states that each Authorized Participant will 
be registered as a broker-dealer under the Act and will be regulated by 
the National Association of Securities Dealers, Inc., or else will be 
exempt from being (or otherwise will not be required to be) so 
registered or regulated, and will be qualified to act as a broker or 
dealer in the states or other jurisdictions where the nature of its

[[Page 36585]]

business so requires. Certain Authorized Participants may be regulated 
under federal and state banking laws and regulations. The Exchange 
states that each Authorized Participant will have its own set of rules 
and procedures, internal controls and information barriers as it 
determines to be appropriate in light of its own regulatory regime.
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    \29\ See June 13 AM Telephone Conversation, supra at note 15 
(authorizing clarification of this sentence.)
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    Authorized Participants may act for their own accounts or as agents 
for broker-dealers, depositaries and other securities or foreign 
currency market participants that wish to create or redeem Baskets. An 
order for one or more Baskets may be placed by an Authorized 
Participant on behalf of multiple clients.
    In order to create a Basket, the Authorized Participant deposits 
the applicable Basket Amount (defined below) with the Depository and 
orders Shares from the Trustee.\30\ The Trustee directs DTC to credit 
Shares to the Authorized Participant. The Authorized Participant will 
then be able to sell Shares to Purchasers on the NYSE or any other 
market in which the Shares may trade.
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    \30\ The Trustee shall determine the Basket Amount ``as promptly 
as practicable'' after the Federal Reserve Bank of New York 
announces the Noon Buying Rate on each day that the NYSE is open for 
regular trading. Ordinarily, this will occur by 2 p.m. (New York 
time) . The Basket Amount will be published on the Trust's Web site 
every day the NYSE is open for regular trading. The Registration 
Statements, the Participant Agreement and the Trust Agreement do not 
state a precise time each day for publication of the Basket Amount. 
It will be published simultaneously with the NAV. The Sponsor for 
the Trusts has represented to the Exchange that the NAV and the 
Basket amount for each Trust will be available to all market 
participants at the same time.
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    On any business day, an Authorized Participant may place an order 
with the Trustee to create one or more Baskets. The creation or 
redemption of Shares can occur only in a Basket of 50,000 Shares or 
multiples thereof. For purposes of processing both purchase and 
redemption orders, a ``business day'' means any day other than a day 
when the NYSE is closed for regular trading. Purchase orders must be 
placed by 4 p.m. (New York time) or the close of regular trading on the 
NYSE, whichever is earlier. The day on which the Trustee receives a 
valid purchase order is the purchase order date. By placing a purchase 
order, an Authorized Participant agrees to deposit the applicable 
foreign currency with the Trust. Before the delivery of Baskets for a 
purchase order, the Authorized Participant also must have wired to the 
Trustee the non-refundable transaction fee due for the purchase order.
    The total deposit required to create each Basket, called the Basket 
Amount, is an amount of foreign currency bearing the same proportion to 
the number of Baskets to be created as the total assets of a Trust (net 
of estimated accrued but unpaid expenses) bears to the total number of 
Baskets outstanding on the date that the order to purchase is properly 
received. The amount of the required deposit is determined by dividing 
the number of units of foreign currency (e.g. Australian Dollars) held 
by a Trust (net of estimated accrued but unpaid expenses) by the number 
of Baskets outstanding. All questions as to the composition of a Basket 
Amount are finally determined by the Trustee. The Trustee's 
determination of the Basket Amount shall be final and binding on all 
persons interested in the Trusts.
    An Authorized Participant who places a purchase order is 
responsible for delivering the Basket Amount to the Deposit Account by 
7:30 a.m. or 8:30 a.m. eastern standard time (``EST''), depending upon 
whether daylight savings is in effect,\31\ on the third business day 
after the purchase order date. Authorized Participants will use the 
SWIFT system to make timely deposits through their bank correspondents 
in London. Upon receipt of the foreign currency deposit from an 
Authorized Participant, the Trustee will direct DTC to credit the 
number of Baskets ordered to the Authorized Participant's DTC account. 
The expense and risk of delivery, ownership, and safekeeping of the 
applicable foreign currency until such foreign currency has been 
received by the Depository shall be borne solely by the Authorized 
Participant.
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    \31\ See June 13 AM Telephone Conversation, supra at note 15 
(information provided about EST).
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    In order to redeem Shares, an Authorized Participant must send the 
Trustee a Redemption Order specifying the number of Baskets that the 
Authorized Participant wishes to redeem. The Trustee then instructs the 
Depository to send the Authorized Participant the foreign currency and 
directs DTC to cancel the Authorized Participant's Shares that were 
redeemed.
    The procedures by which an Authorized Participant can redeem one or 
more Baskets mirror the procedures for the creation of Baskets. On any 
business day, an Authorized Participant may place an order with the 
Trustee to redeem one or more Baskets. Redemption orders must be placed 
by 4 p.m. (New York time) or the close of regular trading on the NYSE, 
whichever is earlier. A redemption order so received is effective on 
the date it is received in satisfactory form by the Trustee. The 
redemption procedures allow Authorized Participants to redeem Baskets 
and do not entitle an individual Shareholder to redeem any Shares in an 
amount less than a Basket or to redeem Baskets other than through an 
Authorized Participant.
    By placing a redemption order, an Authorized Participant agrees to 
deliver the Baskets to be redeemed through DTC's book-entry system to 
the Depository not later than 7:30 a.m. or 8:30 a.m. EST, depending 
upon whether daylight savings is in effect,\32\ on the third business 
day after the redemption order date. Before the delivery of the 
redemption distribution for a redemption order, the Authorized 
Participant must also have wired to the Trustee the non-refundable 
transaction fee due for the redemption order.
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    \32\ See id.
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    The redemption distribution from a Trust is a wire transfer, to an 
account of the redeeming Authorized Participant identified by the 
Authorized Participant, in the amount of foreign currency held by the 
Trust evidenced by the Shares being redeemed, giving effect to all 
estimated accrued but unpaid expenses. Redemption distributions are 
subject to the deduction of any applicable tax or other governmental 
charges that may be due.\33\ All questions as to the amount of a 
redemption distribution are finally determined by the Trustee. The 
Trustee's determination of the amount shall be final and binding on all 
persons interested in the Trust.
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    \33\ Authorized Participants will not be responsible for any 
transfer tax, sales or use tax, recording tax, value added tax or 
similar tax or governmental charge applicable to the creation or 
redemption of Baskets, regardless of whether or not such tax or 
charge is imposed directly on the Authorized Participant, and agree 
to indemnify the Sponsor, the Trustee, and the Trust if they are 
required by law to pay any such tax, together with any applicable 
penalties, additions to tax or interest thereon.
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    The redemption distribution due from a Trust is delivered to the 
Authorized Participant on the third business day after the redemption 
order date if, by 7:30 a.m. or 8:30 a.m. EST (depending upon whether 
daylight savings is in effect) \34\ on the third business day after the 
redemption order date, the Trustee's DTC account has been credited with 
the Baskets to be redeemed. If the Trustee's DTC account has not been 
credited with all of the Baskets to be redeemed by that time, then the 
redemption distribution is delivered to the extent of whole Baskets 
received. Any remainder of the redemption distribution is delivered on

[[Page 36586]]

the next business day to the extent of remaining whole Baskets received 
if the Trustee receives the fee applicable to the extension of the 
redemption distribution date that the Trustee may, from time to time, 
determine and the remaining Baskets to be redeemed are credited to the 
Trustee's DTC account by 7:30 a.m. or 8:30 a.m. EST (depending upon 
whether daylight savings is in effect) \35\ on such next business day. 
Any further outstanding amount of the redemption order will be 
cancelled. The Trustee also is authorized to deliver the redemption 
distribution notwithstanding that the Baskets to be redeemed are not 
credited to the Trustee's DTC account by 7:30 a.m. or 8:30 a.m. EST 
(depending upon whether daylight savings is in effect) \36\ on the 
third business day after the redemption order date, if the Authorized 
Participant has collateralized its obligation to deliver the Baskets 
through DTC's book-entry system on such terms as the Sponsor and the 
Trustee may agree upon from time to time.
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    \34\ See June 13 AM Telephone Conversation, supra at note 15.
    \35\ See id.
    \36\ See id.
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    The Depository wires the redemption amount from the Deposit Account 
to an account of the redeeming Authorized Participant identified by the 
Authorized Participant. The Authorized Participant and the Trust are 
each at risk in respect of foreign currency credited to their 
respective accounts in the event of the Depository's insolvency. The 
Trustee will reject a redemption order if the order is not in proper 
form as described in the Participant Agreement or if the fulfillment of 
the order, in the opinion of its counsel, might be unlawful.
    Valuation of Applicable Foreign Currency, Definition of Net Asset 
Value and Adiusted Net Asset Value. As promptly as practicable, 
ordinarily no later than 2 p.m. (New York time) after the Federal 
Reserve Bank of New York announces the Noon Buying Rate for the 
applicable foreign currency on each day that the NYSE is open for 
regular trading, the Trustee will value such foreign currency held by a 
Trust and determine the NAV of the Trust. The Trustee determines the 
NAV of the Trusts.\37\ In doing so, the Trustee values the foreign 
currency held by the Trusts on the basis of the Noon Buying Rate.\38\ 
If, on a particular Evaluation Day, the Noon Buying Rate has not been 
determined and announced by 2:00 p.m. (New York time), then the most 
recent Federal Reserve Bank of New York determination of the Noon 
Buying Rate shall be used to determine the NAV of the Trusts unless the 
Trustee, in consultation with the Sponsor, determines that such price 
is inappropriate to use as the basis for such valuation. In the event 
that the Trustee and the Sponsor determine that the most recent Federal 
Reserve Bank of New York determination of the Noon Buying Rate is not 
an appropriate basis for valuation of the Trust's foreign currency, 
they shall determine an alternative basis for such evaluation to be 
employed by the Trustee.\39\ The Trustee also determines the NAV per 
Share, which equals the NAV of the Trusts divided by the number of 
outstanding Shares. Neither the Trustee nor the Sponsor will be liable 
to any person for its determination that the most recently announced 
Noon Buying Rate is not appropriate as a basis for evaluation of the 
foreign currency held by the Trust, so long as that detennination is 
made in good faith.\40\
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    \37\ The NAV of the Trusts will be published by the Sponsor on 
each day that the NYSE is open for regular trading and will be 
posted on the Trusts' Web Site.
    \38\ The Noon Buying Rate is the USD/applicable foreign currency 
exchange rate as determined by the Federal Reserve Bank of New York 
as of 12:00 p.m. (New York time) on each day that the NYSE is open 
for regular trading.
    \39\ The Trustee and the Sponsor may determine to apply an 
alternative basis for evaluation in extraordinary circumstances, 
such as if the Federal Reserve Bank of New York does not announce a 
Noon Buying Rate, or discontinues such announcements, of if there is 
an extraordinary change in the spot price of the applicable foreign 
currency after the Noon Buying Rate is established. In the event the 
Sponsor and Trustee determine to use a source other than the Noon 
Buying Rate on more than a temporary basis, the Exchange will 
contact the Commission staff and, as necessary, file a proposed rule 
change pursuant to Rule 19b-4 seeking Commission approval to 
continue to trade the CurrencyShares. Unless approved by the 
Commission for continued trading, the Exchange will commence 
delisting proceedings.
    \40\ The NAV will be posted on the Trusts' Web Site as soon as 
the valuation of the foreign currency held by the Trust is complete 
(ordinarily by 2 p.m., New York time). 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. The Exchange represents 
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.
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    To calculate the NAV, the Trustee will subtract the Sponsor's fee 
and any other accrued but unpaid expenses of the Trust that are or will 
be incurred or accrued through the close of the evaluation day from the 
total number of the foreign currency owned by a Trust, including 
interest accrued during the prior day. The Trustee will multiply the 
resultant number of units of foreign currency (e.g., Australian 
Dollars) by the Noon Buying Rate to detennine the NAV. The Trustee will 
also detennine the NAV per Share by dividing the NAV of a Trust by the 
number of the Shares outstanding as of the close of trading on the 
NYSE. Shares deliverable under a purchase order will be considered 
outstanding for purposes of detennining NAV per Share; shares 
deliverable under a redemption order will not be considered outstanding 
for this purpose. The Trustee's estimation of accrued but unpaid 
expenses will be conclusive upon all persons interested in a Trust.
    Book Entry Fonn; Clearance and Settlement. The Sponsor and the 
Trustee will apply to DTC for acceptance of the Shares in its book-
entry settlement system. If the Shares are eligible for book-entry 
settlement, individual certificates will not be issued for the Shares. 
Instead, global certificates will be signed by the Trustee and the 
Sponsor on behalf of the Trusts, registered in the name of Cede & Co., 
as nominee for DTC, and deposited with the Trustee on behalf of DTC. 
The global certificates will evidence all of the Shares outstanding at 
any time.\41\ In order to transfer Shares through DTC, Shareholders 
must be DTC Participants. The Shares will be transferable only through 
the book-entry system of DTC. A Shareholder that is not a DTC 
Participant will be able to transfer its Shares through DTC by 
instructing the DTC Participant holding its Shares. Transfers will be 
made in accordance with standard securities industry practice.
---------------------------------------------------------------------------

    \41\ The representations, undertakings and agreements made on 
the part of the Trusts in the global certificates will be made and 
intended for the purpose of binding only the Trusts and not the 
Trustee or the Sponsor individually.
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    Upon the settlement date of any creation, transfer, or redemption 
of Shares, DTC will credit or debit, on its book-entry registration and 
transfer system, the amount of the Shares so created, transferred, or 
redeemed to the accounts of the appropriate DTC Participants. The 
Trustee and the Authorized Participants will designate the accounts to 
be credited and charged in the case of creation or redemption of 
Shares.
    Beneficial ownership of the Shares is limited to DTC Participants, 
Indirect Participants and persons holding interests through DTC 
Participants and Indirect Participants. Ownership of beneficial 
interests in the Shares will be shown on, and the transfer of ownership 
will be effected only through, records maintained by DTC (with respect 
to DTC Participants), the records of DTC Participants (with respect to 
Indirect Participants), and the records of Indirect Participants (with 
respect to Shareholders that are not DTC Participants or Indirect 
Participants). A Shareholder is expected to receive from

[[Page 36587]]

or through the DTC Participant maintaining the account through which 
the Shareholder purchased its Shares a written confirmation relating to 
the purchase.
    DTC may discontinue providing its service with respect to Baskets 
or the Shares (or both) by giving notice to the Trustee and the 
Sponsor. Under such circumstances, the Trustee and the Sponsor would 
either find a replacement for DTC to perform its functions at a 
comparable cost or, if a replacement is unavailable, terminate the 
Trust.
    Risk Factors to Investing in the Shares. An investment in the 
Shares carries certain risks. The following risk factors are taken from 
and discussed in more detail in the Registration Statements:
     The value of the Shares relates directly to the value of 
the foreign currency held by the Trust. Fluctuations in the price of 
the currency could materially and adversely affect the value of the 
Shares.
     The USD/applicable foreign currency exchange rate, like 
foreign exchange rates in general, can be volatile and difficult to 
predict. This volatility could materially and adversely affect the 
performance of the Shares.
     The Deposit Account is not entitled to payment at any 
office of JP Morgan Chase Bank, N.A. located in the U.S.
     Shareholders will not have the protections associated with 
ownership of a demand deposit account insured in the U.S. by the 
Federal Deposit Insurance Corporation nor the protection provided under 
English law.
     Foreign currency held in the Deposit Account will not be 
segregated from the Depository's assets. If the Depository becomes 
insolvent, then its assets might not be adequate to satisfy a claim by 
the Trust or any Authorized Participant. In addition, in the event of 
the insolvency of the Depository or the U.S. Bank of which it is a 
branch, there may be a delay and costs incurred in identifying the 
foreign currency held in the Deposit Account.
     The Shares are a new securities product. Their value could 
decrease if unanticipated operational or trading problems were to 
arise.
     Shareholders will not have the protections associated with 
ownership of shares in an investment company registered under the 
Investment Company Act of 1940.
     Shareholders will not have the rights enjoyed by investors 
in certain other financial instruments.
     The Shares may trade at a price that is at, above, or 
below the NAV per Share.
     The interest rate earned by the Trusts, although 
competitive, may not be the best rate available. If the Sponsor 
determines that the interest rate is inadequate, then its sole recourse 
will be to remove the Depositary and terminate the Deposit Account.
     The possible sale of foreign currency by the Trust to pay 
expenses, if required, will reduce the amount of foreign currency 
represented by each Share on an ongoing basis regardless of whether the 
price of a Share rises or falls in response to changes in the price of 
the foreign currency.
     The sale of the Trusts' deposited currency, if necessary, 
to pay expenses at a time when the price of the currency is relatively 
low could adversely affect the value of the Shares.
     The Depository owes no fiduciary duties to the Trusts or 
the Shareholders, is not required to act in their best interest and 
could resign or be removed by the Sponsor with respect to any Trust, 
triggering early termination of such Trust.
     The Trusts may be required to terminate and liquidate at a 
time disadvantageous to Shareholders.
     Redemption orders are subject to rejection by the Trustee 
under certain circumstances.
     Substantial sales of foreign currency by the official 
sector could adversely affect an investment in the Shares.
     Shareholders that are not Authorized Participants may only 
purchase or sell their Shares in secondary trading markets.
     The liability of the Sponsor and the Trustee under the 
Depositary Trust Agreement is limited; and, except as set forth in the 
Depositary Trust Agreement, they are not obligated to prosecute any 
action, suit or other proceeding in respect to any Trust property.
     The Depositary Trust Agreement may be amended to the 
detriment of Shareholders without their consent.
     The License Agreement with the Bank of New York may be 
terminated by the Bank of New York in the event of a material breach by 
the Sponsor. Termination of the License Agreement might lead to early 
termination and liquidation of the Trusts.
     Each member of the European Union has the option of 
adopting the Euro as its official currency in lieu of a national 
currency. If this occurs, then the national currency and the Shares may 
depreciate significantly. Further, there is the risk that the council 
of the European Union could adopt an irrevocable conversion rate, in 
which case the applicable Trusts will terminate.
    Availability of Information Regarding Foreign Currency Prices. 
Currently, the Consolidated Tape Plan does not provide for 
dissemination of the spot price of a foreign currency over the 
Consolidated Tape. However, there will be disseminated over the 
Consolidated Tape the last sale price for the Shares, as is the case 
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, the Exchange represents that there is a 
considerable amount of foreign currency price and market information 
available on public Web sites and through professional and subscription 
services. As is the case with equity securities generally and exchange-
traded funds specifically, in most instances, real-time information is 
only available for a fee, and information available free of charge is 
subject to delay (typically, 15 to 20 minutes).
    Investors may obtain on a 24-hour basis foreign currency pricing 
information based on the foreign currency spot price of each applicable 
foreign currency from various financial information service providers. 
Complete real-time data for foreign currency futures and options prices 
traded on the CME and 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.
    According to the Exchange, there are a variety of other public Web 
sites available at no charge that provide information on the currencies 
underlying the CurrencyShares that are the subject of this filing, 
which service providers include Bloomberg, (http://www.bloomberg.com/markets/currencies/fxc.html). CBS Market Watch (http://www.marketwatch.com/tools/stockresearchlglobalmarkets stockresearchlglobalmarkets), Yahoo! Finance 
(http://www.finance.yahoo.com/currency), moneycentral.com, cnnfn.com 
and reuters.com. which provide spot price or currency conversion 
information about each of the currencies that underlie the 
CurrencyShares that are the subject of this filing. 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.\42\ In

[[Page 36588]]

addition, major market data vendors regularly report current currency 
exchange pricing for a fee for the currencies underlying the 
CurrencyShares that are subject of this filing. Like bond securities 
traded in the OTC market with respect to which pricing information is 
available directly from bond dealers, current foreign currency spot 
prices are also generally available with bid/ask spreads from foreign 
currency dealers.\43\ In addition, the Trusts' Web site, 
www.currencvshares.com. will provide ongoing pricing information for 
foreign currency spot prices and the Shares. Market prices for the 
Shares will be available from a variety of sources, including brokerage 
firms, financial information Web Sites and other information service 
providers.
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    \42\ There may be incremental differences in the foreign 
currency spot price among the various information service sources. 
While the Exchange believes the differences in the foreign currency 
spot price may be relevant to those entities engaging in arbitrage 
or in the active daily trading of the applicable foreign currency or 
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. See telephone 
conversation between Michael Cavalier, Assistant General Counsel, 
NYSE, and Christopher Chow, Special Counsel, Commission, on June 19, 
2006 (authorizing the continued inclusion of footnote 21 from the 
original filing, despite the text of Amendment No.1).
    \43\ See, e.g., Securities Exchange Act Release No. 46252 (July 
24, 2002), 67 FR 49715 (July 31, 2002) (SR-Amex-2001-35) (noting 
that quote and trade information regarding debt securities is widely 
available to market participants from a variety of sources, 
including broker-dealers, information service providers, newspapers 
and Web sites).
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    In addition, the Trust's Web Site will provide the following 
information: (1) The spot price for each applicable foreign 
currency,\44\ including the bid and offer and the midpoint between the 
bid and offer for the foreign currency spot price, updated at least 
every 15 seconds,\45\ which is an essentially real-time basis; (2) an 
intraday indicative value (``IIV'') per share for the Shares calculated 
by multiplying the indicative spot price of the applicable foreign 
currency by the quantity of foreign currency backing each Share, 
updated at least every 15 seconds; \46\ (3) a delayed indicative value 
(subject to a 20 minute delay), which is used for calculating premium/
discount information; (4) premium/discount information, calculated on a 
20 minute delayed basis; (5) the NAV of the Trust as calculated each 
business day by the Trustee; (6) accrued interest per Share; (7) the 
daily Federal Reserve Bank of New York Noon Buying Rate; (8) the Basket 
Amount for each applicable foreign currency; and (9) the last sale 
price of the Shares as traded in the U.S. market, subject to a 20-
minute delay, as it is provided free of charge.\47\ The Exchange will 
provide on its own public Web site (http://www.nyse.com) a link to the 
Trust's Web site.
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    \44\ The Trust Web site's foreign currency spot price will be 
provided by FactSet Research Systems (http://www.factset.com). The 
NYSE will provide a link to the Trust's Web site. FactSet Research 
Systems is not affiliated with the Trusts, Trustee, Sponsor, 
Depository, Distributor or the Exchange. In the event that the 
Trust's Web site should cease to provide this foreign currency spot 
price information from an unaffiliated source and the intraday 
indicative value of the Shares, the NYSE will commence delisting 
proceedings for the Shares.
    \45\ The midpoint will be calculated by the Sponsor. The 
midpoint is used for purposes of calculating the premium or discount 
of the Shares. For example, assuming a British Pound spot bid of 
$1.7473 and an offer of $1.7474, the mid point would be calculated 
as follows: (British Pound spot bid plus ((spot offer minus spot 
bid) divided by 2)) or ($1.7473+($1.7474-$1.7473)/2)) + $1.74735.
    \46\ The IIV of the Shares is analogous to the intraday 
optimized portfolio value (sometimes referred to as the IOPV), 
indicative portfolio value and the intraday indicative value 
(sometimes referred to as the IIV) associated with the trading of 
exchange-traded funds. See, e.g., Securities Exchange Act Release 
No. 46686 (October 18, 2002), 67 FR 65388 (October 24, 2002) (SR-
NYSE-2002-51) for a discussion of indicative portfolio value in the 
context of an exchange-traded fund. The Exchange will halt trading 
in an issue of CurrencyShares for which the IIV per Share is no 
longer calculated or disseminated. In such case, the Exchange will 
immediately contact the Commission staff to discuss measures that 
may be appropriate under the circumstances.
    \47\ The last sale price of the Shares in the secondary market 
will be available on a real-time basis for a fee from regular data 
vendors.
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    Other Characteristics of the Shares. Set forth below is a table 
that shows the initial number of currency units per Share, the number 
of Shares per Basket, and the number of currency units per Basket:

----------------------------------------------------------------------------------------------------------------
                                                                  Currency units    Shares per    Currency units
                           Trust name                                per share        basket        per basket
----------------------------------------------------------------------------------------------------------------
CurrencyShares\TM\ Australian Dollar Trust......................             100          50,000       5,000,000
CurrencyShares\TM\ British Pound Sterling Trust.................             100          50,000       5,000,000
CurrencyShares\TM\ Canadian Dollar Trust........................             100          50,000       5,000,000
CurrencyShares\TM\ Mexican Peso Trust...........................           1,000          50,000      50,000,000
CurrencyShares\TM\ Swedish Krona Trust..........................           1,000          50,000      50,000,000
CurrencyShares\TM\ Swiss Franc Trust............................             100          50,000       5,000,000
----------------------------------------------------------------------------------------------------------------

    For each Trust, a minimum of three Baskets, representing 150,000 
Shares, will be outstanding at the commencement of trading on the 
Exchange.
    Trading in Shares on the Exchange will be effected normally until 
4:15 p.m. each business day. The minimum trading increment for Shares 
on the Exchange will be $0.01.
    Listing Fees. The Exchange original listing fee applicable to the 
listing of the Trust will be $5,000. The annual continued listing fee 
for the Trust will be $2,000.
    Continued Listing Criteria. Under the applicable continued listing 
criteria, the Exchange will commence delisting proceedings with respect 
to Shares for a particular Trust as follows: (1) Following the initial 
twelve-month period beginning upon the commencement of trading of the 
Shares, there are fewer than 50 record and/or beneficial holders of the 
Shares for 30 or more consecutive trading days; (2) the value of 
foreign currency is no longer calculated or available on at least a 15-
second delayed basis from a source unaffiliated with the Sponsor, the 
Trust, the Trustee, or the Exchange or the Exchange stops providing a 
hyperlink on the Exchange's Web site to any such unaffiliated foreign 
currency value; (3) the IIV is no longer made available on at least a 
15-second delayed basis; or (4) such other event shall occur or 
condition exist that, in the opinion of the Exchange, makes further 
dealings on the Exchange inadvisable. In addition, the Exchange will 
remove Shares from listing and trading upon termination of the Trust.

[[Page 36589]]

    Exchange Trading Rules and Policies. The Shares are considered 
``securities'' pursuant to NYSE Rule 3 and are subject to all 
applicable trading rules. Trading in the Shares will be subject to all 
provisions of Rule 1300A.\48\ The Exchange does not currently exempt 
Currency Trust Shares from the Exchange's ``Market-on-Close/Limit-on-
Close/Pre-Opening Price Indications'' Policy, although the Exchange may 
do so by means of a rule change in the future if, after having 
experience with the trading of the Shares, the Exchange believes such 
an exemption is appropriate.
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    \48\ In particular, Rule 1300A provides in part that Rule 105(m) 
is deemed to prohibit an equity specialist, his member organization, 
other member, allied member or approved person in such member 
organization or officer or employee thereof from acting as a market 
maker or functioning in any capacity involving marketmaking 
responsibilities in the applicable non-U.S. currency, options, 
futures or options on futures on such currency, or any other 
derivatives based on such currency, except as otherwise provided 
therein. See Securities Exchange Act Release Nos. 52843, supra at 
note 17 and 52715 (November 1, 2005), 70 FR 68490 (November 10, 
2005).
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    The Exchange also has adopted Rule 1301A (``Currency Trust Shares: 
Securities Accounts and Orders of Specialists'') to ensure that 
specialists handling Currency Trust Shares provide the Exchange with 
all necessary information relating to their trading in the applicable 
non-U.S. currency, options, futures contracts and options thereon or 
any other derivative on such currency.\49\ As a general matter, the 
Exchange has regulatory jurisdiction over its member organizations and 
any person or entity controlling a member organization. The Exchange 
also has regulatory jurisdiction over a subsidiary or affiliate of a 
member organization that is in the securities business. A member 
organization subsidiary or affiliate that does business only in 
commodities would not be subject to NYSE jurisdiction, but the Exchange 
could obtain certain information regarding the activities of such 
subsidiary or affiliate through reciprocal agreements with regulatory 
organizations of which such subsidiary or affiliate is a member.
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    \49\ Rule 1301A also states that, in connection with trading the 
applicable non-U.S. currency, options, futures or options on futures 
or any other derivatives on such currency (including Currency Trust 
Shares), the specialist shall not use 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 the applicable non-U.S. currency, options, futures or options on 
futures, or any other derivatives on such currency. For purposes of 
Rule BOlA, ``person associated with a member'' shall have the same 
meaning ascribed to it in Section 3(a)(21) of the Act.
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    Surveillance. The Exchange's surveillance procedures will be 
comparable to those used for Investment Company Units, and 
streetTRACKS@ Gold Shares and the Euro Currency Trust, and will 
incorporate and rely upon existing NYSE surveillance procedures 
governing equities. The Exchange believes that these procedures are 
adequate to monitor Exchange trading of the Shares and to detect 
violations of Exchange rules, thereby deterring manipulation.
    The Exchange's current trading surveillances focus 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, foreign currency 
options and foreign currency futures through NYSE members, in 
connection with such members' 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. As noted above, futures on the 
Australian Dollar, British Pound, Canadian Dollar, Mexico Peso, Swedish 
Krona, and Swiss Franc, as well as options on such futures (except for 
the Swedish Krona) are traded on the CME (both exchange pit trading and 
GLOBEX trading, except for Swedish Krona futures, which trade on GLOBEX 
only). Standardized options on the Australian Dollar, British Pound, 
Canadian Dollar, and Swiss Franc trade on the Phlx. The Exchange 
represents that these U.S. markets are the primary trading markets in 
the world for exchange-traded futures, options, and options or futures 
on these currencies. The Exchange represents that it can obtain trading 
information in connection with these currency futures, options, and 
options on futures from CME and Phlx through the ISG. Specifically, the 
NYSE can obtain information: (1) From the CME about the trading of the 
relevant foreign currency futures, and options on those futures, that 
trade on the CME; and (2) from the Phlx about the trading of options on 
the relevant foreign currencies that trade on the Phlx.\50\
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    \50\ Phlx is a member of the ISG. CME is an affiliate member of 
lSG.
---------------------------------------------------------------------------

    Trading Halts. With respect to trading halts, the Exchange may 
consider all relevant factors in exercising its discretion to halt or 
suspend trading in the Shares. 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 the 
applicable foreign currency 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 
Exchange's ``circuit breaker'' rule.\51\ The Exchange will halt trading 
in the Shares of a Trust if the Trusts' Web Site (to which NYSE will 
link) ceases to provide: (1) the value of the applicable foreign 
currency updated at least every 15 seconds from a source not affiliated 
with the Sponsor, Trust, or the Exchange; or (2) the IIV per Share 
updated every 15 seconds. In such event, the Exchange would immediately 
contact the Commission to discuss measures that may be appropriate 
under the circumstances.
---------------------------------------------------------------------------

    \51\ NYSE Rule 80B.
---------------------------------------------------------------------------

    Due Diligence. Before a member, member organization, allied member, 
or employee thereof recommends a transaction in the Shares, such person 
must exercise due diligence to learn the essential facts relative to 
the customer pursuant to Exchange Rule 405, and must determine that the 
recommendation complies with all other applicable Exchange and Federal 
rules and regulations. A person making such recommendation should have 
a reasonable basis for believing, at the time of making the 
recommendation, that the customer has sufficient knowledge and 
experience in financial matters that he or she may reasonably be 
expected to be capable of evaluating the risks and any special 
characteristics of the recommended transaction, and is financially able 
to bear the risks of the recommended transaction.
    Information Memo. The Exchange will distribute an Information Memo 
to its members in connection with the trading in the Shares. The Memo 
will discuss the special characteristics and risks of trading this type 
of security. Specifically, the Memo, among other things, will discuss 
what the Shares are, that Shares are not individually redeemable but 
are redeemable only in Baskets of 50,000 shares or multiples thereof, 
how a Basket is created and redeemed, applicable Exchange rules, the 
indicative price of the applicable foreign currency and IIV, 
dissemination information, trading information, and

[[Page 36590]]

the applicability of suitability rules.\52\ The Information Memo also 
will state that the number of units of foreign currency required to 
create a Basket or to be delivered upon redemption of a Basket may 
gradually decrease over time in the event that the Trust is required to 
sell units of foreign currency to pay the Trust's expenses. The Memo 
also will reference that the Trust is subject to various fees and 
expenses described in the Registration Statement. The Memo also will 
reference the fact that there is no regulated source of last sale 
information regarding foreign currency, and that the Commission has no 
jurisdiction over the trading of foreign currency. Finally, the Memo 
also will note to members language in the Registration Statement 
regarding prospectus delivery requirements for the Shares.
---------------------------------------------------------------------------

    \52\ The Information Memo also will discuss exemptive relief, if 
any, granted by the Commission from certain rules under the 1934 
Act. The applicable rules are: Rule 10a-1; Rule 200(g) of Regulation 
SHO; Section 11(d)(1) and Rule 11d1-2; and Rules 101 and 102 of 
Regulation M under the 1934 Act.
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2. Statutory Basis
    The Exchange states that the basis under the Exchange Act for this 
proposed rule change, as amended, is the requirement under Section 
6(b)(5) of the Exchange Act \53\ that an Exchange have rules that are 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change, as 
amended, will have any direct effect, or any significant indirect 
effect, on any other Exchange rule in effect at the time of this 
filing.

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

    The Exchange states that written comments 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 No. SR-NYSE-2006-35 on the subject line.
Paper Comments
     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2006-35. 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 Commissions 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 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2006-35 and should be submitted by July 18, 2006.

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

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the 
Exchange Act \54\ and the rules and regulations thereunder applicable 
to a national securities exchange.\55\ In particular, the Commission 
finds that the proposed rule change, as amended, is consistent with the 
requirements of Section 6(b)(5) of the Exchange Act,\56\ which 
requires, among other things, that the Exchange's rules be designed to 
promote just and equitable principles of trade, to remove impediments 
and to perfect the mechanism of a free and open market and a national 
market system, and in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78f.
    \55\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See U.S.C. 78c(f).
    \56\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

A. Surveillance

    The Commission finds that the proposed rule change provides the 
NYSE with the tools necessary to monitor trading in the Shares and is 
designed to prevent fraudulent and manipulative acts and practices. 
Information sharing agreements with markets trading securities 
underlying a derivative, or primary markets trading derivatives on the 
same underlying instruments, are an important part of a self-regulatory 
organization's ability to monitor for trading abuses in derivative 
products.\57\ Although an information sharing agreement is not possible 
with the OTC foreign exchange market, the Commission believes that the 
Exchange's comprehensive surveillance sharing agreements with the Phlx 
and CME, by virtue of their memberships in the ISO, together with NYSE 
Rules 1301A and 1300A(b), will allow the NYSE to monitor for fraudulent 
and manipulative trading practices.\58\
---------------------------------------------------------------------------

    \57\ See, e.g., Securities Exchange Act Release No. 50603 
(October 28, 2004), 69 FR 64614 (November 5, 2004) (approving 
proposal by the NYSE to list and trade trust shares that correspond 
to a fixed amount of gold).
    \58\ The Commission notes that it has previously approved the 
listing and trading of foreign currency options or warrants. See, 
e.g., Securities Exchange Act Release Nos. 19133 (October 14, 1982), 
47 FR 46946 (October 21,1982) (order approving a Phlx proposal to 
accommodate the listing and trading of standardized option contracts 
on five foreign currencies, including the British Pound and Swiss 
Franc); 22471 (September 26,1985), 50 FR 40636 (October 4,1985) 
(order approving a proposed rule change by the Chicago Board Options 
Exchange, Inc. (''CBOE'') to trade standardized option contracts on 
six foreign currencies, including the British Pound, Canadian 
Dollar, and Swiss Franc); 23945 (December 30, 1986), 52 FR 633 
(January 7, 1987) (order approving a proposal by the CBOE to trade 
standardized options on the Australian Dollar); and 35806 (June 
5,1995), 60 FR 30911 (June 12, 1995) (order approving a Phlx 
proposal to trade currency warrants based on the value of the U.S. 
dollar in relation to the Mexican Peso).
---------------------------------------------------------------------------

    NYSE Rule 1301A requires that the specialist handling the Shares 
provide the Exchange with information relating to its trading in 
options, futures or

[[Page 36591]]

options on futures on the applicable foreign currencies, or any other 
derivatives based on the applicable foreign currencies. These reporting 
and recordkeeping requirements will assist the Exchange in identifying 
situations potentially susceptible to manipulation. NYSE Rule 1301A(c) 
also prohibits the specialist in the 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 the applicable foreign currency, or options, futures or options on 
futures on the applicable foreign currency, or any other derivatives 
based on the applicable foreign currency (including the Shares). In 
addition, NYSE Rule 1300A(b) prohibits the specialist in the Shares 
from being affiliated with a market maker in the applicable foreign 
currency, or options, futures or options on futures on the applicable 
foreign currency, or any other derivative based on the applicable 
foreign currency, unless information barriers are in place that satisfy 
the requirements in NYSE Rule 98.
    The Exchange also represents that it can obtain, through its ISG 
membership, information from CME regarding the trading of the relevant 
foreign currency futures, and options on those futures, that trade on 
CME, and from Phlx regarding the trading of options on the relevant 
foreign currencies that trade on Phlx. In addition, the Exchange 
represents that it is able to obtain information regarding trading in 
the Shares, and options and futures on the applicable foreign currency, 
through its members, in connection with such members' proprietary or 
customer trades that they effect on any relevant market.

B. Dissemination of Information

    The Commission believes that sufficient venues for obtaining 
reliable information exist so that investors in the Shares can monitor 
the underlying spot markets relative to the NAV of their Shares. As 
discussed above, the Exchange represents that there is a considerable 
amount of foreign currency price and market information available 24 
hours a day through public Web sites and through professional and 
subscription services, including Bloomberg and Reuters.\59\ The 
Exchange further represents that major market data vendors regularly 
report current currency exchange pricing for a fee for the currencies 
underlying the Shares. In addition, the Exchange will provide a link to 
the Trust's Web site on the NYSE's public Web site. The Trust's Web 
site will provide, among other things, the relevant spot prices,\60\ 
including the bids and offers and the midpoints between the bids and 
offers for the spot prices, updated no less than every 15 seconds, and 
the daily Federal Reserve Bank of New York Noon Buying Rate.
---------------------------------------------------------------------------

    \59\ The Exchange notes that, in most instances, real-time 
information is available for a fee, and information available free 
of charge is subject to delay (typically, 15 to 20 minutes).
    \60\ As noted above, the spot prices for the applicable foreign 
currencies published on the Trusts' Web site will be provided by 
FactSet Research Systems, which is not affiliated with the Trusts, 
the Trustee, the Sponsor, the Depository, the Distributor or the 
Exchange.
---------------------------------------------------------------------------

    The Commission also notes that the Trust's Web site will contain: 
(1) An IIV per Share for the Shares, updated at least every 15 seconds; 
(2) a delayed indicative value (subject to a 20 minute delay), which is 
used for calculating premium/discount information; (3) premium/discount 
information, calculated on a 20 minute delayed basis; (4) the NAV of 
the Trust, as calculated each business day by the Trustee; \61\ (5) 
accrued interest per Share; (6) the Basket Amount for each applicable 
foreign currency; and (7) the last sale price of the Shares as traded 
in the U.S. market, subject to a 20-minute delay, as it is provided 
free of charge.\62\ Further, the Exchange represents that real-time 
information for prices for futures and options on the applicable 
foreign currencies traded on CME and Phlx are available from 
information service providers, and that CME and Phlx provide delayed 
futures and options information free of charge on their respective Web 
sites.
---------------------------------------------------------------------------

    \61\ According to the Exchange, the Sponsor has represented to 
the Exchange that the NAV for each Trust will be available to all 
market participants at the same time. The Exchange further 
represents that therefore, no market participant will have a time 
advantage in using such data.
    \62\ As noted above, the last sale price of the Shares in the 
secondary market will be disseminated over the Consolidated Tape.
---------------------------------------------------------------------------

    The Commission believes that the wide availability of such 
information, as described above, will facilitate transparency with 
respect to the Shares and diminish the risk of manipulation or unfair 
informational advantage.

C. Listing and Trading

    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of the proposed Shares are 
consistent with the Exchange Act. Shares will trade as equity 
securities subject to NYSE rules including, among others, rules 
governing trading halts, responsibilities of the specialist, account 
opening, and customer suitability requirements. In addition, the Shares 
will be subject to NYSE listing and delisting rules and procedures 
governing the trading of lCUs on the NYSE. The Commission believes that 
listing and deli sting criteria for the Shares should help to maintain 
a minimum level of liquidity and therefore minimize the potential for 
manipulation of the Shares. Finally, the Commission believes that the 
Information Memo the Exchange will distribute will inform members and 
member organizations about the terms, characteristics, and risks in 
trading the Shares, including their prospectus delivery obligations.

D. Acceleration

    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the 30th day after the date of publication 
of the notice of filing thereof in the Federal Register. The Commission 
has previously granted approval to a NYSE proposal to adopt NYSE Rules 
1300A and 1301A that govern the trading of Currency Trust Shares, and a 
proposal to list and trade Euro Shares pursuant to such rules.\63\ The 
Shares proposed to be listed and traded in this proposed rule change, 
based on six different foreign currencies, are substantially similar in 
structure and operation to the Euro Shares, will be listed and traded 
pursuant to the same rules, and do not raise any new issues. Therefore, 
the Commission finds good cause, consistent with Section 19(b)(2) of 
the Act,\64\ to approve the proposal, as amended, on an accelerated 
basis.
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    \63\ See Securities Exchange Act Release No. 52843, supra at 
note 17 (order granting accelerated approval, after a 15-day comment 
period, to a NYSE proposal to list and trade Euro Shares, which 
represent units of fractional undivided beneficial interest in and 
ownership of the Euro Currency Trust).
    \64\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\65\ that the proposed rule change (SR-NYSE-2006-35), as amended, is 
approved on an accelerated basis.
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    \65\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\66\
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    \66\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-5703 Filed 6-26-06; 8:45am]
BILLING CODE 8010-01-M