Document ID: SEC-2006-0709-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-06-01T04:00Z

[Federal Register: June 1, 2006 (Volume 71, Number 105)]
[Notices]               
[Page 31232-31234]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jn06-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53858; File No. SR-Amex-2006-53]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the DB Commodity Index Tracking Fund

May 24, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 23, 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 and 
II below, which Items have been prepared by the Exchange. The Amex 
filed the proposed rule change pursuant to Section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is

[[Page 31233]]

publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise the manner in which the Deutsche 
Bank Liquid Commodity IndexTM--Excess Return (the ``DBLCI'' 
or ``Index'') is maintained in connection with the listing and trading 
of the DB Commodity Index Tracking Fund (the ``Trust'' or ``Fund''). 
The Commission previously approved the listing and trading of the 
shares of the Fund on the Exchange.\5\ The Exchange has designated this 
proposal as non-controversial and has requested that the Commission 
waive the 30-day operative delay contained in Rule 19b-4(f)(6)(iii) 
under the Act.\6\ The text of the proposed rule change is available on 
the Amex's Web site (http://www.amex.com), at the Amex's Office of the 

Secretary, and at the Commission's Public Reference Room.
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    \5\ 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).
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
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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. The Amex 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
    The purpose of the proposal is to clarify the manner in which the 
DBLCI is maintained. In particular, the proposal seeks to provide that 
the replacement of expiring futures contracts will be based on 
``Optimal Yield'' roll rules for the DBLCI, which are described in 
detail below. The effect of this change will be to maximize the 
benefits of rolling in backwardated \7\ markets and minimize the loss 
from rolling in markets in contango.\8\ The Exchange proposes that the 
proposed change be operative June 1, 2006.
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    \7\ ``Backwardation'' refers to a condition in which commodity 
deliveries in the near future have a higher price than those made 
later on. This occurs when demand for the commodity is greater in 
the near term.
    \8\ ``Contango'' refers to a condition in which distant delivery 
prices for futures exceed spot prices, often due to the costs of 
storing and insuring the underlying commodity.
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    The Exchange believes that adoption of this change to futures 
replacement will mitigate losses associated with contango conditions 
and maximize gains associated with backwardated conditions, thereby 
benefiting investors.\9\ A contango condition erodes investor returns/
yields because the price of the futures contract being sold, i.e., the 
nearby futures contract, is less than the price of the futures contract 
being purchased, i.e., a futures contract expiring in a later month 
than the nearby futures contract. Conversely, a backwardated condition 
benefits investors by increasing returns/yields because the price of 
the futures contract being sold, i.e., the nearby futures contract, is 
greater than the price of the futures contract being purchased, i.e., a 
futures contract expiring in a later month than the nearby futures 
contract.
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    \9\ A contango market will tend to cause a drag on the Index 
while a backwardated market will tend to cause a push on the Index.
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    Currently, the expiring futures contracts are replaced monthly 
(other than in November) during the first week of the month in the case 
of futures contracts relating to crude oil and heating oil and annually 
in November in the case of futures contracts relating to aluminum, 
gold, corn and wheat. Crude oil and heating oil futures contracts are 
always replaced with the contract expiring in the next month; aluminum, 
gold, corn and wheat contracts are always replaced with a contract 
expiring in one year. The Index Sponsor and the Exchange believe that 
instituting ``Optimal Yield'' roll rules for the Index futures 
contracts, which require the Index Sponsor to replace expiring 
contracts in the Index with the highest yielding or ``optimal'' futures 
contract that will expire in no more than thirteen (13) months, will 
provide greater flexibility for the Index Sponsor to reduce the effects 
of contango conditions and increase the benefits of backwardation for 
the benefit of investors and the marketplace.
    Under this proposal, an existing contract must be replaced with a 
longer-dated contract if the existing contract is within a 
predetermined number of months of its expiration depending on the 
particular commodity and based on the historical liquidity of the 
particular commodity as it approached expiration. The new futures 
contract will be the contract with the maximum implied roll yield over 
the next 13 months. The maximum implied roll yield is determined by 
inputting the prices of the contracts expiring in future months and the 
price of the existing contract into a formula that compares the prices 
and accounts for the time value associated with those prices based on 
the time-to-expiration of each contract. If two (2) contracts for a 
particular commodity have the same maximum implied roll yield, the 
contract with the maximum yield and minimum time to expiration will be 
selected. Once the contract is selected, the monthly index roll will 
unwind the old futures contract and enter a position in the new 
contract. This will occur between the 2nd and 6th business days of the 
month.
    The Exchange in this proposal solely seeks to permit the listing 
and trading of the shares of the Fund based on the revised Index 
replacement mechanism. This revision will be fully disclosed to the 
marketplace and investors through a regulatory filing by the Fund, as 
well as information on the Fund's Web site at http://www.dbcfund.db.com.

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, protect investors and the public 
interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public

[[Page 31234]]

interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest.
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    \14\ 17 CFR 240.19b-4(f)(6)(iii). As required by Rule 19b-
4(f)(6)(iii), the Amex provided the Commission with written notice 
of its intent to file this proposed rule change, along with a brief 
description and text of the proposed change, at least five business 
days prior to the date of filing of the proposed rule change.
    \15\ Id.
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    The Amex has requested that the Commission waive the 30-day 
operative delay so that the proposed rule change is operative on June 
1, 2006. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because the proposal seeks to change the manner in which 
futures contracts comprising the DBLCI are replaced or ``rolled'' so 
that the effects of contango are reduced while the benefits of 
backwardation are increased to the advantage of investors and the 
marketplace. For this reason, the Commission designates the proposal to 
be operative on June 1, 2006, as requested by the Exchange.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\17\
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    \17\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the 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-2006-53 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-2006-53. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the 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-2006-53 and should be submitted on or before June 
22, 2006.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E6-8438 Filed 5-31-06; 8:45 am]

BILLING CODE 8010-01-P