Document ID: SEC-2006-1113-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-08-29T04:00Z

[Federal Register: August 29, 2006 (Volume 71, Number 167)]
[Notices]               
[Page 51245-51255]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au06-94]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54351; File No. SR-Amex-2006-44]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of a Proposed Rule Change and Amendments No. 1 and 2 
Thereto Relating to the Listing and Trading of the DB Currency Index 
Value Fund

August 23, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 2, 2006, the American Stock Exchange LLC 
(``Amex'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by Amex. On 
July 31, 2006, Amex filed Amendment No. 1 to the proposed rule 
change.\3\ On August 18, 2006, Amex filed Amendment No. 2 to the 
proposed rule change.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, Amex made clarifying changes to the 
proposal regarding the index methodology, the structure of the Fund, 
and the dissemination of information relating to the Index and Fund. 
In Amendment No. 1, the Exchange also amended Commentary .02 to Amex 
Rule 1200 to conform to Amex's current trading hours.
    \4\ In Amendment No. 2, Amex made additional clarifying changes 
to the proposal, including among others, details regarding the 
dissemination of the Index value, intraday indicative value, and net 
asset value of the Investment Shares.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to Commentary .07 to Amex Rule 1202, which permits the 
listing and trading of shares of trust issued receipts (``TIRs'') that 
invest in shares or securities (the ``Investment Shares'') of a trust, 
partnership, commodity pool or other similar entity that holds 
investments comprising, or otherwise based on, any combination of 
securities, futures contracts, swaps, forward contracts, options on 
futures contracts, commodities or portfolios of investments, the 
Exchange seeks to list and trade the DB Currency Index Value Fund (the 
``Trust'' or ``Fund''). In connection with the proposal, Amex also 
seeks to amend Commentary .02 to Amex Rule 1200. The text of the 
proposed rule change, as amended, is below. Proposed new language is in 
italics.
* * * * *

Rules of General Applicability

Amex Rule 1200
    (a) No Change.
    (b) No Change.
* * * Commentary
    .01 No Change.
    .02 Transactions in Trust Issues Receipts may be effected until 4 
p.m. or 4:15 p.m. each business day.
    .03 No Change.
* * * * *

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 Amex 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 the most significant aspects of such statements are 
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
Introduction
    Pursuant to Commentary .07 to Amex Rule 1202, the Exchange may 
approve for listing and trading TIRs investing in Investment Shares 
that hold investments in any combination of securities, futures 
contracts, options on futures contracts, swaps, forward contracts, 
commodities, or portfolios of investments. The Amex proposes to list 
for trading the shares of the Fund (the ``Shares''), which represent 
beneficial ownership interests in the Fund's net assets, consisting 
solely of the common units of beneficial interests of DB Currency Index 
Value Master Fund (the ``Master Fund''). The Master Fund is a statutory 
trust created under Delaware law whose investment portfolio will 
consist primarily of futures contracts on the currencies comprising the 
Deutsche Bank G10 Currency Future Harvest Index\TM\--Excess Return (the 
``DBCHI'' or ``Index'') and securities for margin purposes. Both the 
Fund and the Master Fund will be commodity pools operated by DB 
Commodity Services LLC (the ``Managing Owner''). The Managing Owner is 
registered as a commodity

[[Page 51246]]

pool operator (the ``CPO'') and commodity trading advisor (the ``CTA'') 
with the Commodity Futures Trading Commission (``CFTC'') and is a 
member of the National Futures Association (``NFA'').
    The Managing Owner will serve as the CPO and CTA of the Fund and 
the Master Fund. For the Master Fund, the Managing Owner will manage 
the futures contracts with the investment objective of tracking the 
performance of the Index over time.\5\ The Master Fund will hold a 
portfolio of both long and short futures contracts with a notional 
value to equity ratio of approximately two to one (2:1) \6\ on the 
currencies that comprise the Index (the ``Index Currencies'') and will 
include cash and U.S. Treasury securities for margin purposes and other 
high credit quality short-term fixed income securities. The Master Fund 
will not engage in borrowing. The Managing Owner will manage the Master 
Fund by making adjustments to the portfolio on a quarterly basis to 
conform to periodic changes in the composition and relative weightings 
of the Index Currencies. The Managing Owner may also make certain 
adjustments or changes to the portfolio more frequently in the case of 
significant changes in the foreign currency markets due to volatility.
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    \5\ Telephone conversation between Jeffery Burns, Associate 
General Counsel, Amex, and Brian Trackman, Special Counsel, Division 
of Market Regulation (``Division''), Commission, on August 22, 2006 
(``August 22 Conference'').
    \6\ Such ratio is generally intended to be comparable to the 
limits imposed on registered investment companies pursuant to the 
asset coverage requirements of section 18(a) of the Investment 
Company Act of 1940 (``1940 Act''). Even though the Master Fund is 
not registered or regulated as an investment company under the 1940 
Act, the Exchange represents that it is structured in a manner that 
is sensitive to the capital structure limitations imposed on 
registered investment companies by the 1940 Act.
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    The Exchange submits that Commentary .07 to Amex Rule 1202 
accommodates the listing and trading of the Shares.
    Under Commentary .07(c) to Amex Rule 1202, the Exchange may list 
and trade TIRs investing in Investment Shares such as the Shares. The 
Shares will conform to the initial and continued listing criteria under 
Commentary .07(d) to Amex Rule 1202. The Exchange notes that the 
Commission has permitted the listing and trading of products linked to 
the performance of underlying currencies and commodities.\7\
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    \7\ See Securities Exchange Act Release Nos. 53105 (January 11, 
2006), 71 FR 3129 (January 19, 2006) (approving the listing and 
trading of the DB Commodity Index Tracking Fund); 53059 (January 5, 
2006), 71 FR 2072 (January 12, 2006) (approving the listing and 
trading of the Euro Currency Trust); 51058 (January 19, 2005), 70 FR 
3749 (January 26, 2005) (approving the listing and trading of the 
iShares COMEX Gold Trust); 50603 (October 28, 2004), 69 FR 64614 
(November 5, 2004) (approving the listing and trading of 
streetTRACKS Gold Shares); 36885 (February 26, 1996), 61 FR 8315 
(March 4, 1996) (approving the listing and trading of commodity 
indexed preferred or debt securities linked to the value of single 
commodity); and 35518 (March 21, 1995), 60 FR 15804 (March 27, 1995) 
(approving the listing and trading of commodity linked notes or 
COINS). See also Central Fund of Canada Limited (Registration No. 
033-15180) (closed-end fund listed and traded on the Amex that 
invests in gold) and Salmon Phibro Oil Trust (Registration No. 033-
33823) (trust units listed and traded on the Amex that held the 
right to a forward contract for the delivery of crude oil).
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Index Description

    The Index is structured to provide a return that assumes an asset 
coverage ratio of 2:1.\8\ DBCHI is intended to reflect the return from 
investing assets in long currency futures positions for certain 
currencies associated with relatively high yielding interest rates and 
an equal amount in short currency futures positions for certain 
currencies associated with relatively low yielding interest rates. The 
Index is designed to exploit the trend of currencies associated with 
relatively high interest rates, on average, tending to rise in value 
relative to currencies associated with relatively low interest rates. 
The Index exploits this trend using both long and short futures 
positions, which is expected to provide more consistent and less 
volatile returns than could be obtained by taking long positions only 
or short positions only. This is known as the ``Interest Rate Parity'' 
or ``Covered Interest Arbitrage'' formula. In particular, the Fund, 
which is not managed on a discretionary basis but instead seeks to 
track the Index pursuant to established rules and procedures, will 
reflect the composition and weightings of the Index Currencies with 
adjustments made by the Managing Owner on a quarterly basis to conform 
to the changes in the Index. The Managing Owner will not otherwise 
effect changes to the portfolio that deviate from the Index except in 
extraordinary circumstances (e.g., if the Managing Owner is unable to 
enter into or close out a futures position because of a market 
disruption event).\9\ Therefore, if positions in any of the one or more 
Index Currencies are declining in value, the Fund will not close out 
such positions, except in connection with a mandated change in the 
composition or weighting of the Index. The Managing Owner will seek to 
cause the NAV (as defined herein) \10\ of the Fund to track the Index 
during periods in which the Index is flat or declining, as well as when 
the Index is rising. In this manner, the Managing Owner believes that 
the Index and the Fund will provide the advantages of market 
diversification and the reduction of country-specific foreign exchange 
risk (i.e., volatility).
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    \8\ See supra note 6.
    \9\ See discussion infra at ``Events Requiring Notice to and/or 
Approval by the Commission'' and ``Criteria for Initial and 
Continued Listing'' (describing the Exchange's obligations in the 
event of a disruption in connection with the trading of the futures 
contracts comprising the Index).
    \10\ See infra note 23 (defining net asset value or ``NAV'').
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    The Index, at any time, is comprised of futures positions on six 
(6) currencies from The Group Ten (``G10'') countries,\11\ each of 
which is traded on the Chicago Mercantile Exchange (the ``CME'').\12\ 
The notional amounts of each Index Currency included in the Index are 
based on the Index closing level as of the Index Re-Weighting Period 
(as defined herein).\13\ The Index closing level reflects an arithmetic 
weighted average of the change in the futures positions on the Index 
Currencies' exchange rates against the U.S. Dollar (``USD'') since 
March 12, 1993.\14\ On such date, the closing Index level was $100. The 
sponsor of the Index is Deutsche Bank AG London (``DB London'' or 
``Index Sponsor'').
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    \11\ The G10 currencies are the United States Dollar, the Euro, 
the Japanese Yen, the Canadian Dollar, the Swiss Franc, the British 
Pound, the Australian Dollar, the New Zealand Dollar, the Norwegian 
Krone, and the Swedish Krona (collectively, the ``Eligible Index 
Currencies'').
    \12\ August 22 Conference (clarifying that the Index is 
comprised of futures positions).
    \13\ See infra note 15 and accompanying text (defining and 
discussing the ``Index Re-Weighting Period'').
    \14\ August 22 Conference (clarifying the Index calculation 
methodology).
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    The Index is calculated by DB London on both an excess return basis 
and a total return basis. The excess return index reflects the return 
of the applicable underlying currencies. The total return is the sum of 
the return of the applicable underlying currencies, plus the return of 
three-month U.S. Treasury Bills. The Exchange states that the Fund will 
trade in a manner consistent with the excess return calculation of the 
Index. As described below, the Index will be calculated and 
disseminated every fifteen (15) seconds on the Consolidated Tape 
(``CT'') and through major market data vendors. The closing level of 
the Index is calculated by DB London on the basis of closing prices on 
the CME for the applicable futures contracts relating to the Index 
Currencies and applying a set of rules to these values to calculate the 
closing level of the Index. The CME-traded futures contract of each 
applicable Index Currency that is closest to

[[Page 51247]]

expiration is used in the Index calculation. The futures contracts on 
the Index Currencies are rolled during the period in which the Index is 
re-weighted (the ``Index Re-Weighting Period'').\15\ The new futures 
contract on an Index Currency that has the next closest expiration date 
is selected. The calculation of the Index on an excess-return basis is 
the weighted average return on the change in price of the futures 
contracts relating to the Index Currencies.\16\
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    \15\ The Index Sponsor reviews and re-weights the Index on a 
quarterly basis, in accordance with its rules. The futures contracts 
held by the Fund are, therefore, three (3) months in duration. The 
Index Re-Weighting Period takes place just prior to the third 
Wednesday in each of March, June, September, and December months, 
which are traditional settlement dates in the International Money 
Market (the ``IMM Dates''). The futures contracts on the Index 
Currencies are rolled during the Index Re-Weighting Period, which 
will occur over the fourth and third business days prior to each of 
the IMM Dates.
    \16\ August 22 Conference (clarifying the Index calculation 
methodology).
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    In order to determine which Eligible Index Currencies to include in 
the Index from time to time, the Sponsor will review the composition of 
the Index on a quarterly basis. The Sponsor will review the three-month 
LIBOR rate for each Eligible Index Currency, other than the Swedish 
Krona and Norwegian Krone, and will review the three-month STIBOR rate 
and the three-month NIBOR rate for the Swedish Krona and Norwegian 
Krone, respectively.\17\ The Eligible Index Currencies are then ranked 
according to yield. The three highest yielding and three lowest 
yielding are selected as Index Currencies for inclusion in calculating 
the Index. If two Index Currencies have the same yield, then the 
previous quarter's ranking will be used. Upon re-weighting, the high 
yielding Index Currencies are allocated a base weight of 33\1/3\%, and 
the low yielding Index Currencies are allocated a base weight of -33\1/
3\%. These new weights are applied during the Index Re-Weighting 
Period.
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    \17\ The LIBOR, STIBOR, and NIBOR rates for the Eligible Index 
Currencies, as applicable, mean the London, Stockholm, and Norway 
inter-bank offered rates for overnight deposits, respectively.
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    The Managing Owner represents that it will seek to arrange to have 
the Index calculated and disseminated on a daily basis through a third 
party if DB London ceases to calculate and disseminate the Index. If, 
however, the Managing Owner is unable to arrange for the calculation 
and dissemination of the Index (or another index which succeeds the 
Index), the Exchange will undertake to delist the Shares.\18\
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    \18\ If the Index is discontinued or suspended, the Managing 
Owner, in its sole discretion, may substitute the Index with an 
index substantially similar to the discontinued or suspended Index 
(the ``Successor Index''). The Successor Index may be calculated 
and/or published by any other third party. See discussion infra at 
``Events Requiring Notice to and/or Approval by the Commission.''
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    The composition of the Index may be adjusted in the event that the 
Index Sponsor is not able to obtain information from the relevant 
futures exchanges to calculate the closing prices of the futures 
contracts related to the Index Currencies.\19\ In such an event, the 
Index Sponsor may use a currency futures contract on the same Index 
Currency from a different futures exchange, provided that, if such use 
is more than of a temporary nature, the Exchange will file a proposed 
rule change pursuant to Rule 19b-4 seeking Commission approval to 
continue to trade the Shares. Unless approved for continued trading, 
the Exchange would commence delisting proceedings.
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    \19\ See id. (describing the Exchange's obligations if 
substantial changes are made by the Index Sponsor to the Index 
component selection or weighting methodology). See also supra note 
14.
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    If futures prices are not available as a result of a temporary 
disruption of futures contracts on the Index Currencies, the Managing 
Owner will typically use the prior day's futures price. In exceptional 
cases (such as when a daily price limit is reached on a futures 
exchange), the Managing Owner may employ a ``fair value'' price (i.e., 
the price for unwinding the futures position by dealers over-the-
counter (``OTC'')). The Exchange states that this is similar to the 
case for index options when prices are unavailable or unreliable. The 
Options Clearing Corporation (``OCC''), pursuant to Article XVII, 
Section 4 of its By-Laws, permits options exchanges to use the prior 
day's closing price to fix an index options exercise settlement value. 
In addition, OCC may also use the next day's opening price, a price or 
value at such other times as determined by OCC, or an average of prices 
or values as determined by OCC. The Exchange represents that if the use 
of a prior day's price or ``fair value'' price for an Index Currency or 
Currencies is more than of a temporary nature, the Exchange will file a 
proposed rule change pursuant to Rule 19b-4 under the Act seeking 
Commission approval for the continued trading of the Shares. Unless 
approved for continued trading, the Exchange would commence delisting 
proceedings.
Investment Objective and Strategy
    The Master Fund's portfolio is managed with a view to reflect the 
performance of the Index over time. The Exchange states that the Master 
Fund is not traditionally ``managed,'' which typically involves 
effecting changes in the composition of a portfolio on the basis of 
judgments relating to economic, financial, and market considerations. 
Instead, the Managing Owner seeks to maintain the relationship between 
the composition and weightings of the CME futures positions in the 
Index Currencies to the Master Fund's long and short currency futures 
positions from time to time.\20\ The Managing Owner adjusts the 
portfolio on a quarterly basis to conform to periodic changes in the 
composition and relative weightings of the Index Currencies and may 
make certain adjustments or changes to the portfolio more frequently in 
the case of significant changes in the foreign currency markets due to 
volatility.
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    \20\ August 22 Conference, supra note 12.
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    The Fund will pursue its investment objective by investing 
substantially all of its assets in the Master Fund. To track the Index, 
the Master Fund generally will establish long futures positions in the 
three Index Currencies associated with the highest interest rates and 
short futures positions in the three Index Currencies associated with 
the lowest interest rates \21\ and will adjust its holdings quarterly 
as the Index is adjusted. However, if the USD is among the Index 
Currencies, the Master Fund will not establish a long or short futures 
position (as the case may be) in USD because USD is the Fund's home 
currency and, as a consequence, the Master Fund never can enjoy profit 
or suffer loss from long or short futures positions in USD. When the 
USD is not associated with the highest or lowest interest rates among 
the Eligible Index Currencies, the aggregate notional value of the 
Master Fund's futures contracts at the time they are established will 
be double the value of the Master Fund's holdings of U.S. Treasury 
Bills and other high credit quality short term fixed income securities, 
(i.e., a ratio of 2:1).\22\
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    \21\ The use of long and short positions in the construction of 
the Index causes the Index to rise as a result of any upward price 
movement of Index Currencies expected to gain relative to the USD 
and to rise as a result of any downward price movement of Index 
Currencies expected to lose relative to the USD.
    \22\ See supra note 6.
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    If the USD is associated with the highest or lowest interest rates 
among the Eligible Index Currencies, the aggregate notional value of 
the Master Fund's futures contracts at the time they are established 
will be approximately 1.66 times the value of the Master Fund's 
holdings of U.S. Treasury Bills and other high credit quality short-
term fixed income securities (i.e., a ratio of

[[Page 51248]]

1.66:1). Holding futures positions with a notional amount in excess of 
the Master Fund's NAV \23\ increases the potential for both trading 
profits and losses, depending on the performance of the Index. The 
Master Fund's ability to track the Index will not be affected by the 
presence or absence of the USD among the Index Currencies. Because the 
notional value of the Master Fund's futures positions can rise or fall 
over time, the ratio of long and short futures positions could be 
higher or lower between quarterly adjustments of the Index Currencies.
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    \23\ NAV is the total assets of the Master Fund, less total 
liabilities of the Master Fund, determined on the basis of generally 
accepted accounting principles. NAV per Master Fund share is the NAV 
of the Master Fund divided by the number of outstanding Master Fund 
shares. This will be the same for the Shares of the Fund because of 
a one-to-one correlation between the Shares and the shares of the 
Master Fund.
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Foreign Currency Futures
    The Exchange states that the advent of financial futures began in 
the early 1970s because some commodity traders at CME established the 
International Monetary Market (now a division of CME), which launched 
trading in seven currency futures contracts on May 16, 1972 creating 
the world's first financial futures. Whether the trading venue is open 
outcry or electronic, the Exchange submits that prices for exchange 
traded foreign currency products are disseminated worldwide via major 
quote vendors such as Reuters, Bloomberg, and others. Electronic 
trading on computerized trading systems (e.g., GLOBEX[reg] at CME) 
takes place on a nearly 24-hour basis.
    The Exchange states that foreign exchange rates are influenced by 
national debt levels and trade deficits, domestic and foreign inflation 
rates and investors' expectations concerning inflation rates, domestic 
and foreign interest rates and investors' expectations concerning 
interest rates, currency exchange rates, investment and trading 
activities of mutual funds, hedge funds and currency funds, and global 
or regional political, economic, or financial events and situations. 
Additionally, foreign exchange rates on the Index Currencies may also 
be influenced by changing supply and demand for a particular Index 
Currency, monetary policies of governments (including exchange control 
programs, restrictions on local exchanges or markets and limitations on 
foreign investment in a country or on investment by residents of a 
country in other countries), changes in balances of payments and trade, 
trade restrictions, currency devaluations, and currency revaluations. 
Also, the Exchange states that governments from time to time intervene 
in the currency markets, directly and by regulation, in order to 
influence prices directly. Additionally, expectations among market 
participants that a currency's value soon will change may also affect 
exchange rates on the Index Currencies.
    The Exchange submits that the foreign currency market is the 
largest and most liquid financial market in the world. As of April 
2004, the Exchange states that the foreign currency exchange market 
experienced average daily turnover of approximately $1.88 trillion, 
which was a 57% increase (at current exchange rates) from 2001 daily 
averages.\24\ The foreign currency market is predominantly an OTC 
market, with no fixed location, and it operates 24 hours a day, seven 
days a week. London, New York, and Tokyo are the principal geographic 
centers of the world-wide foreign currency market, with approximately 
58% of all foreign currency business executed in the United Kingdom, 
United States, and Japan. Other, smaller markets include Singapore, 
Zurich, and Frankfurt. The Exchange states that the primary market 
participants in foreign currencies are banks (including government-
controlled central banks), investment banks, money managers, 
multinational corporations, and institutional investors.
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    \24\ The Exchange, however, did not specify the foreign 
currencies or types of transactions that underlie the statistics.
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    The Exchange states that there are three major kinds of 
transactions in the traditional foreign currency markets: Spot 
transactions, outright forwards, and foreign exchange swaps. ``Spot'' 
trades are foreign currency 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 currency 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 OTC and, in the United States, on the 
Philadelphia Stock Exchange, Inc. (``Phlx''). Foreign 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 CME, the Singapore Exchange 
Derivatives Trading Limited (``SGX''), and the London International 
Financial Futures Exchange (``LIFFE''). Over 85% of currency derivative 
products (swaps, options, and futures) are traded OTC.\25\
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    \25\ See Bank for International Settlements, Triennial Central 
Bank Survey of Foreign Exchange and Derivatives Market Activity in 
April 2004, September 2004 (Tables 2 and 6).
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Futures Regulation
    The Exchange states that the CEA governs the regulation of 
commodity interest transactions, markets, and intermediaries. The 
Exchange states that the CFTC administers the CEA, which requires 
commodity futures exchanges, such as the CME, to have rules and 
procedures to prevent market manipulation, abusive trade practices, and 
fraud. The CEA provides for varying degrees of regulation of commodity 
interest transactions depending upon the variables of the transaction. 
In general, these variables include (1) the type of instrument being 
traded (e.g., contracts for future delivery, options, swaps, or spot 
contracts), (2) the type of commodity underlying the instrument 
(distinctions are made between instruments based on agricultural 
commodities, energy and metals commodities, and financial commodities), 
(3) the nature of the parties to the transaction (retail, eligible 
contract participant, or eligible commercial entity), (4) whether the 
transaction is entered into on a principal-to-principal or 
intermediated basis, (5) the type of market on which the transaction 
occurs, and (6) whether the transaction is subject to clearing through 
a clearing organization.
    Among other things, the Exchange states that the CEA provides that 
the trading of commodity interest contracts generally must be upon 
exchanges designated as contract markets or Derivatives Transaction 
Execution Facilities and that all trading on those exchanges must be 
done by or through exchange members. Commodity interest trading between 
sophisticated persons may be traded on a trading facility not regulated 
by the CFTC. As a general matter, the Exchange states that trading in 
spot contracts, forward contracts, options on forward contracts or 
commodities, or swap contracts between eligible contract participants 
is not within the jurisdiction of the CFTC and may therefore be 
effectively unregulated.

[[Page 51249]]

    The Exchange submits that trading on non-U.S. exchanges may differ 
from trading on U.S. exchanges in a variety of ways and, accordingly, 
may subject the Fund to additional risks. Non-U.S. futures exchanges 
are not subject to regulation by the CFTC, but rather are regulated by 
their home country regulator. In contrast to U.S. designated contract 
markets, some non-U.S. exchanges are principals' markets, where trades 
remain the liability of the traders involved, and the exchange or an 
affiliated clearing organization, if any, does not become substituted 
for any party. Due to the absence of a clearing system, the Exchange 
states that such exchanges are significantly more susceptible to 
disruptions. Further, participants in such markets must often satisfy 
themselves as to the individual creditworthiness of each entity with 
which they enter into a trade. Trading on non-U.S. exchanges is often 
in the currency of the exchange's home jurisdiction. Consequently, the 
Fund may be subject to the additional risk of fluctuations in the 
exchange rate between such currencies and USD and the possibility that 
exchange controls could be imposed in the future.
    The Exchange states that CFTC and U.S. designated contract markets 
have established limits or position accountability rules (i.e., 
speculative position limits or position limits) on the maximum net long 
or net short speculative position that any person or group of persons 
under common trading control (other than a hedger) may hold, own, or 
control in commodity interests. Among the purposes of speculative 
position limits is to prevent a corner or squeeze on a market or undue 
influence on prices by any single trader or group of traders.
    The Exchange also states that most U.S. futures exchanges limit the 
amount of fluctuation in some futures contract or options on futures 
contract prices during a single trading session. These regulations 
specify what are referred to as daily price fluctuation limits (i.e., 
daily limits). The daily limits establish the maximum amount that the 
price of a futures contract or options on futures contract may vary 
either up or down from the previous day's settlement price. Once the 
daily limit has been reached in a particular futures contract or 
options on futures contract, no trades may be made at a price beyond 
the limit.
Foreign Currency Regulation
    Most trading in the global OTC foreign currency markets is 
conducted by regulated financial institutions such as banks and broker-
dealers. In addition, in the United States, the Foreign Exchange 
Committee of the New York Federal Reserve Bank has issued guidelines 
for foreign exchange trading, and central-bank sponsored committees in 
Japan and Singapore have published similar best practice guidelines. In 
the United Kingdom, the Bank of England has published the Non-
Investment Products Code, which covers foreign currency trading. The 
Financial Markets Association, whose members include major 
international banking organizations, has also established best 
practices guidelines called the ``Model Code.''
    In addition, in the United States, the Commission regulates the 
trading of options on foreign currencies on Phlx, and the CFTC 
regulates trading of futures, options, and options on futures on 
foreign currencies on regulated futures exchanges.\26\
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    \26\ In addition to its oversight of regulated futures 
exchanges, the Exchange states that the CFTC has jurisdiction over 
certain foreign currency futures, options, and options on futures 
transactions occurring other than on a regulated exchange and 
involving retail customers.
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Structure of the Fund
    Fund. The Fund will be formed as a Delaware statutory trust 
pursuant to a Certificate of Trust and a Declaration of Trust and Trust 
Agreement among Wilmington Trust Company, as trustee, the Managing 
Owner, and the holders of the Shares.\27\ The Fund will issue common 
units of beneficial interest or shares that represent units of 
fractional undivided beneficial interest in and ownership of the Fund. 
The term of the Fund is perpetual (unless terminated earlier in certain 
circumstances). The investment objective of the Fund is to reflect the 
performance of the DBCHI, over time, less the expenses of the operation 
of the Fund and the Master Fund. The Fund will pursue its investment 
objective by investing substantially all of its assets in the Master 
Fund. Each Share will correlate with a Master Fund share issued by the 
Master Fund and held by the Fund.
---------------------------------------------------------------------------

    \27\ The Exchange states that the Fund will not be subject to 
registration and regulation under the 1940 Act.
---------------------------------------------------------------------------

    Master Fund. The Master Fund is a statutory trust formed pursuant 
to the Delaware Statutory Trust Act and will issue common units of 
beneficial interest or shares that represent units of fractional 
undivided beneficial interest in and ownership of the Master Fund. The 
term of the Master Fund is perpetual (unless terminated earlier in 
certain circumstances). The investment objective of the Master Fund is 
to reflect the performance of the DBCHI, less the expenses of the 
operations of the Fund and the Master Fund. The Master Fund will pursue 
its investment objective by taking long positions in the three (3) 
highest-yielding Index Currencies and, as reflected in the Index, will 
take three (3) short positions in the lowest yielding Index Currencies. 
In addition, the Master Fund will also hold cash and U.S. Treasury 
securities for deposit with futures commission merchants (``FCMs'') as 
margin and other high credit quality short-term fixed income 
securities.
    Trustee. The Wilmington Trust Company is the trustee of the Fund 
and the Master Fund. The Trustee has delegated to the Managing Owner 
the power and authority to manage and operate the day-to-day affairs of 
the Fund and the Master Fund.
    Managing Owner. The Managing Owner is a Delaware limited liability 
company which is registered with the CFTC as a CPO and CTA and is an 
affiliate of DB London. The Managing Owner will serve as the CPO and 
CTA of the Fund and the Master Fund and will manage and control all 
aspects of the business of both.
    Commodity Broker. Deutsche Bank Securities, Inc., the Commodity 
Broker, is an affiliate of the Managing Owner and is registered with 
the CFTC as a FCM. The Commodity Broker will execute and clear each of 
the Master Fund's futures contract transactions and will perform 
certain administrative services for the Master Fund.
    Administrator. The Bank of New York is the administrator for both 
the Fund and the Master Fund (the ``Administrator''). The Administrator 
will perform or supervise the performance of services necessary for the 
operation and administration of the Fund and the Master Fund (other 
than making investment decisions), including NAV calculations, 
accounting, and other administrative services. The Administrator will 
retain certain financial books and records, including: Financial 
accounting records, ledgers with respect to assets, liabilities, 
capital, income and expenses, the register, transfer journals and 
related details, and trading and related documents received from FCMs.
    Distributor. ALPS Distributors, Inc. is the distributor for both 
the Fund and the Master Fund (the ``Distributor''). The Distributor 
will assist the Managing Owner and the Administrator with certain 
functions and duties relating to the creation and redemption of Baskets 
(as defined below), including receiving and processing orders from 
Authorized Participants (as defined below) to create and redeem 
Baskets, coordinating the

[[Page 51250]]

processing of such orders and related functions and duties. The 
Distributor will also retain all marketing materials and Basket 
creation and redemption books and records.
Product Description
A. Creation and Redemption of Shares
    Issuances of the Shares will be made only in one or more blocks of 
200,000 Shares (the ``Basket''). The Fund will issue and redeem the 
Shares on a continuous basis, by or through participants that have 
entered into participant agreements (each, an ``Authorized 
Participant'') \28\ with the Managing Owner at the NAV per Share next 
determined after an order to purchase the Shares in a Basket is 
received in proper form. Following issuance, the Shares will be traded 
on the Exchange similar to other equity securities. The Shares will be 
registered in book entry form through DTC.
---------------------------------------------------------------------------

    \28\ An ``Authorized Participant'' is a person, who at the time 
of submitting to the trustee an order to create or redeem one or 
more Baskets, (i) is a registered broker-dealer, (ii) is a 
Depository Trust Company (``DTC'') participant and (iii) has in 
effect a valid participant agreement.
---------------------------------------------------------------------------

    Baskets will be issued in exchange for a cash amount equal to the 
NAV per Share times 200,000 Shares (the ``Basket Amount''). The Basket 
Amount will be determined on each business day by the Administrator. 
Authorized Participants that wish to purchase a Basket must transfer 
the Basket Amount to the Administrator (the ``Cash Deposit Amount''). 
Authorized Participants that wish to redeem a Basket will receive cash 
in exchange for each Basket surrendered in an amount equal to the NAV 
per Basket (the ``Cash Redemption Amount''). The Commodity Broker will 
be the custodian for the Master Fund and responsible for safekeeping 
the Master Fund's assets.
    All purchase orders received by the Administrator prior to 1 p.m. 
ET will be settled by depositing with the Commodity Broker the Cash 
Deposit Amount disseminated by the Administrator shortly after 10 a.m. 
ET on the next business day. The Basket Amount necessary for the 
creation of a Basket will change from day to day. On each day that the 
Amex is open for regular trading, the Administrator will adjust the 
Cash Deposit Amount as appropriate to reflect the prior day Fund NAV 
(as described below) and accrued expenses. The Administrator will 
determine the Cash Deposit Amount for a given business day by 
multiplying the NAV for each Share by the number of Shares in each 
Basket (200,000).
    Likewise, all redemption orders received by the Administrator prior 
to 1 p.m. ET will be settled by the Commodity Broker's payment of the 
Cash Redemption Amount shortly after 10 a.m. ET on the next business 
day.\29\ The Shares will not be individually redeemable but will only 
be redeemable in Baskets. To redeem, an Authorized Participant will be 
required to accumulate enough Shares to constitute a Basket (i.e., 
200,000 shares). Upon the surrender of the Shares and payment of 
applicable redemption transaction fee, taxes, or charges, the 
Administrator will deliver to the redeeming Authorized Participant the 
Cash Redemption Amount.
---------------------------------------------------------------------------

    \29\ Telephone conversation between Jeffrey Burns, Associate 
General Counsel, Amex, and Florence Harmon, Senior Special Counsel, 
Division, Commission, on June 26, 2006.
---------------------------------------------------------------------------

    On each business day, the Administrator will make available 
immediately prior to the opening of trading on the Amex via the 
facilities of the CT,\30\ the most recent Basket Amount for the 
creation of a Basket. The Amex will disseminate every fifteen (15) 
seconds throughout the trading day, via the CT, an amount representing 
on a per Share basis, the current value of the Basket Amount. It is 
anticipated that the deposit of the Cash Deposit Amount in exchange for 
a Basket will be made primarily by institutional investors, 
arbitrageurs, and the Exchange specialist. Baskets are then separable 
upon issuance into identical Shares that will be listed and traded on 
the Amex.\31\ The Shares are expected to be traded on the Exchange by 
professionals, as well as institutional and retail investors. Thus, the 
Shares may be acquired in two (2) ways: (1) Through a deposit of the 
Cash Deposit Amount with the Administrator during normal business hours 
by Authorized Participants, or (2) through a purchase on the Exchange 
by investors.
---------------------------------------------------------------------------

    \30\ Id.
    \31\ The Shares are separate and distinct from the shares of the 
Master Fund. The Exchange expects that the number of outstanding 
Shares will increase and decrease from time to time as a result of 
creations and redemptions of Baskets.
---------------------------------------------------------------------------

B. Net Asset Value (NAV)
    Shortly after 4 p.m. Eastern time (``ET'') each business day, the 
Administrator will determine the NAV for the Fund, utilizing the 
current settlement value of the particular long and short exchange-
traded futures contracts on the Index Currencies. At or about 4 p.m. ET 
each business day, the Administrator will determine the Basket Amount 
for orders placed by Authorized Participants received before 1 p.m. ET 
that day. Thus, although Authorized Participants place orders to 
purchase Shares throughout the trading day until 1 p.m. ET, the actual 
Basket Amount is determined at 4 p.m. ET or shortly thereafter.
    Shortly after 4 p.m. ET each business day, the Administrator, Amex, 
and the Managing Owner will disseminate the NAV for the Shares and the 
Basket Amount (for orders placed during the day). The Basket Amount and 
the NAV are communicated by the Administrator to all Authorized 
Participants via facsimile or electronic mail message and will be 
available on the Index Sponsor's Internet Web site at http://index.db.com.
 The Amex will also disclose the NAV and Basket Amount on 

its Internet Web site (http://www.amex.com). Amex represents that the 

NAV will be made available to all market participants at the same time. 
If the NAV is not disseminated to all market participants at the same 
time, the Exchange will halt trading of the Shares.\32\
---------------------------------------------------------------------------

    \32\ However, if the Fund temporarily does not disseminate the 
NAV to all market participants at the same time, the Exchange will 
immediately contact the Commission to discuss measures that may be 
appropriate under the circumstances. See discussion infra at 
``Events Requiring Notice to and/or Approval by the Commission'' and 
``Criteria for Initial and Continued Listing'' (discussing delisting 
procedures in the event of a disruption to the dissemination of the 
NAV); see also discussion infra at ``Trading Halts'' (noting that 
the Exchange would halt trading in the Shares if the NAV is no 
longer calculated or disseminated for the benefit of market 
participants at the same time).
---------------------------------------------------------------------------

    When calculating NAV for the Fund and Master Fund, the 
Administrator will value U.S. futures contracts held by the Master Fund 
on the basis of their then current market value. All non-U.S. futures 
contracts will be calculated based upon the liquidation value. Forward 
contracts will be calculated based on the mean of the bid-ask as 
provided by the counterparty.
    The NAV for the Fund is total assets of the Master Fund less total 
liabilities of the Master Fund. The NAV is calculated by including any 
unrealized profit or loss on futures contracts and any other credit or 
debit accruing to the Master Fund but unpaid or not received by the 
Master Fund. The NAV is then used to compute all fees (including the 
management and administrative fees) that are calculated from the value 
of Master Fund assets. The Administrator will calculate the NAV per 
share by dividing the NAV by the number of Shares outstanding.
    The Exchange believes that the Shares will not trade at a material 
discount or premium to the NAV of the Shares based on potential 
arbitrage opportunities. Due to the fact that the Shares can be created 
and redeemed

[[Page 51251]]

only in Baskets at NAV, the Exchange submits that arbitrage 
opportunities should provide a mechanism to mitigate the effect of any 
premiums or discounts to or from NAV per Share that may exist from time 
to time. The value of a Share may be influenced by non-concurrent 
trading hours between the Amex and the various futures exchanges on 
which the Index Currencies are traded. As a result, during periods when 
the Amex is open and the futures exchanges on which the Index 
Currencies are traded are closed, trading spreads and the resulting 
premium or discount on the Shares may widen, and, therefore, increase 
the difference between the price of the Shares and the NAV of the 
Shares.
C. Dissemination of the Index and Underlying Futures Contracts 
Information
    DB London, as the Index Sponsor, will publish the value of the 
Index at least once every fifteen (15) seconds throughout each trading 
day on the CT, Bloomberg, Reuters, and on its Internet Web site at 
http://index.db.com. The Exchange states that the disseminated value of 

the Index will not reflect changes to the prices of the Index 
Currencies between the close of trading of each respective futures 
contract on the relevant futures exchange, i.e., 3 p.m. ET (close of 
trading on the CME futures market), and the close of trading on the 
Amex at 4:15 p.m. ET.\33\ The closing Index level will similarly be 
provided by DB London. In addition, any adjustments or changes to the 
Index will also be provided by DB London and the Exchange on their 
respective Internet Web sites.\34\
---------------------------------------------------------------------------

    \33\ August 22 Conference.
    \34\ The Sponsor has in place procedures to prevent the improper 
sharing of information between different affiliates and departments. 
Specifically, an information barrier exists between the personnel 
within DB London that calculate and reconstitute the Index and other 
personnel of the Sponsor, including but not limited to the Managing 
Owner, sales and trading, external or internal fund managers, and 
bank personnel who are involved in hedging the bank's exposure to 
instruments linked to the Index, in order to prevent the improper 
sharing of information relating to the composition of the Index.
---------------------------------------------------------------------------

    The daily settlement prices for the futures contracts held by the 
Master Fund are publicly available on the Internet Web sites of the 
futures exchanges trading the particular contracts. All of the futures 
contracts in which the Master Fund currently expects to invest are 
traded on the CME, although currency futures contracts on the Eligible 
Index Currencies also trade on other futures exchanges in the United 
States and the Master Fund may invest in such contracts.\35\ In 
addition, various data vendors and news publications publish futures 
prices and data. The Exchange represents that futures quotes and last 
sale information for the Index Currencies are widely disseminated 
through a variety of market data vendors worldwide, including Bloomberg 
and Reuters. In addition, the Exchange further notes that complete 
real-time data for such futures is available by subscription from 
Reuters and Bloomberg. The specific contract specifications for the 
futures contracts are also available from the futures exchanges on 
their Internet Web sites, as well as other financial informational 
sources.
---------------------------------------------------------------------------

    \35\ Other futures exchanges may include, for example, the New 
York Board of Trade and HedgeStreet, Inc.
---------------------------------------------------------------------------

D. Availability of Information Regarding the Shares
    The Internet Web sites for the Fund and/or the Exchange, which are 
publicly accessible at no charge, will contain the following 
information: (a) Current NAV per Share daily and the prior business 
day's NAV and the reported closing price; (b) the mid-point of the bid-
ask price in relation to the NAV as of the time the NAV is calculated 
(the ``Bid-Ask Price''); \36\ (c) the calculation of the premium or 
discount of such price against such NAV; (d) data in chart form 
displaying the frequency of distribution of discounts and premiums of 
the Bid-Ask Price against the NAV, within appropriate ranges for each 
of the four (4) previous calendar quarters; (e) the prospectus; and (f) 
other applicable quantitative information. The Exchange will also make 
available on its Internet Web site the daily trading volume of the 
Shares. The closing price and settlement prices of the futures 
contracts comprising the Index and held by the Master Fund are also 
readily available from the relevant futures exchanges, automated 
quotation systems, published or other public sources, or online 
information services such as Bloomberg or Reuters. In addition, the 
Exchange will provide a hyperlink on its Internet Web site to the Index 
Sponsor's Internet Web site.
---------------------------------------------------------------------------

    \36\ The Bid-Ask Price of the Shares is determined using the 
highest bid and lowest offer as of the time of calculation of the 
NAV.
---------------------------------------------------------------------------

    Investors may obtain, on a 24-hour basis, currency pricing 
information from various financial information service providers. The 
Exchange states that current currency spot prices are also generally 
available with bid/ask spreads from foreign exchange dealers. Complete 
real-time data for futures and options prices traded on CME and Phlx 
are also available by subscription from information service providers. 
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 
Internet Web sites that provide information on currency, such as 
Bloomberg (http://www.bloomberg.com/markets/currecies[fxsp0]/eurafr--

currencies.html), which regularly reports current foreign currency 
pricing for a fee. Other service providers include CBS Market Watch 
(http://marketwatch.com/[fxsp0]tools.stockresearch/globalmarkets) and Yahoo! Finance (http://finance.yahoo.com/currency). Many of these 

Internet Web 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.
E. Dissemination of Indicative Fund Value
    As noted above, the Administrator calculates the NAV of the Fund 
once each trading day and disseminates such NAV to all market 
participants at the same time. In addition, the Administrator causes to 
be made available on a daily basis the Cash Deposit Amount to be 
deposited in connection with the issuance of the Shares in Baskets. 
Other investors can also request such information directly from the 
Administrator.
    In order to provide updated information relating to the Fund for 
use by investors, professionals, and persons wishing to create or 
redeem the Shares, the Exchange will disseminate through the facilities 
of the CT an updated Indicative Fund Value (the ``Indicative Fund 
Value''). The Indicative Fund Value will be disseminated on a per Share 
basis every fifteen (15) seconds during regular Amex trading hours of 
9:30 a.m. to 4:15 p.m. ET. The Indicative Fund Value will be calculated 
based on the cash required for creations and redemptions (i.e., NAV x 
200,000), adjusted to reflect the price changes of the Index Currencies 
through investments held by the Master Fund, i.e., futures contracts 
and options on futures and/or forwards.
    The Indicative Fund Value will not reflect price changes to the 
price of an underlying currency between the close of trading of the 
futures contract at the relevant futures exchange and the close of 
trading on the Amex at 4:15 p.m. ET. While the Shares will trade on the 
Amex from 9:30 a.m. to 4:15 p.m. ET, regular trading hours for each of 
the Index Currencies on the CME are 8:20 a.m. to 3 p.m. ET. Therefore, 
the value

[[Page 51252]]

of a Share may be influenced by non-concurrent trading hours between 
the Amex and the various futures exchanges on which the futures 
contracts based on the Index Currencies are traded.
    While the market for futures trading for each of the Index 
Currencies is open, the Indicative Fund Value can be expected to 
closely approximate the value per Share of the Basket Amount. However, 
during Amex trading hours and when the futures contracts have ceased 
trading, spreads and resulting premiums or discounts may widen, and 
therefore, increase the difference between the price of the Shares and 
the NAV of the Shares. Indicative Fund Value on a per Share basis 
disseminated during Amex trading hours should not be viewed as a real 
time update of the NAV, which is calculated only once a day.
    The Exchange believes that dissemination of the Indicative Fund 
Value based on the cash amount required for a Basket provides 
additional information that is not otherwise available to the public 
and is useful to professionals and investors in connection with the 
Shares trading on the Exchange or the creation or redemption of the 
Shares.
F. Events Requiring Notice to and/or Approval by the Commission
    The Exchange represents that should the Index Sponsor substantially 
change either the Index component selection or weighting methodology, 
the Exchange would file a proposed rule change pursuant to Rule 19b-4 
under the Act, which must be approved by the Commission for continued 
trading of the Shares.\37\
---------------------------------------------------------------------------

    \37\ See supra note 19 and accompanying text (noting that the 
Index Sponsor may also use a currency futures contract on the same 
Index Currency from a different futures exchange, provided that, if 
such use is more than of a temporary nature, the Exchange will file 
a proposed rule change pursuant to Rule 19b-4 seeking Commission 
approval to continue to trade the Shares. Unless approved for 
continued trading, the Exchange would commence delisting 
proceedings.
---------------------------------------------------------------------------

    The Exchange represents that if a successor or substitute index is 
used by the Managing Owner, Amex will file with the Commission a 
proposed rule change pursuant to Rule 19b-4 under the Act to address, 
among other things, the listing and trading characteristics of the 
successor index and Amex's surveillance procedures applicable to the 
successor index, which must be approved by the Commission to continue 
trading the Shares relating to the successor index.
    Additionally, in the case of a temporary disruption in connection 
with the trading of the futures contracts comprising the Index, the 
Exchange believes that it is unnecessary for a filing pursuant to Rule 
19b-4 under the Act to be filed with the Commission. The Exchange 
submits that for a temporary disruption of such futures contracts, the 
Index Sponsor would typically use the prior day's price for an Index 
Currency. In exceptional cases, the Index Sponsor may employ a ``fair 
value'' price (i.e., the price for unwinding the position by dealers in 
the OTC market). However, the Exchange represents that if the use of a 
prior day's price or ``fair value'' pricing for an Index Currency is 
more than of a temporary nature, the Exchange will file a proposed rule 
change with the Commission pursuant to Rule 19b-4 under the Act seeking 
Commission approval to continue trading the Shares. Unless approved for 
continued trading, the Exchange would commence delisting proceedings.
    The Exchange represents that it would halt trading of the Shares if 
(a) the value of the Index is no longer calculated or available on at 
least a fifteen (15) second basis through the facilities of the CT or 
major market data vendors during the time the Shares trade on Amex, (b) 
if the Indicative Fund Value, updated at least every fifteen (15) 
seconds, is no longer calculated or available, or (c) the NAV is no 
longer disseminated to all market participants at the same time.\38\ In 
any event, unless approval is received from the Commission to continue 
to list and trade the Shares after a proposed rule change filing is 
properly filed pursuant to Rule 19b-4 under the Act, the Exchange 
represents that will commence delisting procedures for the Shares if: 
(i) The Index Sponsor substantially changes either the Index component 
selection or weighting methodology; (ii) more than a temporary 
disruption exists with trading of the futures contracts comprising the 
Index; or (iii) a Successor Index is used by the Managing Owner; or 
(iv) the calculation and/or dissemination of the NAV is more than 
temporarily disrupted.
---------------------------------------------------------------------------

    \38\ The Exchange further represents that it would immediately 
contact the Commission to discuss measures that may be appropriate 
under the circumstances.
---------------------------------------------------------------------------

Termination Events
    The Exchange states that the Fund will be terminated if any of the 
following circumstances occur: (1) The filing of a certificate of 
dissolution or revocation of the Managing Owner's charter or upon the 
withdrawal, removal, adjudication, or admission of bankruptcy or 
insolvency of the Managing Owner, or an event of withdrawal unless (i) 
there is at least one remaining Managing Owner who carries on the 
business of the Fund or (ii) within 90 days of such event of withdrawal 
all the remaining shareholders agree in writing to continue the 
business of the Fund and to select one or more successor Managing 
Owners; (2) the occurrence of any event which would make unlawful the 
continued existence of the Fund; (3) the suspension, revocation, or 
termination of the Managing Owner's registration as a CPO, or 
membership as a CPO with the NFA; (4) the Fund becomes insolvent or 
bankrupt; (5) the holders of at least 50% of the outstanding Shares 
notify the Managing Owner that they elect to terminate the Fund; (6) 
the determination of the Managing Owner that the aggregate net assets 
of the Fund in relation to the operating expenses of the Fund make it 
unreasonable or imprudent to continue the business of the Fund, or the 
determination by the Managing Owner to dissolve the Fund because the 
aggregate NAV of the Fund as of the close of business on any business 
day declines below $10 million; (7) the Commission finds that the Fund 
should be registered as an investment company under the 1940 Act; or 
(8) the DTC is unable or unwilling to continue to perform its 
functions, and a comparable replacement is unavailable. Upon 
termination of the Fund, holders of the Shares will surrender their 
Shares and receive from the Administrator, in cash, their portion of 
the value of the Fund.
Criteria for Initial and Continued Listing
    The Fund will be subject to the criteria in Commentary .07(d) of 
Amex Rule 1202 for initial and continued listing of the Shares. The 
proposed continued listing criteria provides for the delisting or 
removal from listing of the Shares under any of the following 
circumstances:
     Following the initial twelve-month period from the date of 
commencement of trading of the Shares: (i) If the Fund has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of the Shares for 30 or more consecutive 
trading days; (ii) if the Fund has fewer than 50,000 Shares issued and 
outstanding; or (iii) if the market value of all Shares is less than 
$1,000,000;
     If the value of the underlying Index is no longer 
calculated or available on at least a 15-second delayed basis through 
one or more major market data vendors; \39\
---------------------------------------------------------------------------

    \39\ In the event the Index value is no longer calculated or 
disseminated by one or more major market data vendors, the Exchange 
would immediately contact the Commission to discuss measures that 
may be appropriate under the circumstances.

---------------------------------------------------------------------------

[[Page 51253]]

     The Indicative Fund Value is no longer made available on 
at least a 15-second delayed basis through the facilities of the CT; 
\40\
---------------------------------------------------------------------------

    \40\ In the event the Indicative Fund Value is no longer 
calculated or disseminated through the facilities of the CT, the 
Exchange would immediately contact the Commission to discuss 
measures that may be appropriate under the circumstances.
---------------------------------------------------------------------------

     The calculation or dissemination of the NAV is disrupted 
such that the NAV is no longer disseminated to all market participants 
at the same time; \41\
---------------------------------------------------------------------------

    \41\ In the event the NAV is no longer calculated or 
disseminated to all market participants at the same time, the 
Exchange would immediately contact the Commission to discuss 
measures that may be appropriate under the circumstances.
---------------------------------------------------------------------------

     Unless approval is received from the Commission to 
continue to list and trade the Shares after a proposed rule change 
pursuant to Rule 19b-4 under the Act is properly filed by the Exchange, 
(i) more than a temporary disruption exists in connection with the 
pricing of the futures contracts comprising the Index, (ii) a successor 
or substitute index is used by the Managing Owner in connection with 
the Shares, (iii) calculation or dissemination of the NAV is more than 
temporarily disrupted, or (iv) the Index Sponsor substantially changes 
either the Index component selection methodology or weighting 
methodology; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The initial purchaser (the ``Initial Purchaser'') will initially 
purchase and take delivery of 200,000 Shares, which comprises the 
initial Basket, at a purchase price of $25.00 per Share ($5,000,000 per 
Basket) pursuant to an Initial Purchaser Agreement. The Initial 
Purchaser proposes to offer to the public these 200,000 Shares at a 
per-Share offering price that will vary depending on, among other 
factors, the trading price of the Shares on the Amex, the NAV per 
Share, and the supply of and demand for the Shares at the time of the 
offer. Shares offered by the Initial Purchaser at different times may 
have different offering prices. The Initial Purchaser will not receive 
from the Fund, the Managing Owner, or any of their affiliates, any fee 
or other compensation in connection with the sale of the Shares to the 
public. The Fund will not bear any expenses in connection with the 
offering or sales of the Shares composing the initial Baskets. The 
Managing Owner has agreed to indemnify the Initial Purchaser against 
certain liabilities, including liabilities under the Securities Act of 
1933, and to contribute to payments that the Initial Purchaser may be 
required to make in respect thereof.
    The Initial Purchaser will not act as an Authorized Participant 
with respect to the initial Baskets, and its activities with respect to 
the initial Baskets will be distinct from those of an Authorized 
Participant. The Exchange believes that the anticipated minimum number 
of Shares outstanding at the start of trading is sufficient to provide 
adequate market liquidity and to further the Fund's objective to seek 
to provide a simple and cost effective means of accessing the currency 
futures markets. The Exchange represents that, for the initial and 
continued listing, the Shares must be in compliance with Section 803 of 
the Amex Company Guide and Rule 10A-3 under the Act.\42\
---------------------------------------------------------------------------

    \42\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Amex original listing fee applicable to the listing of the Fund 
is $5,000. In addition, the annual listing fee applicable under Section 
141 of the Amex Company Guide will be based upon the year-end aggregate 
number of Shares in all series of the Fund outstanding at the end of 
each calendar year.
Trading Rules
    The Shares are equity securities subject to Amex rules governing 
the trading of equity securities, including, among others, rules 
governing priority, parity and precedence of orders, specialist 
responsibilities and account opening and customer suitability (Amex 
Rule 411). Initial equity margin requirements of 50% will apply to 
transactions in the Shares. Shares will trade on the Amex until 4:15 
p.m. ET each business day and will trade in a minimum price variation 
of $0.01 pursuant to Amex Rule 127. Trading rules pertaining to odd-lot 
trading in Amex equities (Amex Rule 205) will also apply.
    Amex Rule 154, Commentary .04(c), provides that stop and stop limit 
orders to buy or sell a security (other than an option, which is 
covered by Amex Rule 950(f) and Commentary thereto) the price of which 
is derivatively priced based upon another security or index of 
securities, may with the prior approval of a Floor Official, be elected 
by a quotation, as set forth in Commentary .04(c)(i)-(v). The Exchange 
has designated the Shares as eligible for this treatment.\43\
---------------------------------------------------------------------------

    \43\ See Securities Exchange Act Release No. 29063 (April 10, 
1991), 56 FR 15652 (April 17, 1991) (noting the Exchange's 
designation of equity derivative securities as eligible for such 
treatment under Amex Rule 154, Commentary .04(c)).
---------------------------------------------------------------------------

    The Shares will be deemed ``Eligible Securities'', as defined in 
Amex Rule 230, for purposes of the Intermarket Trading System (``ITS'') 
plan and therefore will be subject to the trade-through provisions of 
Amex Rule 236, which require that Amex members avoid initiating trade-
throughs for ITS securities.
    Specialist transactions of the Shares made in connection with the 
creation and redemption of Shares will not be subject to the 
prohibitions of Amex Rule 190.\44\ Unless exemptive or no-action relief 
is available, the Shares will be subject to the short sale rule, Rule 
10a-1 and other rules under the Act.\45\ If exemptive or no-action 
relief is provided, the Exchange will issue a notice detailing the 
terms of the exemption or relief. The Shares will generally be subject 
to the Exchange's stabilization rule, Amex Rule 170, except that 
specialists may buy on ``plus ticks'' and sell on ``minus ticks,'' in 
order to bring the Shares into parity with the underlying currency and/
or futures contract price. Commentary .07(f) to Amex Rule 1202 sets 
forth this limited exception to Amex Rule 170.
---------------------------------------------------------------------------

    \44\ See Commentary .05 to Amex Rule 190.
    \45\ The Fund expects to seek relief, in the near future, from 
the Commission in connection with the trading of the Shares from the 
operation of the short sale rule, Rule 10a7-1 under the Act. If 
granted, the Shares would be exempt from Rule 10a-1 permitting sales 
without regard to the ``tick'' requirements of Rule 10a-1. Rule 10a-
1(a)(1)(i) provides that a short sale of an exchange-traded security 
may not be effected (i) below the last regular-way sale price or 
(ii) at such price unless such price is above the next preceding 
different price at which a sale was reported.
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    The trading of the Shares will be subject to certain conflict of 
interest provisions set forth in Commentary .07(e) to Amex Rule 1202. 
Specifically, Commentary .07(e) provides that the prohibitions in Amex 
Rule 175(c) apply to a specialist in the Shares so that the specialist 
or affiliated person may not act or function as a market maker in an 
underlying asset, related futures contract or option, or any other 
related derivative. An affiliated person of the specialist consistent 
with Amex Rule 193 may be afforded an exemption to act in a market 
making capacity, other than as a specialist in the Shares on another 
market center, in the underlying asset, related futures, or options or 
any other related derivative. Commentary .07(e) further provides that 
an approved person of an equity specialist that has established and 
obtained Exchange approval for procedures restricting the flow of 
material, non-public market information between itself and the

[[Page 51254]]

specialist member organization, and any member, officer, or employee 
associated therewith, may act in a market making capacity, other than 
as a specialist in the Shares on another market center, in the 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives.
    Commentary .07(e) to Amex Rule 1202 also ensures that specialists 
handling the Shares provide the Exchange with all the necessary 
information relating to their trading in physical assets or 
commodities, related futures contracts and options thereon, or any 
other derivative. As a general matter, the Exchange has regulatory 
jurisdiction over its members, member organizations, and approved 
persons of a member organization. The Exchange also has regulatory 
jurisdiction over any person or entity controlling a member 
organization as well as a subsidiary or affiliate of a member 
organization that is in the securities business. A subsidiary or 
affiliate of a member organization that does business only in 
commodities or futures contracts would not be subject to Exchange 
jurisdiction, but the Exchange could obtain information regarding the 
activities of such subsidiary or affiliate through surveillance sharing 
agreements with regulatory organizations of which such subsidiary or 
affiliate is a member.
Trading Halts
    Prior to the commencement of trading, the Exchange will issue an 
Information Circular (described below) to members informing them of, 
among other things, Exchange policies regarding trading halts in the 
Shares. First, the circular will advise that trading will be halted in 
the event the market volatility trading halt parameters set forth in 
Amex Rule 117 have been reached. Second, the circular will advise that, 
in addition to the parameters set forth in Amex Rule 117, the Exchange 
will halt trading in the Shares if trading in the underlying related 
futures contract(s) is halted or suspended. Third, with respect to a 
halt in trading that is not specified above, the Exchange may also 
consider other relevant factors and the existence of unusual conditions 
or circumstances that may be detrimental to the maintenance of a fair 
and orderly market. The Exchange will halt trading in the Shares if the 
value of the Index is no longer calculated or available on at least a 
fifteen (15) second basis through one or more major market data vendors 
during the time the Shares trade on Amex, or if the Indicative Fund 
Value per Share updated at least every fifteen (15) seconds is no 
longer calculated or available the facilities of the CT, or if the NAV 
is no longer calculated or disseminated for the benefit of all market 
participants at the same time.\46\
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    \46\ See supra notes 39-41 and accompanying text.
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Suitability
    The Information Circular (described below) will inform members and 
member organizations of the characteristics of the Fund and of 
applicable Exchange rules, as well as of the requirements of Amex Rule 
411 (Duty to Know and Approve Customers).
    The Exchange notes that pursuant to Amex Rule 411, members and 
member organizations are required in connection with recommending 
transactions in the Shares to have a reasonable basis to believe that a 
customer is suitable for the particular investment given reasonable 
inquiry concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such member.
Information Circular
    The Amex will distribute an Information Circular to its members in 
connection with the trading of the Shares. The Circular, will discuss 
the special characteristics and risks of trading this type of security, 
such as currency fluctuation risk. Specifically, the Circular, among 
other things, will discuss what the Shares are, how a Basket is created 
and redeemed, applicable Amex rules, dissemination information, trading 
information, and applicable suitability rules. The Circular will also 
explain that the Fund is subject to various fees and expenses described 
in the Registration Statement. The Circular will also reference the 
fact that the CFTC has regulatory jurisdiction over the trading of 
futures contracts.
    The Circular will also notify members and member organizations 
about the procedures for purchases and redemptions of Shares in 
Baskets, and that Shares are not individually redeemable but are 
redeemable only in one or more Baskets. The Circular will advise 
members of their suitability obligations with respect to recommended 
transactions to customers in the Shares. The Circular will also discuss 
any relief, if granted, by the Commission or the staff from any rules 
under the Act.
    Additionally, the Circular will disclose that the NAV for Shares 
will be calculated shortly after 4 p.m. ET each trading day and that 
information about the Shares and the Index will be publicly available 
on the Internet Web site of Amex and the Fund. In the Information 
Circular, the Exchange will inform members and member organizations, 
prior to commencement of trading, of the prospectus delivery 
requirements applicable to the Fund. The Exchange notes that investors 
purchasing Shares directly from the Fund (in exchange for cash) will 
receive a prospectus. Amex members purchasing Shares from the Trust for 
resale to investors will deliver a prospectus to such investors. Also, 
in the Information Circular, Amex will inform members and member 
organizations that procedures for purchases and redemptions of Shares 
in Baskets are described in the Prospectus and that Shares are not 
individually redeemable but are redeemable by Basket or multiples 
thereof and that individual shareholders may only redeem through an 
Authorized Participant, not from the Fund.
Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares and to deter and 
detect violations of Amex rules. Specifically, Amex will rely on its 
existing surveillance procedures governing Index Fund Shares. Amex 
represents that its surveillance procedures for the Shares will be 
similar to those used for other TIRs (such as the Currency Trust Shares 
and the DB Commodity Index Tracking Fund) and exchange-traded funds and 
will incorporate and rely upon existing Amex surveillance procedures 
governing options and equities. The Exchange also notes that the CME is 
a member of the Intermarket Surveillance Group. As a result, the 
Exchange asserts that market surveillance information is available from 
the CME, if necessary, due to regulatory concerns that may arise in 
connection with the CME futures.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6 of the Act,\47\ in general, and furthers the 
objectives of section 6(b)(5),\48\ in particular, in that it is 
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, and to remove impediments to and perfect the mechanism of a 
free and

[[Page 51255]]

open market and a national market system.
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    \47\ 15 U.S.C. 78f.
    \48\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    The Exchange did not receive any 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 Amex consents, the Commission will:
    (A) By order approve such 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, as amended, at the end of a 15-day comment 
period.\49\
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    \49\ Amex has requested accelerated approval of this proposed 
rule change, as amended, prior to the 30th day after the date of 
publication of the notice of the filing thereof, following the 
conclusion of a 15-day comment period.
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-Amex-2006-44 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2006-44. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all 

written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of the filing 
also will be available for inspection and copying at the principal 
office of the Exchange. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-Amex-2006-44 and should be submitted on or before September 19, 
2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\50\
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    \50\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-14304 Filed 8-28-06; 8:45 am]

BILLING CODE 8010-01-P