[Federal Register Volume 70, Number 217 (Thursday, November 10, 2005)]
[Notices]
[Pages 68490-68501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-22413]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52715; File No. SR-NYSE-2005-65]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Regarding the Euro Currency 
Trust

November 1, 2005.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is 
hereby given that on September 29, 2005, the New York Stock Exchange, 
Inc. (``NYSE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, III below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade under new NYSE Rules 1300A 
et seq. (``Currency Trust Shares'') Euro

[[Page 68491]]

Shares, which represent units of fractional undivided beneficial 
interest in and ownership of the Euro Currency Trust. The text of the 
proposed rule change is set forth below. Proposed new language is in 
italics.
* * * * *
NYSE Constitution and Rules

Rule 1300A

Currency Trust Shares

    (a) The provisions of this Rule 1300A series apply only to Currency 
Trust Shares. The term ``Currency Trust Shares'' as used in this Rule 
and in Rule 1301A means a security that (a) is issued by a trust 
(``Trust'') which holds a specified non-U.S. currency deposited with 
the Trust; (b) when aggregated in some specified minimum number may be 
surrendered to the Trust by the beneficial owner to receive the 
specified non-U.S. currency; and (c) pays beneficial owners interest 
and other distributions on the deposited non-U.S. currency, if any, 
declared and paid by the Trust. While Currency Trust Shares are not 
technically Investment Company Units and thus are not covered by Rule 
1100, all other rules that reference ``Investment Company Units,'' as 
defined and used in Para. 703.16 of the Listed Company Manual, 
including, but not limited to Rules 13, 36.30, 98, 104, 460.10, 1002, 
and 1005 shall also apply to Currency Trust Shares. When these rules 
reference Investment Company Units, the word ``index'' (or derivative 
or similar words) will be deemed to be the applicable non-U.S. currency 
spot price and the word ``security'' (or derivative or similar words) 
will be deemed to be ``Currency Trust Shares''. The term ``applicable 
non-U.S. currency'' as used in Rule 1300A and 1301A means the currency 
that is held by the trust for a particular issue of Currency Trust 
Shares.
    (b) As is the case with Investment Company Units, paragraph (m) of 
the Guidelines to Rule 105 shall also apply to Currency Trust Shares. 
Specifically, Rule 105(m) shall be deemed to prohibit an equity 
specialist, his member organization, other member, allied member or 
approved person in such member organization or officer or employee 
thereof from acting as a market maker or functioning in any capacity 
involving market-making responsibilities in the applicable non-U.S. 
currency, options, futures or options on futures on such currency, or 
any other derivatives based on such currency. However, an approved 
person of an equity specialist entitled to an exemption from Rule 
105(m) under Rule 98 may act in a market making capacity, other than as 
a specialist in the same issue of Currency Trust Shares in another 
market center, options, futures or options on futures on the applicable 
non-U.S. currency, or any other derivatives based on such currency.
    (c) Except to the extent that specific provisions in this Rule 
govern, or unless the context otherwise requires, the provisions of the 
Constitution, all other Exchange Rules and policies shall be applicable 
to the trading of Currency Trust Shares on the Exchange. Pursuant to 
Exchange Rule 3 (``Security''), Currency Trust Shares are included 
within the definition of ``security'' or ``securities'' as those terms 
are used in the Constitution and Rules of the Exchange.

Rule 1301A

Currency Trust Shares: Securities Accounts and Orders of Specialists

    (a) The member organization acting as specialist in Currency Trust 
Shares is obligated to conduct all trading in the Shares in its 
specialist account, subject only to the ability to have one or more 
investment accounts, all of which must be reported to the Exchange. 
(See Rules 104.12 and 104.13.) In addition, the member organization 
acting as specialist in Currency Trust Shares must file with the 
Exchange in a manner prescribed by the Exchange and keep current a list 
identifying all accounts for trading in the applicable non-U.S. 
currency options, futures or options on futures on such currency, or 
any other derivatives based on such currency, which the member 
organization acting as specialist may have or over which it may 
exercise investment discretion. No member organization acting as 
specialist in Currency Trust Shares shall trade in the applicable non-
U.S. currency, options, futures or options on futures on such currency, 
or any other derivatives based on such currency, in an account in which 
a member organization acting as specialist, directly or indirectly, 
controls trading activities, or has a direct interest in the profits or 
losses thereof, which has not been reported to the Exchange as required 
hereby.
    (b) In addition to the existing obligations under Exchange rules 
regarding the production of books and records (see, e.g., Rule 
476(a)(11)), the member organization acting as specialist in Currency 
Trust Shares shall make available to the Exchange such books, records 
or other information pertaining to transactions by such entity or any 
member, allied member, approved person, registered or non-registered 
employee affiliated with such entity for its or their own accounts in 
the applicable non-U.S. currency options, futures or options on futures 
on such currency, or any other derivatives on such currency, as may be 
requested by the Exchange.
    (c) In connection with trading the applicable non-U.S. currency, 
options, futures or options on futures on such currency or any other 
derivative on such currency (including Currency Trust Shares), the 
specialist registered as such in an issue of Currency Trust Shares 
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 of such currency, or any other 
derivatives on such currency.
* * * * *

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

    In its filing with the Commission, the NYSE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below and is set forth in sections A, B, and C below.

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

1. Purpose
    The Exchange proposes to list and trade under new NYSE Rules 1300A 
et seq. Euro Shares (``Shares''), which represent units of fractional 
undivided beneficial interest in and ownership of the Euro Currency 
Trust (``Trust''). Rydex Specialized Products LLC is the sponsor of the 
Trust (``Sponsor''), The Bank of New York is the trustee of the Trust 
(``Trustee''), JPMorgan Chase Bank, N.A., London Branch, is the 
depository for the Trust (``Depository''), and Rydex Distributors, Inc. 
is the Distributor for the Trust (``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.
    As stated in the Trust's Registration Statement,\4\ the investment 
objective of

[[Page 68492]]

the Trust is for the Shares to reflect the price of the euro. The 
shares are intended to provide institutional and retail investors with 
a simple, cost-effective means of gaining investment benefits similar 
to those of holding euro.
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    \4\ The Sponsor, on behalf of the Trust, filed the Form S-1 (the 
``Registration Statement'') on June 7, 2005, Amendment No. 1 thereto 
on August 12, 2005, and Amendment No. 2 thereto on October 25, 2005. 
See Registration No. 333-125581.
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Overview of the Foreign Exchange Industry \5\
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    \5\ The Exchange states that, except as otherwise specifically 
noted, the information provided in its Rule 19b-4 filing relating to 
the Shares, foreign currency markets, movements in foreign currency 
or euro pricing, and the like is based entirely on information 
included in the Registration Statement.
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    The Exchange represents that the foreign exchange market is the 
largest and most liquid financial market in the world. 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 worldwide foreign 
exchange market, with approximately 58% of all foreign exchange 
business executed in the United Kingdom, United States (``US''), and 
Japan. Other, smaller markets include Singapore, Zurich, and Frankfurt.
    Approximately 89% of foreign exchange transactions involve the U.S. 
dollar (``USD''), and approximately 37% involve the euro. The euro/USD 
pair is by far the most-traded currency pair and in recent years has 
comprised approximately 28% of the global turnover in foreign exchange. 
As of September 26, 2005, $1 USD was worth approximately 0.828 euro, 
calculated at the then-current Noon Buying Rate (described below in 
``Issuance of the Shares'').\6\
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    \6\ For April 2004, the daily average foreign exchange turnover 
of the US dollar against the euro was approximately $550 billion. 
See Bank for International Settlements, Triennial Central Bank 
Survey, March 2005, Statistical annex tables, Table E-2. In 
addition, the reported daily turnover of foreign exchange contracts 
(USD against euro) in over-the-counter derivatives markets for April 
2004, including outright forwards and Forex swaps, was $1.15 
trillion. See id. at 17.
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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. ``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.
    There also are transactions in currency options, which trade both 
over-the-counter and, in the US, on the Philadelphia Stock Exchange 
(``Phlx''). 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. Currency 
futures 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'').\7\ Over 85% of currency derivative products (swaps, 
options, and futures) are traded over-the-counter.\8\
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    \7\ Volume in euro futures (Euro FX) on the CME for 2004 was 
17,791,457 contracts. The 2005 Euro FX futures volume on the CME 
through October 19, 2005 was 25,222,252 contracts. Euro options 
(EURFX) volume on the Phlx was 6,162 contracts in June 2005 and 
2,918 in July 2005. The 2005 EURFX volume through July was 33,408 
contracts. See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005 (confirming Euro FX volume on CME).
    \8\ 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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    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 primary participants in the foreign exchange market 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.
    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.
    The Sponsor believes that the Trust is the first exchange-traded 
fund \9\ whose assets are limited to a particular foreign currency. The 
Trust will not hold or trade in any currency swaps, options, futures, 
or other currency derivative products, or engage in any foreign 
exchange market transactions. The sole assets of the Trust are the euro 
deposited into the Deposit Account \10\ upon the creation of Baskets of 
50,000 Shares each (as described below), and the euro earned as 
interest on the Deposit Account. The investment objective of the Trust 
is for the Shares to reflect the price of the euro.\11\ The

[[Page 68493]]

Sponsor believes that, for many investors, the Shares 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 euro market through a traditional 
brokerage account, which will provide investors with an efficient means 
of implementing investment tactics and strategies that involve the 
euro.
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    \9\ The Exchange states that the Trust is not a registered 
investment company under the Investment Company Act of 1940 (``1940 
Act'') and is not required to register under the 1940 Act.
    \10\ The Deposit Account is the euro 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 euro deposited with the Trust.
    \11\ The Sponsor expects interest paid by the Depository on the 
deposited euro to offset the Trust's expenses; however, in the event 
that the Trust has to sell deposited euro to pay Trust expenses, the 
Shares would reflect the price of the euro, less the Trust's 
expenses. See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
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    Foreign Currency Regulation. Most trading in the global over-the-
counter foreign currency markets is conducted by regulated financial 
institutions such as banks and broker-dealers. In addition, in the US, 
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. over-the-counter 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 US, the SEC 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.\12\ Both 
the SEC 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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    \12\ The CFTC is an independent government agency with the 
mandate to regulate commodity futures and options markets in the US 
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.
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    The Phlx, CME, SGX, and LIFFE 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.
    The Euro. According to the Registration Statement, in 1998, the 
European Central Bank in Frankfurt was organized by Austria, Belgium, 
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, 
Portugal, and Spain in order to establish a common currency--the euro. 
In 2001, Greece joined as the twelfth country adopting the euro as its 
national currency. Unlike the U.S. Federal Reserve System, the Bank of 
Japan, and other comparable central banks, the European Central Bank is 
a central authority that conducts monetary policy for an economic area 
consisting of many otherwise largely autonomous states.
    At its inception on January 1, 1999, the euro was launched as an 
electronic currency used by banks, foreign exchange dealers, and stock 
markets. In 2002, the euro became cash currency for approximately 300 
million citizens of 12 European countries. On May 1, 2004, ten 
additional countries joined the European Union and, subject to meeting 
rigorous criteria established by the European Central Bank, are 
expected to adopt the euro as their national currency on or about 2010. 
These countries are Cyprus (South), the Czech Republic, Estonia, 
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. 
Although the European countries that have adopted the euro are members 
of the European Union, the United Kingdom, Denmark, and Sweden are 
European Union members that have not adopted the euro as their national 
currency.
Trust's Sponsor, Trustee, Depository, and Distributor
    The Sponsor. The Sponsor of the Trust is Rydex Specialized Products 
LLC, a Delaware LLC that is wholly-owned by PADCO Advisors II, Inc., a 
privately-held Maryland corporation owned and controlled by two 
irrevocable trusts. The Sponsor and its affiliates, collectively, do 
business as ``Rydex Investments.''
    The Sponsor is responsible for establishing the Trust and for the 
registration of the Shares. The Sponsor generally oversees the 
performance of the Trustee and the Trust's principal service providers, 
but does not exercise day-to-day oversight over the Trustee or service 
providers to the Trust. The Sponsor regularly communicates with the 
Trustee to monitor the overall performance of the Trust. The Sponsor, 
with assistance and support from the Trustee, is responsible for 
preparing and filing periodic reports on behalf of the Trust with the 
SEC and will provide any required certification for such reports. The 
Sponsor will designate the independent certified public accountants of 
the Trust and may, from time to time, employ legal counsel for the 
Trust.
    To assist the Sponsor in marketing the Shares and in accordance 
with the Depositary Trust Agreement, the Sponsor will enter into a 
Distributor Agreement with the Distributor and the Trust. The Sponsor 
may determine to engage additional or successor distributors. The fees 
of the Distributor (an affiliate of the Sponsor) and of any additional 
or successor distributor will be paid by the Sponsor from its fee paid 
from the assets of the Trust.
    The Sponsor will maintain a public Web site on behalf of the Trust, 
http://www.currencyshares.com, which will contain information about the 
Trust and the Shares, and will oversee certain shareholder services, 
such as a call center and prospectus delivery.\13\
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    \13\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
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    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 Trust's euro to pay 
expenses, to suspend a redemption order or postpone a redemption 
settlement date, or to terminate the Trust if certain criteria are met. 
The Sponsor anticipates that, if the market capitalization of the Trust 
is less than $300 million (as adjusted for inflation) at any time after 
the first anniversary of the Trust's inception, then the Sponsor will, 
in accordance with the Depositary Trust Agreement, direct the Trustee 
to terminate and liquidate the 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 Trust's Web site and marketing the 
Shares. The Sponsor's fee is payable monthly in arrears and is accrued 
daily at an annual rate equal to 0.40% of the Net Asset Value (``NAV'') 
of the Trust.
    The Trustee. The Bank of New York, the Trustee, is generally 
responsible for the day-to-day administration of the Trust, including 
keeping the Trust's operational records. The Trustee's principal 
responsibilities include selling the Trust's euro if needed to pay the 
Trust's expenses, calculating the NAV of the Trust 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

[[Page 68494]]

orders with the Depository and The Depository Trust Company (``DTC''). 
The Trustee will earn a monthly fee that will be paid by the Sponsor 
from its fee paid from the assets of the Trust.
    The Trustee intends to regularly communicate with the Sponsor to 
monitor the over-all performance of the Trust. The Trustee, along with 
the Sponsor, consults with the Trust's legal, accounting and other 
professional service providers as needed. The Trustee assists and 
supports the Sponsor with the preparation of all periodic reports 
required to be filed with the SEC on behalf of the Trust.
    Affiliates of the Trustee may, from time to time, act as Authorized 
Participants or purchase or sell euro or Shares for their own account, 
as agent for their customers, and for accounts over which they exercise 
investment discretion.
    The Depository. The London Branch of JPMorgan Chase Bank, N.A., a 
U.S. national banking association, is the Depository. The Depository 
accepts Trust euro deposited with it as a banker \14\ by Authorized 
Participants in connection with the creation of Baskets. The Depository 
facilitates the transfer of euro into and out of the Trust through the 
euro deposit account maintained with it as a banker by the Trust. The 
Depository will not be paid a fee for its services to the Trust but 
will be reimbursed for certain expenses.\15\ The Depository may earn a 
``spread'' or ``margin'' over the rate of interest it pays to the Trust 
on the euro deposit balances.\16\ The Depository and its affiliates 
may, from time to time, act as Authorized Participants or purchase or 
sell euro or Shares for their own account, as agent for their 
customers, and for accounts over which they exercise investment 
discretion.
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    \14\ While the Depository will hold the Trust's assets, the 
Depository is not a trustee for the Trust or the Shareholders.
    \15\ See infra ``Description of the Trust.''
    \16\ Interest on the Deposit Account accrues daily at an initial 
annual nominal rate of Euro Overnight Index Average (``EONIA'') 
minus 27 basis points, and is paid monthly. EONIA is calculated by 
the European Central Bank and published by the European Banking 
Federation on TELERATE. EONIA is the effective overnight reference 
rate for the euro and is the benchmark for the competitive market 
interest rate to be paid to the Shareholders of the Trust. However, 
the Depository is free to invest the Trust's assets as it sees fit, 
and is entitled to any proceeds that exceed the interest payable to 
the Trust. See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
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    The Distributor. Rydex Distributors, Inc., the Distributor, assists 
the Sponsor in developing a marketing plan for the Trust on an ongoing 
basis, preparing marketing materials regarding the Shares, including 
the content on the Trust's Web site, executing the marketing plan for 
the Trust, 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 euro 
or Shares for their own account, as agent for their customers, and for 
accounts over which they exercise investment discretion.

Description of the Trust

    General Description. The Exchange states that the Trust 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. A Basket is a block of 50,000 Shares. The Trust holds euro 
\17\ and is expected, from time to time, to issue Baskets in exchange 
for deposits of euro and to distribute euro in connection with 
redemptions of Baskets. The investment objective of the Trust is for 
the Shares to reflect the price of the euro. The Shares represent units 
of fractional undivided beneficial interest in, and ownership of, the 
Trust. The Trust is not managed like a business corporation or an 
active investment vehicle. The euro held by the 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 Exchange notes that, according to the 
Registration Statement, the sale of euro by the Trust is a taxable 
event to Shareholders.
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    \17\ The Exchange notes that 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 StreetTRACK [reg] Gold 
Shares); 19133 (October 14, 1982), 47 FR 46946 (October 21, 1982) 
(SR-Phlx-81-4) (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); 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 Trust's assets will consist only of euro on demand deposit in a 
euro-denominated, interest-bearing account at JPMorgan Chase, London 
Branch.\18\ The Trust will not hold any derivative products. Each Share 
represents a proportional interest, based on the total number of Shares 
outstanding, in the euro owned by the Trust, less the estimated accrued 
but unpaid expenses (both asset-based and non-asset based) of the 
Trust. The Sponsor expects that the price of a Share will fluctuate in 
response to fluctuations in the price of the euro, and that the price 
of a Share will reflect accumulated interest as well as the estimated 
accrued but unpaid expenses of the Trust.
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    \18\ Shareholders will not have the protections associated with 
ownership of a demand deposit account insured in the US by the 
Federal Deposit Insurance Corporation nor the protection provided 
under English law.
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    The 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.
    The Sponsor, on behalf of the Trust, intends to request relief from 
certain trading requirements of the Exchange Act; it has also requested 
guidance on the application of the certification rules for quarterly 
and annual reports adopted pursuant to section 302 of the Sarbanes-
Oxley Act of 2002. In addition, the Trust will not be subject to the 
Exchange's corporate governance requirements, including the Exchange's 
audit committee requirements.\19\
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    \19\ See Securities Exchange Act Release No. 48745 (November 4, 
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33, SR-NASD-
2002-77, SR-NASD-2002-80, SR-NASD-2002-138, SR-NASD-2002-139, and 
SR-NASD-2002-141) (specifically noting that the corporate governance 
standards will not apply to, among others, passive business 
organizations in the form of trusts). See also Securities Exchange 
Act Release No. 47654 (April 9, 2003), 68 FR 18788 (April 16, 2003) 
(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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    Trust's Expenses. The Trust's only ordinary recurring expense is 
expected to be the Sponsor's fee. The Sponsor is obligated under the 
Depositary Trust Agreement to pay the following administrative and 
marketing expenses of the Trust: the Trustee's monthly fee, the 
Distributor's fee, NYSE listing fees, SEC registration fees, printing 
and mailing costs, audit fees and expenses, and up to $100,000 per year 
in legal fees and expenses. The Sponsor is also obligated to pay the 
costs of the Trust's organizational expenses and the costs of the 
initial sale of the Shares, including the applicable SEC registration 
fees.
    As stated in the Trust's Registration Statement, the Trust will use 
interest earned on the Deposit Account to pay the Sponsor's fee and any 
other Trust

[[Page 68495]]

expenses that may arise from time to time. If that interest is not 
sufficient to fully pay the Sponsor's fee and Trust expenses, then the 
Trustee will sell deposited euro as needed.
    The following additional expenses may be charged to the Trust: (1) 
Expenses and costs of any extraordinary services performed by the 
Trustee or the Sponsor on behalf of the Trust or action taken by the 
Trustee or the Sponsor to protect the Trust or interests of 
Shareholders; (2) indemnification of the Sponsor; (3) taxes and other 
governmental charges; and (4) expenses of the Trust other than those 
the Sponsor is obligated to pay pursuant to the Depositary Trust 
Agreement.
    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.
    Description of the Shares. The Exchange states that 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. For example, the Exchange concludes that 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. 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 (see ``Voting and 
Approvals,'' below). The Shares do not entitle their holders to any 
conversion or pre-emptive rights or, except as provided below, any 
redemption or distribution rights.
    Distributions. The Depositary Trust Agreement requires the Trustee 
to promptly distribute ``Surplus Property'' that are in USD and sell or 
convert all other Surplus Property into USD and distribute the 
proceeds. ``Surplus Property'' includes, among other things, interest 
on euro in the Deposit Account that the Trustee determines is not 
required to pay estimated Trust expenses within the following month. In 
addition, if the 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.\20\
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    \20\ 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 euro.
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    Liquidity. The amount of the discount or premium in the trading 
price relative to the NAV per Share may be influenced by non-concurrent 
trading hours between the major euro markets and the NYSE. The period 
of greatest liquidity in the euro market is typically that time of the 
day when trading in the European time zones overlap with trading in the 
US, which is when over-the-counter market trading in London, New York, 
and other centers coincides with futures and options trading on the 
euro. While the Shares will trade on the NYSE until 4:15 p.m. (New York 
time), liquidity in the over-the-counter market for euro 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 Trust, the Sponsor believes that the Shares will not trade at a 
material discount or premium to the value of underlying euro held by 
the Trust. The arbitrage process, which, in general, provides investors 
the opportunity to profit from differences in prices of assets, 
increases the efficiency of the markets, serves to prevent potentially 
manipulative efforts, and can be expected to operate efficiently in the 
case of the Shares and euro. If the price of the Shares deviates enough 
from the price of euro to create a material discount or premium, an 
arbitrage opportunity is created. If the Shares are inexpensive 
compared to the euro 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 euro, and sell the euro in the cash market 
at a profit. If the Shares are expensive compared to the euro that 
underlies them, an Authorized Participant may sell the Shares short, 
buy enough euro 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.\21\ In both instances, the arbitrageur serves 
efficiently to correct price discrepancies between the Shares and the 
underlying euro.
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    \21\ The Exchange notes that the Trust, which will only hold 
euro as an asset in the normal course of its operations, differs 
from index-based exchange-traded funds, which may involve a trust 
holding hundreds or even thousands of underlying component 
securities, necessarily involving in the arbitrage process movements 
in a large number of security positions. See, e.g., Securities 
Exchange Act Release No. 46306 (August 2, 2002), 67 FR 51916 (August 
9, 2002) (SR-NYSE-2002-28) (approving the UTP trading of, among 
other things, Vanguard Total Market VIPERs based on the Wilshire 
5000 Total Market Index).
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    Voting and Approvals. 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 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 Shareholders, may remove the Trustee. 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.
    Book-Entry Form. 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, all Shares will be 
evidenced by global certificates issued by the Trustee to DTC and 
registered in the name of Cede & Co., as nominee for DTC. The global 
certificates will evidence all of the

[[Page 68496]]

Shares outstanding at any time. 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.
Issuance of the Shares
    The Trust creates and redeems Shares in Baskets on a continuous 
basis. Each Share will initially represent 100 euro.\22\ A Basket is a 
block of 50,000 Shares. The creation and redemption of Baskets requires 
the delivery to the Trust or the distribution by the Trust of the 
amount of euro 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 euro. Shareholders pay for 
Shares with U.S. dollars.
---------------------------------------------------------------------------

    \22\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
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    The Trustee expects to determine the NAV of the Trust between 12 
p.m. and 2 p.m. (New York time) each business day.\23\ In doing so, the 
Trustee values the euro held by the Trust on the basis of the Noon 
Buying Rate, which is the USD/euro exchange rate as determined by the 
Federal Reserve Bank of New York as of 12 p.m. (New York time) on each 
day that the NYSE is open for regular trading.\24\ If, on a particular 
business day, the Noon Buying Rate has not been determined and 
announced by 2 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 value of the euro held by the Trust, unless the 
Trustee, in consultation with the Sponsor, determines that such price 
is inappropriate to use as the basis for such valuation. In the event 
that the Trustee and the Sponsor determine that the most recent Federal 
Reserve Bank of New York determination of the Noon Buying Rate is not 
an appropriate basis for valuation of the Trust's euro, they shall 
determine an alternative basis for such evaluation to be employed by 
the Trustee.
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    \23\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
    \24\ 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 euro after the Noon 
Buying Rate is established. In the event the Sponsor and Trustee 
determine to use, on a regular and ongoing basis, a source other 
than the Noon Buying Rate, the Exchange will make an appropriate 
filing pursuant to Rule 19b-4 under the Exchange Act.
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    To calculate the NAV of the Trust, the Trustee will subtract the 
Sponsor's accrued fee for the current day from the euro held by the 
Trust (including all unpaid interest accrued through the immediately 
preceding day). The Trustee also determines the NAV per Share, which 
equals the NAV of the Trust divided by the number of outstanding 
Shares.\25\ The NAV will be posted on the Trust Web site as soon as the 
valuation of the euro 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. 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.
---------------------------------------------------------------------------

    \25\ Shares deliverable under a purchase order will be 
considered outstanding for purposes of determining NAV per Share; 
Shares deliverable under a redemption order will not be considered 
outstanding for this purpose.
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Creation and Redemption
    Authorized Participants, which have entered into a Participation 
Agreement with the Sponsor and the Trustee, are the only entities that 
may place orders to create and redeem Baskets. An Authorized 
Participant is a DTC Participant that is registered as a broker-dealer 
under the Exchange 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 business so 
requires. Certain Authorized Participants may be regulated under 
federal and state banking laws and regulations. The Participant 
Agreement provides the procedures for the creation and redemption of 
Baskets and for the delivery of euro required for creations and 
redemptions. Authorized Participants pay a transaction fee of $500 to 
the Trustee for each order that they place to create or redeem one or 
more Baskets. 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 thirty days 
after the date of the notice. Authorized Participants may sell to other 
investors all or part of the Shares included in the Baskets that they 
purchase from the Trust. 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.
    Certain Authorized Participants are expected to have the facilities 
to participate directly in the global foreign exchange market. In some 
cases, an Authorized Participant may acquire euro from, or sell euro 
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 market make it unlikely that an Authorized 
Participant's direct activities in the foreign exchange and securities 
markets will impact the price of euro or the price of Shares. 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.
    Authorized Participants may act for their own accounts or as agents 
for broker-dealers, depositories, 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.
    Creation Orders. In order to create a Basket, the Authorized 
Participant deposits the Basket Euro Amount \26\ with the Depository 
and orders Shares from the Trustee.\27\ The Trustee directs

[[Page 68497]]

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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    \26\ The total deposit required to create each Basket, called 
the Basket Euro Amount, is an amount of euro bearing the same 
proportion to the number of Baskets to be created as the total 
assets of the 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 euro held 
by the Trust (net of estimated accrued but unpaid expenses) by the 
number of Baskets outstanding.
    \27\ The Trustee shall determine the Basket Euro 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 Euro Amount will be published on the Trust's Web 
site every day the NYSE is open for regular trading. The Basket Euro 
Amount will be published simultaneously with the NAV, between 12 
p.m. and 2 p.m. (New York time). See Telephone conference between 
Michael Cavalier, Assistant General Counsel, NYSE, and Florence E. 
Harmon, Senior Special Counsel, Division of Market Regulation, 
Commission, on October 21, 2005.
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    An Authorized Participant who places a purchase order is 
responsible for delivering the Basket Euro Amount to the Deposit 
Account by 2:30 p.m. (Central European time) 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 euro deposit of 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 euro until 
such euro have been received by the Depository shall be borne solely by 
the Authorized Participant.
    Redemption Orders. In order to redeem Shares, an Authorized 
Participant must send the Trustee a Redemption Order specifying the 
number of Baskets (e.g., 50,000 Shares) that the Authorized Participant 
wishes to redeem. The Trustee then instructs the Depository to send the 
Authorized Participant euro 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.
    The redemption distribution due from the Trust is delivered to the 
Authorized Participant on the third business day after the redemption 
order date if, by 2:30 p.m. (Central European time) 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 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 2:30 p.m. (Central 
European time) on such next business day. Any further outstanding 
amount of the redemption order will be cancelled.\28\
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    \28\ 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 2:30 p.m. (Central European 
time) 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. 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.
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Clearance and Settlement
    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 Trust, registered in the name of Cede & Co., as nominee for DTC, 
and deposited with the Trustee on behalf of DTC. The representations, 
undertakings, and agreements made on the part of the Trust in the 
global certificates will be made and intended for the purpose of 
binding only the Trust and not the Trustee or the Sponsor individually.
    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,\29\ 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 or through the 
DTC Participant maintaining the account through which the Shareholder 
purchased its Shares a written confirmation relating to the purchase.
---------------------------------------------------------------------------

    \29\ ``Indirect Participants'' are defined in the Registration 
Statement as ``[t]hose banks, brokers, dealers, trust companies and 
others that maintain, either directly or indirectly, a custodial 
relationship with a DTC Participant.'' See Amendment No. 2 to 
Registration No. 333-125581.
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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 Statement.
    <bullet> The value of the Shares relates directly to the value of 
the euro held by the Trust. Fluctuations in the price of the euro could 
materially and adversely affect the value of the Shares.
    <bullet> The USD/euro 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.
    <bullet> The Deposit Account is not entitled to payment at any 
office of JP Morgan Chase Bank, N.A. located in the US.
    <bullet> 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.
    <bullet> Euro 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 euro held in the Deposit 
Account.
    <bullet> The Shares are a new securities product. Their value could 
decrease if unanticipated operational or trading problems were to 
arise.
    <bullet> Shareholders will not have the protections associated with 
ownership of shares in an investment company registered under the 1940 
Act.

[[Page 68498]]

    <bullet> Shareholders will not have the rights enjoyed by investors 
in certain other financial instruments.
    <bullet> The Shares may trade at a price which is at, above, or 
below the NAV per Share.
    <bullet> The interest rate earned by the Trust, 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.
    <bullet> The possible sale of euro by the Trust to pay expenses, if 
required, will reduce the amount of euro 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 euro.
    <bullet> The sale of the Trust's deposited euro, if necessary, to 
pay expenses at a time when the price of the euro is relatively low 
could adversely affect the value of the Shares.
    <bullet> The Depository owes no fiduciary duties to the Trust or 
the Shareholders, is not required to act in their best interest and 
could resign or be removed by the Sponsor, triggering early termination 
of the Trust.
    <bullet> The Trust may be required to terminate and liquidate at a 
time disadvantageous to Shareholders.
    <bullet> Redemption orders are subject to rejection by the Trustee 
under certain circumstances.
    <bullet> Substantial sales of euro by the official sector could 
adversely affect an investment in the Shares.
    <bullet> Shareholders that are not Authorized Participants may only 
purchase or sell their Shares in secondary trading markets.
    <bullet> 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.
    <bullet> The Depositary Trust Agreement may be amended to the 
detriment of Shareholders without their consent.
    <bullet> 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 Trust.
Availability of Information Regarding Euro Prices
    Currently, the Consolidated Tape Plan does not provide for 
dissemination of the spot price of a foreign currency, such as euro, 
over the Consolidated Tape. However, the last sale price for the Shares 
will be disseminated over the Consolidated Tape, as is the case for all 
equity securities traded on the Exchange (including exchange-traded 
funds). In addition, there is a considerable amount of euro price and 
euro market information available on public Web sites and through 
professional and subscription services. 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 euro pricing information 
based on the euro spot price from various financial information service 
providers. Current spot prices are also generally available with bid/
ask spreads from foreign exchange dealers. Complete real-time data for 
euro futures and options prices traded on the 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.
    There are a variety of other public Web sites that provide 
information on foreign currency and the euro, such as Bloomberg (http://www.bloomberg.com/markets/currencies/ eurafr--currencies.html), which 
regularly reports current foreign exchange pricing for a fee. Other 
service providers include CBS Market Watch (http://www.marketwatch.com/tools/ stockresearch/globalmarkets) and Yahoo! Finance (http://finance.yahoo.com/currency). Many of these sites offer price quotations 
drawn from other published sources, and as the information is supplied 
free of charge, it generally is subject to time delays.\30\ Like bond 
securities traded in the over-the-counter market with respect to which 
pricing information is available directly from bond dealers, current 
euro spot prices are also generally available with bid/ask spreads from 
foreign currency dealers.\31\
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    \30\ There may be incremental differences in the euro spot price 
among the various information service sources. While the Exchange 
believes the differences in the euro spot price may be relevant to 
those entities engaging in arbitrage or in the active daily trading 
of euro or foreign currency derivatives, the Exchange believes such 
differences are likely of less concern to individual investors 
intending to hold the Shares as part of a long-term investment 
strategy.
    \31\ 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 euro spot price,\32\ including the bid and offer 
and the midpoint between the bid and offer for the euro spot price, 
updated every 5 to 10 seconds,\33\ 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 euro by 
the quantity of euro backing each Share, on a 5 to 10 second delay 
basis; \34\ (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 
Sponsor; (6) accrued interest per Share; (7) the daily Federal Reserve 
Bank of New York Noon Buying Rate; (8) the Basket Euro Amount; and (9) 
the last sale price (under symbol FXE) of the Shares as traded in the 
U.S. market, subject to a 20-minute delay, as it is provided free of 
charge.\35\ The Exchange will provide on its own public Web site 
(http://www.nyse.com) a link to the Trust's Web site. The market prices 
for the Shares will also be available from a variety of sources, 
including brokerage firms, financial information Web sites, and other 
information service providers.
---------------------------------------------------------------------------

    \32\ The Trust Web site's euro spot price will be provided by 
The Bullion Desk (http://www.thebulliondesk.com). The NYSE will 
provide a link to the Trust Web site. The Bullion Desk is not 
affiliated with the Trust, Trustee, Sponsor, Depository, 
Distributor, or the Exchange. In the event that the Trust's Web site 
should cease to provide this euro spot price information from an 
unaffiliated source and the intraday indicative value of the Shares, 
the NYSE will commence delisting proceedings for the Shares.
    \33\ The midpoint will be calculated by the Sponsor. The 
midpoint is used for purposes of calculating the premium or discount 
of the Shares. Assuming a euro spot bid of $1.2235 and an offer of 
$1.2236, the midpoint would be calculated as follows:(Euro spot bid 
plus ((euro spot offer minus euro spot bid) divided by 2)) or 
($1.2235 + (($1.2236-$1.2235)/2)) = $1.22355
    \34\ The intraday indicative value of the Shares is analogous to 
the intraday optimized portfolio value (sometimes referred to as the 
IOPV), indicative portfolio value, and the intraday indicative value 
(sometimes referred to as the IIV) associated with the trading of 
exchange-traded funds. See, e.g., Securities Exchange Act Release 
No. 46686 (October 18, 2002), 67 FR 65388 (October 24, 2002) (SR-
NYSE-2002-51) for a discussion of indicative portfolio value in the 
context of an exchange-traded fund. The Trust's Web site is expected 
to indicate that the intraday indicative value and euro spot prices 
are subject to an average delay of 5 to 10 seconds.
    \35\ The last sale price of the Shares in the secondary market 
is available on a real-time basis for a fee from regular data 
vendors.

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[[Page 68499]]

Other Characteristics of the Shares
    General Information. A minimum of three Baskets, representing 
150,000 Shares, will be outstanding at the commencement of trading on 
the Exchange. Each Share initially represents 100 euro, and the value 
of Shares outstanding at the start of trading will be approximately 
15,000,000 euro.\36\
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    \36\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005 (correcting the statement that each Share 
represents 100 euro, rather than 40 euro as previously stated).
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    Trading in Shares on the Exchange will be effected normally until 
4:15 p.m. (New York time) 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 Shares may be delisted if: (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 euro 
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 euro 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.
    Exchange Trading Rules and Policies. The Shares are considered 
``securities'' pursuant to NYSE Rule 3 and are subject to all 
applicable trading rules. The Exchange's surveillance procedures will 
be comparable to those used for investment company units currently 
trading on the Exchange and will incorporate and rely upon existing 
NYSE surveillance procedures governing equities.
    The Exchange hereby proposes to adopt new NYSE Rule 1300A 
(``Currency Trust Shares'') to deal with issues related to the trading 
of the Shares. Specifically, for purposes of NYSE Rules 13 
(``Definitions of Orders''), 36.30 (``Communications Between Exchange 
and Members' Offices: Specialist Post Wires''), 98 (``Restrictions on 
Approved Person Associated with a Specialist's Member Organization''), 
104 (``Dealings by Specialists''), 105(m) (``Specialists' Interest in 
Pools, Options, and Single Stock Futures: Specialist Shall Not Be 
Options or Single Stock Futures Market-Maker''), 460.10 (``Specialists 
Participating in Contests''), 1002 (``Availability of Automatic 
Execution Feature''), and 1005 (``Orders May Not Be Broken Into Smaller 
Amounts'') the Shares will be treated the same as Investment Company 
Units.\37\ When these Rules discuss Investment Company Units, 
references to the word ``index'' (or derivative or similar words) will 
be deemed to be references to the applicable currency spot price, and 
reference to the word ``security'' (or derivative or similar words) 
will be deemed to be references to the Currency Trust Shares. The term 
``applicable non-US currency'' as used in proposed NYSE Rules 1300A and 
1301A, is defined as the currency held by the Trust for a particular 
issue of Currency Trust Shares. Proposed NYSE Rules 1300A and 1301A are 
intended to accommodate possible future listings of trusts based on 
non-US currencies in addition to the euro. Any Exchange listing of an 
issue of Currency Trust Shares will be subject to approval of a 
proposed rule change by the Commission pursuant to section 19(b)(2) of 
the Exchange Act \38\ and Rule 19b-4 \39\ thereunder.
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    \37\ In particular, proposed NYSE Rule 1300A provides that NYSE 
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 market-
making responsibilities in the applicable non-US currency, options, 
futures, or options on futures on such currency, or any other 
derivatives based on such currency, except as otherwise provided 
therein.
    \38\ 15 U.S.C. 78s(b)(2).
    \39\ 17 CFR 240.19b-4.
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    The Exchange does not currently intend to 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.
    The Exchange is proposing to adopt new NYSE 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.\40\ 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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    \40\ Proposed NYSE Rule 1301A also states that, in connection 
with trading the applicable non-US 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-US currency, options, 
futures, or options on futures, or any other derivatives on such 
currency. For purposes of proposed NYSE Rule 1301A, ``person 
associated with a member'' shall have the same meaning ascribed to 
it in section 3(a)(21) of the Exchange Act.
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    Surveillance. The Exchange's surveillance procedures will be 
comparable to those used for Investment Company Units and 
streetTRACKS[reg] Gold Shares and will incorporate and rely upon 
existing NYSE surveillance procedures governing equities. The Exchange 
represents that these procedures are adequate to monitor Exchange 
trading of the Shares and to detect violations of Exchange rules, 
thereby deterring manipulation.\41\
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    \41\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
---------------------------------------------------------------------------

    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations. The Exchange is able to 
obtain information regarding trading in the Shares, euro options, and 
euro futures through 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

[[Page 68500]]

Surveillance Group (``ISG'') from other exchanges who are members or 
affiliates of the ISG. Specifically, the NYSE can obtain such 
information from the Phlx in connection with euro options trading on 
the Phlx and from the CME and LIFFE in connection with euro futures 
trading on those exchanges.\42\
---------------------------------------------------------------------------

    \42\ Phlx is a member of ISG. CME and LIFFE are affiliate 
members of ISG.
---------------------------------------------------------------------------

    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 euro, 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 is subject to trading halts caused by extraordinary 
market volatility pursuant to the Exchange's ``circuit breaker'' 
rule.\43\
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    \43\ See NYSE Rule 80B.
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    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 NYSE 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 
Information Memo will discuss the special characteristics and risks of 
trading this type of security. Specifically, the Information 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 euro and 
IIV, dissemination information, trading information, and the 
applicability of suitability rules.\44\ The Information Memo will also 
state that the number of euro 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 deposited euro to pay 
the Trust's expenses, and that if done at a time when the price of the 
euro is relatively low, it could adversely affect the value of the 
Shares.\45\ The Information Memo will also reference the fact that 
there is no regulated source of last sale information regarding euro, 
and that the Commission has no jurisdiction over the trading of euro. 
Finally, the Information Memo will also note to members language in the 
Registration Statement regarding prospectus delivery requirements for 
the Shares.
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    \44\ The Information Memo will also discuss exemptive relief 
granted by the Commission from certain rules under the Exchange 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 Exchange Act.
    \45\ See Telephone conference between Michael Cavalier, 
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior 
Special Counsel, Division of Market Regulation, Commission, on 
October 21, 2005.
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    2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under section 6(b)(5) \46\ 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.
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

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

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Commission is considering granting accelerated approval of the 
proposed rule change at the end of a 15-day comment period.\47\
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    \47\ The NYSE has requested accelerated approval of this 
proposed rule change prior to the 30th day after the date of 
publication of notice of the filing thereof, following the 
conclusion of a 15-day comment period. See Telephone conference 
between Michael Cavalier, Assistant General Counsel, NYSE, and 
Florence E. Harmon, Senior Special Counsel, Division of Market 
Regulation, Commission, on October 27, 2005.
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IV. Solicitation of Comments

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

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#4634332a236b25292b2b232832350635232568212930"><span class="__cf_email__" data-cfemail="e99b9c858cc48a8684848c879d9aa99a8c8ac78e869f">[email protected]</span></a>. Please include 
File Number SR-NYSE-2005-65 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NYSE-2005-65. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro/shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the

[[Page 68501]]

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 the filing will also be 
available for inspection and copying at the principal office of the 
NYSE. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File number SR-
NYSE-2005-65 and should be submitted by November 25, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 05-22413 Filed 11-9-05; 8:45 am]
BILLING CODE 8010-01-P


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