68490 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

23See supra note 10. 

24 15 U.S.C. 78o–3. 

25 In approving the proposed rule, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

26The issuer, Morgan Stanley, disclosed in the 

prospectus that the original issue price of the Notes 

includes commissions (and the secondary market 

prices are likely to exclude commissions) and 

Morgan Stanley’s costs of hedging its obligations 

under the Notes. These costs could increase the 

initial value of the Notes, thus affecting the 

payment investors receive at maturity. 

Additionally, the issuer discloses in the prospectus 

that the hedging activities of its affiliates, including 

selling call options on the Nasdaq-100, could affect 

the value of these call option during the half hour 

period in which their value is determined for 

purposes of inclusion in the BXN Index. Such 

hedging activity must, of course, be conducted in 

accordance with applicable regulatory 

requirements. 

27See Securities Exchange Act Release Nos. 

44913 (October 9, 2001), 66 FR 52469 (October 15, 

2001) (order approving the listing and trading of 

notes whose return is based on the performance of 

the Nasdaq-100 Index) (SR–NASD–2001–73); 44483 

(June 27, 2001), 66 FR 35677 (July 6, 2001) (order 

approving the listing and trading of notes whose 

return is based on a portfolio of 20 securities 

selected from the Amex Institutional Index) (File 

No. SR–Amex–2001–40); and 3774 (September 27, 

1996), 61 FR 52480 (October 7, 1996) (order 

approving the listing and trading of notes whose 

return is based on a weighted portfolio of 

healthcare/biotechnology industry securities) (SR–

Amex–96–27). 

28See supra not 10. 

29 15 U.S.C. 78f(b)(5) and 78s(b)(2). 

30 15 U.S.C. 78o3(b)(6) and 78s(b)(2). 

31 15 U.S.C. 78s(b)(2). 

32 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

Nasdaq requests that the Commission 

approve this filing on an accelerated 

basis since it raises no new or novel 

issues and will enable Nasdaq to 

accommodate the timetable of listing the 

Notes. In this regard, Nasdaq notes that 

the Commission has previously 

approved the listing of securities the 

performance of which has been linked 

to the Index.23

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities association, and, in particular, 

the requirements of Section 15A of the 

Act.24 Specifically, the Commission 

finds that the proposal is consistent 

with Section 15A(b)(6) of the Act, which 

requires that the rules be designed to 

promote just and equitable principles of 

trade, foster cooperation and 

coordination with persons engaged in 

processing information with respect to 

and facilitating transactions in 

securities, as well as to remove 

impediments to and perfect the 

mechanism of a free and open market, 

and, in general, to protect investors and 

the public interest.25

In approving the product, the 

Commission recognizes that the Index is 

a passive total return index based on (1) 

buying a portfolio consisting of the 

component stocks of the Nasdaq-100, 

and (2) ‘‘writing’’ (or selling) near-term 

Nasdaq-100 call options, with the 

closest out-of-the money strike price, 

generally on the third Friday of each 

month. Given the large trading volume 

and capitalization of the compositions 

of the stocks underlying the Index, the 

Commission believes that the listing and 

trading of the Notes that are linked to 

the BXN Index should not unduly 

impact the market for the underlying 

securities compromising the Nasdaq-100 

or raise manipulative concerns.26

Moreover, the issuers of the underlying 

securities comprising the Nasdaq-100 

are subject to reporting requirements 

under the Act, and all of the component 

stocks are either listed or traded on, or 

traded through the facilities of, U.S. 

securities markets. 

The Commission also believes that 

any concerns that a broker-dealer, such 

as Morgan Stanley, or a subsidiary 

providing a hedge for the issuer, will 

incur undue position exposure are 

minimized by the size of the Notes 

issuance in relation to the net worth of 

Morgan Stanley.27

Finally, the Commission notes that 

the value of the Index will be calculated 

and disseminated by CBOE once every 

trading day after the close of trading. 

However, the Commission notes that the 

value of the Nasdaq-100 will be widely 

disseminated at least once every fifteen 

seconds throughout the trading day and 

that investors are able to obtain realtime call option pricing on the Nasdaq100 Index during the trading day. 

Further, the Indicative Value, which 

will be calculated by the CBOE after the 

close of trading and after the CBOE 

calculates the BXN Index for use by 

investors the next trading day, is 

designed to provide investors with a 

daily reference value of the adjusted 

Index. 

Further, the Commission notes that 

the Nasdaq has agreed to undertake to 

delist the Notes in the event that CBOE 

ceases to calculate and disseminate the 

Index, and Morgan Stanley is unable to 

arrange to have the BXN Index 

calculated and widely disseminated 

through a third party. 

The Commission finds good cause for 

approving the proposed rule change 

prior to the 30th day after the date of 

publication of the notice of filing thereof 

in the Federal Register. Nasdaq has 

requested accelerated approval because 

this product is similar to several other 

instruments currently listed and traded 

on the Nasdaq.28 Additionally, the 

Notes will be listed pursuant to 

Nasdaq’s existing hybrid security listing 

standards as described above. Therefore, 

the Commission finds good cause, 

consistent with Section 19(b)(2) of the 

Act,29 to approve the proposal on an 

accelerated basis. 

Accordingly, the Commission believes 

there is good cause, consistent with 

Sections 15A(b)(6) and 19(b)(2) of the 

Act,30 to approve the proposal, on an 

accelerated basis. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,31 that the 

proposed rule change (SR–NASD–2005–

118) is hereby approved on an 

accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.32

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–22414 Filed 11–9–05; 8:45 am] 

BILLING CODE 8010–01–P 

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. 

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 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68491 

4The Sponsor, on behalf of the Trust, filed the 

Form S–1 (the ‘‘Registration Statement’’) on June 7, 

Continued 

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 nonU.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 nonregistered 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 

68492 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

2005, Amendment No. 1 thereto on August 12, 

2005, and Amendment No. 2 thereto on October 25, 

2005. See Registration No. 333–125581. 

5The 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. 

6For 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. 

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). 

8See Bank for International Settlements, 

Triennial Central Bank Survey of Foreign Exchange 

and Derivatives Market Activity in April 2004, 

September 2004 (Tables 2 and 6). 

9The 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. 

10The 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. 

11The 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. 

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, costeffective means of gaining investment 

benefits similar to those of holding euro. 

Overview of the Foreign Exchange 

Industry 5

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

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

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 offbalance-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 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68493 

12The 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. 

13See 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. 

Sponsor believes that, for many 

investors, the Shares represent a costeffective 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. 

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 centralbank 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-thecounter 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. 

The Phlx, CME, SGX, and LIFFE have 

authority to perform surveillance on 

their members’ trading activities, review 

positions held by members and largescale 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 whollyowned 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

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 

68494 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

14While the Depository will hold the Trust’s 

assets, the Depository is not a trustee for the Trust 

or the Shareholders. 

15See 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. 

17The 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  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). 

18Shareholders 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. 

19See 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.’’) 

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. 

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. 

The Trust’s assets will consist only of 

euro on demand deposit in a eurodenominated, 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. 

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 SarbanesOxley 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

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 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68495 

20On 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. 

21The Exchange notes that the Trust, which will 

only hold euro as an asset in the normal course of 

its operations, differs from index-based exchangetraded 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). 

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 nonassessable, 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

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. 

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 662⁄3% 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 bookentry 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 

68496 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

22See 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. 

23See 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. 

24The 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. 

25Shares 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. 

26The 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. 

27The Trustee shall determine the Basket Euro 

Amount ‘‘as promptly as practicable’’ after the 

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. 

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. 

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. 

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 brokerdealer 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 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68497 

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. 

28The 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. 

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. 

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. 

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

Clearance and Settlement 

If the Shares are eligible for bookentry 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. 

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. 

• 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. 

• 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. 

• The Deposit Account is not entitled 

to payment at any office of JP Morgan 

Chase Bank, N.A. located in the US. 

• 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. 

• 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. 

• 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 1940 Act. 

68498 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

30There 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. 

31See, 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). 

32The 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. 

33The 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 

34The 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. 

35The last sale price of the Shares in the 

secondary market is available on a real-time basis 

for a fee from regular data vendors. 

• Shareholders will not have the 

rights enjoyed by investors in certain 

other financial instruments. 

• The Shares may trade at a price 

which is at, above, or below the NAV 

per Share. 

• 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. 

• 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. 

• 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. 

• 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. 

• The Trust 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 euro 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 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 realtime 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 overthe-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

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. 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68499 

36See 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). 

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. 

40Proposed 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. 

41See 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. 

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

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 MarketMaker’’), 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 nonUS 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. 

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. 

Surveillance. The Exchange’s 

surveillance procedures will be 

comparable to those used for Investment 

Company Units and streetTRACKS 

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

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 

68500 Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 

42Phlx is a member of ISG. CME and LIFFE are 

affiliate members of ISG. 

43See NYSE Rule 80B. 

44The 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. 

45See 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. 

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

47The 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. 

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

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

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. 

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. 

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

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 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2005–65 on the 

subject line. 

Paper Comments 

• 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 

Federal Register / Vol. 70, No. 217 / Thursday, November 10, 2005 / Notices 68501 

48 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78s et seq. 

3 17 CFR 240.19b–4. 

4SR–NYSE–204–39: Amendment No. 1. The 

NYSE, in coordination with the Chicago Board 

Options Exchange, Incorporated (‘‘CBOE’’), filed the 

partial amendment to conform the complex options 

spreads strategies to which its rule amendments 

apply to those of the CBOE. 

5At the request of the NYSE, the Commission 

staff clarified that the Exchange filed a partial 

amendment. Telephone conversation between Al 

Lucks, Managing Director, Member Firm 

Regulation, NYSE, and Matthew Comstock, Branch 

Chief, Division of Market Regulation (‘‘Division’’), 

on November 4, 2005. 

6NYSE Rule 431(f)(2)(C) defines a ‘‘butterfly 

spread’’ as an aggregation of positions in three 

series of either puts or calls all having the same 

underlying component or index, and time of 

expiration, and based on the same aggregate current 

underlying value, where the interval between the 

exercise price of each series is equal, which 

positions are structured as either: (A) A ‘‘long 

butterfly spread’’ in which two short options in the 

same series are offset by one long option with a 

higher exercise price and one long option with a 

lower exercise price of (B) a ‘‘short butterfly 

spread’’ in which two long options in the same 

series offset one short option with a higher exercise 

Continued 

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

Jonathan G. Katz, 

Secretary. 

[FR Doc. 05–22413 Filed 11–9–05; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–52738; File No. SR–NYSE–

2004–39] 

Self-Regulatory Organizations; New 

York Stock Exchange, Inc.; Notice of 

Filing of Proposed Rule Change and 

Partial Amendment No. 1 To Amend 

Exchange Rule 431 (Margin 

Requirements) 

November 4, 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 July 12, 2004, the New York Stock 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘NYSE’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or the 

‘‘Commission’’) the proposed rule 

change and on September 29, 2005, filed 

a partial amendment to its proposed 

rule change 4 as described in Items I, II 

and 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is proposing 

amendments to Rule 431 (Margin 

Requirements) that will recognize 

specific additional complex option 

spread strategies and set margin 

requirements commensurate with the 

risk of such spread strategies. These 

complex spread strategies are a 

combination of two or more basic option 

spreads that are already covered under 

Exchange Rule 431. In addition, the 

Exchange is proposing the elimination 

of the two-dollar standard exercise price 

interval limitation for listed options and 

certain terminology with respect to 

‘‘permitted offsets,’’ as defined in its 

Rule. 

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 IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On July 12, 2004, the Exchange filed 

with the Securities and Exchange 

Commission proposed rule change to 

Rule 431, filed as SR–NYSE–2004–39, 

that would recognize specific additional 

complex option spread strategies and set 

margin requirements commensurate 

with the risk of such spread strategies. 

The purpose of this filing is to amend 

SR–NYSE–2004–39.5

These complex spread strategies are a 

combination of two or more basic option 

spreads that are already covered under 

Exchange Rule 431. In addition, the 

Exchange is proposing the elimination 

of the two-dollar standard exercise price 

interval limitation for listed options and 

certain terminology with respect to 

‘‘permitted offsets’’ as defined in Rule 

431. 

Background 

Rule 431 prescribes minimum 

maintenance margin requirements for 

customer accounts held at members and 

member organizations. In April 1996, 

the Exchange established a Rule 431 

Committee (the ‘‘Committee’’) to assess 

the adequacy of Rule 431 on an ongoing 

basis, review margin requirements, and 

make recommendations for change. The 

Exchange’s Board of Directors has 

approved a number of proposed 

amendments resulting from the 

Committee’s recommendations since it 

was established. Similarly, the 

Committee has recommended the 

proposed amendments discussed below. 

The proposed amendments described 

below have been developed in 

conjunction with the Chicago Board 

Options Exchange (‘‘CBOE’’). 

Complex Option Spreads 

The Exchange is proposing 

amendments to Rule 431 to recognize 

certain additional complex option 

spread strategies that are the net result 

of combining two or more spread 

strategies that are currently recognized 

in the Exchange’s margin rules. The 

netting of contracts in option series 

common to each of the currently 

recognized spreads in an aggregation 

reduces it to the complex spread 

strategies noted below. 

Basic option spreads can be paired in 

such ways that they offset each other in 

terms of risk. The total risk of the 

combined spreads is less than the sum 

of the risk of both spread positions if 

viewed as stand-alone strategies. The 

specific complex spread strategies listed 

below are structured using the same 

principles as, and are essentially 

expansions of, the advanced spreads 

currently allowed in Rule 431. 

Currently, Rule 431 recognizes and 

prescribes margin requirements for 

advanced spread strategies known as the 

‘‘butterfly spread’’ 6 and the ‘‘box