[Federal Register: April 24, 2006 (Volume 71, Number 78)]
[Notices]
[Page 21074-21087]
[DOCID:fr24ap06-110]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53659; File No. SR-NYSE-2006-17]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To
List and Trade Shares of the iShares GSCI Commodity Indexed Trust Under
New Rules 1300B and 1301B, et seq.

April 17, 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 March 7, 2006, the New York Stock Exchange LLC (``NYSE'' 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 the NYSE. On March 24,
2006, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ The Commission is publishing this notice to solicit comments
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the NYSE made some technical and
clarifying changes. In addition, the Exchange added Supplementary
Material .10 to its proposed Rule 1301B, applying the provisions of
its proposed Rules 1300B(b) and 1301B to certain securities listed
on the Exchange pursuant to section 703.19 (``Other Securities'') of
the NYSE Listed Company Manual, in addition to the securities in
this proposal. Specifically, NYSE Rules 1300B(b) and 1301B would
apply to securities listed under section 703.19 where the price of
such securities is based in whole or part on the price of a
commodity or commodities, a commodities index, or any futures
contracts or other derivatives based thereon. Examples of the
securities to which these securities will apply are the subjects of
File No. SR-NYSE-2006-16 (proposal to list and trade Index-Linked
Securities of Barclays Bank PLC (``Notes'') linked to the
performance of the Dow Jones-AIG Commodity Index Total Return
TM and File No. SR-NYSE-2006-20 (proposal to list and
trade Notes linked to the performance of GSCI Total Return Index).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The NYSE proposes to list and trade under new NYSE Rules 1300B, et
seq. shares (``Commodity Trust Shares'' or ``Shares'') of the
iShares[supreg] GSCI[supreg] Commodity--Indexed Trust (``Trust''),
which will issue units of beneficial interest representing fractional
undivided beneficial interests in the net assets of the Trust. NYSE
Rules 1300B and 1301B are set forth below, with new text underlined:

Rule 1300B

Commodity Trust Shares

    (a) The provisions of this Rule 1300B series apply only to
Commodity Trust Shares. The term ``Commodity Trust Shares'' as used in
this Rule and in Rule 1301B means a security that (a) is issued by a
trust (``Trust'') which (i) is a commodity pool that is managed by a
commodity pool operator registered as such with the Commodity Futures
Trading Commission, and (ii) which holds positions in futures contracts
on a specified commodity index, or interests in a commodity pool which,
in turn, holds such positions; (b) when aggregated in some specified
minimum number may be surrendered to the Trust by the beneficial owner
to receive positions in futures contracts on a specified index and cash
or short term securities. The term ``futures contract'' is commonly
known as a ``contract of sale of a commodity for future delivery'' set
forth in section 2(a) of the Commodity Exchange Act. While Commodity
Trust Shares are not technically Investment Company Units and thus are
not covered by Rule 1100, all other rules that reference ``Investment
Company Units,'' as defined and used in Para. 703.16 of the Listed
Company Manual, including, but not limited to Rules 13, 36.30, 98, 104,
460.10, 1002, and 1005 shall also apply to Commodity Trust Shares. When
these rules reference Investment Company Units, the word ``index'' (or
derivative or similar words) will be deemed to be the applicable
commodity index and the word ``security'' (or derivative or similar
words) will be deemed to be ``Commodity Trust Shares''.
    (b) As is the case with Investment Company Units, paragraph (m) of
the Guidelines to Rule 105 shall also apply to Commodity Trust Shares.
Specifically, Rule 105(m) shall be deemed to prohibit an equity
specialist, his member organization, other member, allied member or
approved person in such member organization or officer or employee
thereof from acting as a market maker or functioning in any capacity
involving market-making responsibilities in the physical commodities
included in, or options, futures or options on futures on, the index
underlying an issue of Commodity

Trust Shares, or any other derivatives based on such index or based on
any commodity included in such index. However, an approved person of an
equity specialist entitled to an exemption from Rule 105(m) under Rule
98 may act in a market making capacity, other than as a specialist in
the same issue of Commodity Trust Shares in another market center, in
physical commodities included in, or options, futures or options on
futures on, the index underlying an issue of Commodity Trust Shares, or
any other derivatives based on such index or based on any commodity
included in such index.
    (c) Except to the extent that specific provisions in this Rule
govern, or unless the context otherwise requires, the provisions of all
Exchange Rules and policies shall be applicable to the trading of
Commodity Trust Shares on the Exchange. Pursuant to Exchange Rule 3
(``Security''), Commodity Trust Shares are included within the
definition of ``security'' or ``securities'' as those terms are used in
the rules of the Exchange.

Rule 1301B

Commodity Trust Shares: Securities Accounts and Orders of Specialists

    (a) The member organization acting as specialist in Commodity Trust
Shares is obligated to conduct all trading in the Shares in its
specialist account, subject only to the ability to have one or more
investment accounts, all of which must be reported to the Exchange.
(See Rules 104.12 and 104.13.) In addition, the member organization
acting as specialist in Commodity Trust Shares must file with the
Exchange in a manner prescribed by the Exchange and keep current a list
identifying all accounts for trading in the physical commodities
included in, or options, futures or options on futures on, an index
underlying an issue of Commodity Trust Shares in which the member
organization acts as specialist, or any other derivatives based on such
index or based on any commodity included in such index, which the
member organization acting as specialist may have or over which it may
exercise investment discretion. No member organization acting as
specialist in Commodity Trust Shares shall trade in physical
commodities included in, or options, futures or options on futures on,
an index underlying an issue of Commodity Trust Shares in which the
member organization acts as specialist, or any other derivatives based
on such index or based on any commodity included in such index, in an
account in which a member organization acting as specialist, directly
or indirectly, controls trading activities, or has a direct interest in
the profits or losses thereof, which has not been reported to the
Exchange as required hereby.
    (b) In addition to the existing obligations under Exchange rules
regarding the production of books and records (see, e.g., Rule
476(a)(11)), the member organization acting as specialist in Commodity
Trust Shares shall make available to the Exchange such books, records
or other information pertaining to transactions by such entity or any
member, allied member, approved person, registered or non-registered
employee affiliated with such entity for its or their own accounts in
options, futures or options on futures on, an index underlying an issue
of Commodity Trust Shares in which the member organization acts as
specialist; or in any commodity included in such index; or in any other
derivatives based on such index or based on any commodity included in
such index, as may be requested by the Exchange.
    (c) In connection with trading any physical commodity included in,
or options, futures or options on futures on, an index underlying an
issue of Commodity Trust Shares in which the member organization acts
as specialist, or any other derivatives based on such index (including
Commodity Trust Shares) or based on any commodity included in such
index, the specialist registered as such in an issue of Commodity Trust
Shares shall not use any material nonpublic information received from
any person associated with a member or employee of such person
regarding trading by such person or employee in the options, futures or
options on futures on an index underlying an issue of Commodity Trust
Shares in which the member organization acts as specialist; or in any
other derivatives on such index; or in any commodity included in such
index or any derivatives on such commodity.
    Supplementary Material:
    .10 The provisions of Rule 1300B (b) and Rule 1301B shall apply to
securities listed on the Exchange pursuant to Section 703.19 (``Other
Securities'') of the Listed Company Manual where the price of such
securities is based in whole or part on the price of (a) a commodity or
commodities, (b) any futures contracts or other derivatives based on a
commodity or commodities; or (c) any index based on either (a) or (b)
above.
* * * * *

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

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

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

1. Purpose
    The Exchange proposes to list and trade Commodity Trust Shares
under new NYSE Rules 1300B et seq. The Trust, a Delaware statutory
trust, will issue Shares that represent fractional undivided beneficial
interests in its net assets. Substantially all of the assets of the
Trust consist of its holdings of the limited liability company
interests of a commodity pool (``Investing Pool Interests''), which are
the only securities in which the Trust may invest. That commodity pool,
iShares[supreg] GSCI Commodity--Indexed Investing Pool LLC (``Investing
Pool''), holds long positions in futures contracts on the GSCI Excess
Return Index (``CERFs''), which are listed on the Chicago Mercantile
Exchange (``CME''), and will post margin in the form of cash or short-
term securities to collateralize these futures positions. According to
the Trust's registration statement,\4\ it is the objective of the Trust
that the performance of the Shares will correspond generally to the
performance of the GSCI Total Return Index (``Index'') before payment
of the Trust's and the Investing Pool's expenses and liabilities. The
Trust and the Investing Pool are each commodity pools managed by a
commodity pool operator registered as such with the Commodity Futures
Trading Commission (``CFTC''). Neither the Trust nor the Investing Pool
is an investment company registered under the Investment Company Act of
1940 (``Investment Company Act'').
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    \4\ The sponsor of the Trust (``Sponsor''), Barclays Global
Investors International, Inc., on behalf of the Trust, filed the
Form S-1 (the ``Registration Statement'') on July 22, 2005, as
amended. See Registration No. 333-126810.
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    The Shares are intended to constitute a relatively cost-effective
means of achieving investment exposure to the

performance of the Index, which is intended to reflect the performance
of a diversified group of commodities. Although the Shares will not be
the exact equivalent of an investment in the underlying futures
contracts and Treasury securities represented by the Index, the Shares
are intended to provide investors with an alternative way of
participating in the commodities market.

a. The Sponsor and Trustee

    The Sponsor's primary business function is to act as Sponsor and
commodity pool operator of the Trust and manager of the Investing Pool
(``Manager''), as discussed below.\5\ The advisor to the Investing Pool
(``Advisor'') is Barclays Global Fund Advisors, a California
corporation and an indirect subsidiary of Barclays Bank PLC.
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    \5\ Barclays Global Investors International, Inc. is a commodity
pool operator registered with the CFTC.
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    As Manager, Barclays Global Investors International, Inc. will
serve as commodity pool operator of the Investing Pool and be
responsible for its administration. The Manager will arrange for and
pay the costs of organizing the Investing Pool. The Manager has
delegated some of its responsibilities for administering the Investing
Pool to the Administrator, Investors Bank & Trust Company, which in
turn, has employed the Investing Pool Administrator and the Tax
Administrator (Pricewaterhouse Coopers) to maintain various records on
behalf of the Investing Pool.
    The trustee of the Trust (``Trustee'') is Barclays Global
Investors, N.A., a national banking association affiliated with the
Sponsor. The Trustee is responsible for the day-to-day administration
of the Trust. Day-to-day administration includes: (i) Processing orders
for the creation and redemption of Baskets (as described below, with
each Basket an aggregation of 50,000 Shares); (ii) coordinating with
the Manager of the Investing Pool the receipt and delivery of
consideration transferred to, or by, the Trust in connection with each
issuance and redemption of Baskets; and (iii) calculating the net asset
value of the Trust on each Business Day.\6\ The Trustee has delegated
these responsibilities to the Trust Administrator, Investors Bank &
Trust Company, a banking corporation that is not affiliated with the
Sponsor or the Trustee.\7\
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    \6\ The Trust Registration Statement defines ``Business Day'' as
any day (1) on which none of the following occurs: (a) The NYSE is
closed for regular trading, (d) the CME is closed for regular
trading, or (c) the Federal Reserve transfer system is closed for
cash wire transfers, or (2) the Trustee determines that it is able
to conduct business.
    \7\ Except as otherwise specifically noted, the information
provided in this proposed rule filing relating to the Trust and the
Shares, commodities markets, and related information is based
entirely on information included in the Registration Statement.
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b. The Investing Pool

    The Investing Pool will hold long positions in CERFs, which are
cash-settled futures contracts listed on the CME that have a term of
approximately five years after listing and whose settlement at
expiration is based on the value of the GSCI Excess Return Index
(``GSCI-ER'') at that time. The Investing Pool will also earn interest
on the assets used to collateralize its holdings of CERFs. Trading on
the CME Globex electronic trading platform of CERFs commenced effective
March 12, 2006 for trade date March 13, 2006.
    Each CERF is a contract that provides for cash settlement, at
expiration, based upon the final settlement value of the GSCI-ER at the
expiration of the contract multiplied by a fixed dollar multiplier. The
final settlement value is determined for this purpose. Accordingly, a
position in CERFs provides the holder with the positive or negative
return on the GSCI-ER during the period in which the position is held.
On a daily basis, most market participants with positions in CERFs are
obligated to pay, or entitled to receive, cash (known as ``variation
margin'') in an amount equal to the change in the daily settlement
level of the CERF from the preceding trading day's settlement level
(or, initially, the contract price at which the position was entered
into). Specifically, if the daily settlement price of the contract
increases over the previous day's price, the seller of the contract
must pay the difference to the buyer, and if the daily settlement price
is less than the previous day's price, the buyer of the contract must
pay the difference to the seller. The Investing Pool, however, and
certain other categories of investors, will be required to deposit
initial margin equal to 100% of the value of the CERF position at the
time it is established.
    The GSCI-ER is calculated based on the same commodities included in
the Goldman Sachs Commodity Index (``GSCI''), which is a production-
weighted index of the prices of a diversified group of futures
contracts on physical commodities. The GSCI, the GSCI-ER and the Index
are administered, calculated, and published by Goldman, Sachs & Co.
(``Index Sponsor''),\8\ a subsidiary of The Goldman Sachs Group Inc.
The Index Sponsor is a broker-dealer.\9\
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    \8\ Telephone conference between Michael Cavalier, Assistant
General Counsel, NYSE, and Florence Harmon, Senior Special Counsel,
Commission, on April 13, 2006 (``April 13 Telephone Conference'').
    \9\ Id.
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    The GSCI-ER reflects the return of an uncollaterized investment in
the contracts comprising the GSCI, and in addition incorporates the
economic effect of ``rolling'' the contracts included in the GSCI as
they near expiration. ``Rolling'' a futures contract means closing out
a position in an expiring futures contract and establishing an
equivalent position in the contract on the same commodity with the next
expiration date. The Index reflects the return of the GSCI-ER, together
with the return on specified U.S. Treasury securities that are deemed
to have been held to collateralize a hypothetical long position in the
futures contracts comprising the GSCI. If Goldman, Sachs & Co.
(``Goldman Sachs'') ceases to maintain the GSCI-ER, the Trust, through
the Investing Pool, may seek investment results that correspond
generally to the Index by holding a fully-collateralized investment in
a successor index, or an index that, in the opinion of the Manager, is
reasonably similar to the GSCI-ER.\10\
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    \10\ In the event the Trust utilizes any index that is a
successor to or similar to the GSCI-ER or the GSCI Total Return
Index, the Exchange will file a proposed rule change pursuant to
Rule 19b-4 under the Act. Such filing would address, among other
things, the characteristics of the successor or substitute index and
the Exchange's surveillance procedures applicable to such index.
Unless approved for continued trading, the Exchange would commence
delisting proceedings. See ``Continued Listing Criteria,'' infra.
Telephone conference between Michael Cavalier, Assistant General
Counsel, NYSE, and Florence Harmon, Senior Special Counsel,
Commission, on April 10, 2006 (``April 10 Telephone Conference'').
    The Exchange will also file a proposed rule change pursuant to
Rule 19b-4 if GSCI substantially changes either the Index component
selection methodology or the weighting methodology. In addition, the
Exchange will file a proposed rule change pursuant to Rule 19b-4
whenever GSCI adds a new component to the Index using pricing
information from a market with which the Exchange does not have a
previously existing information sharing agreement or switches to
using pricing information from such a market with respect to an
existing component when such component constitutes more than 10% of
the weight of the Index. Unless approved for continued trading, the
Exchange would commence delisting proceedings. See ``Continued
Listing Criteria,'' infra. April 10 Telephone Conference.
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    The Trust, through the Investing Pool, will be a passive investor
in CERFs and the cash or Short-Term Securities \11\ posted as margin to
collateralize the

Investing Pool's CERF positions. Neither the Trust nor the Investing
Pool will engage in any activities designed to obtain a profit from, or
to ameliorate losses caused by, changes in the value of CERFs or
securities posted as margin.
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    \11\ ``Short-Term Securities'' means U.S. Treasury Securities or
other short-term securities and similar securities, in each case
that are eligible as margin deposits under the rules of the CME.
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    The Investing Pool, and some other types of market participants,
will be required to deposit margin with a value equal to 100% of the
value of each CERF position at the time it is established. Those market
participants not subject to the 100% margin requirement are required to
deposit margin generally with a value of 3% to 5% of the established
position. Interest paid on the collateral deposited as margin, net of
expenses, will be reinvested by the Investing Pool or, at the Trustee's
discretion, may be distributed from time to time to the Shareholders.
The Investing Pool's profit or loss on its CERF positions should
correlate with increases and decreases in the value of the GSCI-ER,
although this correlation will not be exact. The interest on the
collateral deposited by the Investing Pool as margin, together with the
returns corresponding to the performance of the GSCI-ER, is expected to
result in a total return for the Investing Pool that corresponds
generally, but is not identical, to the Index. Differences between the
returns of the Investing Pool and the Index may be based on, among
other factors, any differences between the return on the assets used by
the Investing Pool to collateralize its CERF positions and the U.S.
Treasury rate used to calculate the return component of the Index,
timing differences, differences between the weighting of the Investing
Pool's proportion of assets invested in CERFs versus the Index, and the
payment of expenses and liabilities by the Investing Pool. The Trust's
net asset value will reflect the performance of the Investing Pool, its
sole investment.
    The Investing Pool will be managed by the Advisor, which will
invest all of the Investing Pool's assets in long positions in CERFs
and post margin in the form of cash or Short-Term Securities to
collateralize the CERF positions. Any cash that the Investing Pool
accepts as consideration from the Trust for Investing Pool Interests
will be used to purchase additional CERFs, in an amount that the
Advisor determines will enable the Investing Pool to achieve investment
results that correspond with the Index, and to collateralize the CERFs.
According to the Registration Statement, the Advisor will not engage in
any activities designed to obtain a profit from, or to ameliorate
losses caused by, changes in value of any of the commodities
represented by the GSCI or the positions or other assets held by the
Investing Pool.

c. Futures Contracts on the GSCI-ER

    The assets of the Investing Pool will consist of CERFs and cash or
Short-Term Securities posted as margin to collateralize the Investing
Pool's CERF positions. Futures contracts and options on futures
contracts on the GSCI, which does not reflect the excess return
embedded in the GSCI-ER, have been traded on the CME since 1992. CERFs
are listed and traded separately from the GSCI futures contracts and
options on futures contracts.
    CERFs trading is subject to the rules of the CME. According to the
Registration Statement, CERFs trade on GLOBEX, the CME's electronic
trading system, and do not trade through open outcry on the floor of
the CME.\12\ Transactions in CERFs are cleared through the CME clearing
house by the trader's futures commission merchant (``FCM'') acting as
its agent. Under these clearing arrangements, the CME clearing house
becomes the buyer to each member FCM representing a seller of the
contract and the seller to each member FCM representing a buyer of the
contract. As a result of these clearing arrangements, each trader
holding a position in CERFs is subject to the credit risk of the CME
clearing house and the FCM carrying its position in CERFs.
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    \12\ Trading hours for CERFs on GLOBEX will be as follows:
Sunday, 6 p.m. to 2:40 p.m. (next day) (New York time); Monday to
Thursday, 6 p.m. to 2:40 p.m. (next day) and 3 p.m. to 5 p.m. (New
York time).
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    Each CERF is a contract that provides for cash settlement, at
expiration, based upon the final settlement value of the GSCI-ER at the
expiration of the contract, multiplied by a fixed dollar multiplier.
The final settlement value is determined for this purpose on the date
set forth in the Trust prospectus. On a daily basis, most market
participants with positions in CERFs are obligated to pay, or entitled
to receive, cash (known as ``variation margin'') in an amount equal to
the change in the daily settlement level of the CERF from the preceding
trading day's settlement level (or, initially, the contract price at
which the position was entered into). Specifically, if the daily
settlement price of the contract increases over the previous day's
price, the seller of the contract must pay the difference to the buyer,
and if the daily settlement price is less than the previous day's
price, the buyer of the contract must pay the difference to the seller.
    Futures contracts also typically require deposits of initial margin
as well as payments of daily variation margin as the value of the
contracts fluctuate. For most market participants, the initial margin
requirement for CERFs is generally expected to be 3% to 5%. Certain
market participants (known as ``100% margin participants''), however,
will be required to deposit with their FCM initial margin in an amount
equal to 100% of the value of the CERF on the date the position is
established. The FCM, in turn, will be required to deliver to the CME
clearing house initial margin in a specified amount and pledge to the
clearing house, pursuant to a separate custody arrangement, an amount
equal to the remainder of the 100% margin amount posted by 100% margin
participants, either from amounts posted by those 100% margin
participants or from its own assets. The separate custody arrangement
will be either an account with the FCM or a third party custody
account.
    As a result of these arrangements, a 100% margin participant buying
a CERF will be subject to substantially greater initial margin
requirements than other market participants, but will not be required
to pay any additional amounts to its FCM as variation margin if the
value of the CERFs declines. Instead, the FCM will be obligated to make
variation margin payments to the clearinghouse in respect of CERFs held
by 100% margin participants, which it will withdraw from the separate
custody account (and, in turn, from the 100% margin posted by those
participants).
    If the daily settlement price increases, the FCM will receive
variation margin from the clearinghouse for the account of the 100%
margin participant, which it will hold in the separate custody account
for the benefit of 100% margin participants. The buyer will not,
however, be entitled to receive this variation margin from its FCM
(until the liquidation or final settlement of its CERF position). The
buyer will be entitled to receive interest or other income on the
assets it has deposited as margin or that are credited to the custody
account on its behalf from time to time.
    Upon liquidation or settlement of a CERF, a 100% margin participant
will receive from its FCM its initial margin deposit, adjusted for
variation margin paid or received by the FCM with respect to the
contract during the time it was held by the participant (or the
proceeds from liquidation of any investments made with such funds for
the benefit of the participant under the terms of its custody
arrangement with the carrying FCM).
    The 100% margin participants will include any market participant
that is: (i) An investment company registered

under the Investment Company Act; or (ii) an investment fund, commodity
pool, or other similar type of pooled trading vehicle (other than a
pension plan or fund) that is offered to the public pursuant to an
effective registration statement filed under the Securities Act of
1933, regardless of whether it is also registered under the Investment
Company Act , and that has its principal place of business in the
United States.
    The Investing Pool will be a 100% margin participant. The Investing
Pool will satisfy the 100% margin requirement by depositing with the
Clearing FCM cash or Short-Term Securities with a value equal to 100%
of the value of each long position in CERFs.
    According to the Registration Statement, CERFs differ from
traditional futures contracts in another significant respect. In
contrast to other types of futures contracts, which are typically
listed with monthly, bimonthly or quarterly expirations, CERFs will be
listed only with approximately five-year expirations. A buyer or seller
of CERFs will be able to trade CERFs on the market maintained by the
CME and will consequently be able to liquidate its position at any
time, subject to the existence of a liquid market. If a party to a CERF
wishes to hold its position to expiration, however, it will be
necessary to maintain the position for up to five years. According to
the Registration Statement, as a CERF nears expiration, it is
anticipated, but there can be no assurance, that the CME will list an
additional CERF with an approximately five-year expiration.
    Creation and redemption of interests in the Trust, and the
corresponding creation and redemption of interests in the Investing
Pool, will generally be effected through transactions in ``exchanges of
futures for physicals,'' or ``EFPs.'' EFPs involve contemporaneous
transactions in futures contracts and the underlying cash commodity or
a closely related commodity. In a typical EFP, the buyer of the futures
contract sells the underlying commodity to the seller of the futures
contract in exchange for a cash payment reflecting the value of the
commodity and the relationship between the price of the commodity and
the related futures contract. According to the Registration Statement,
in the context of CERFs, CME rules permit the execution of EFPs
consisting of simultaneous purchases (sales) of CERFs and sales
(purchases) of Shares. This mechanism will generally be used by the
Trust in connection with the creation and redemption of Baskets.
Specifically, it is anticipated that an ``Authorized Participant''
(defined below) requesting the creation of additional Baskets typically
will transfer CERFs and cash (or, in the discretion of the Trustee,
Short-Term Securities in lieu of cash) to the Trust in return for
Shares.\13\
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    \13\ Authorized Participants will require access to a
commodities account in connection with creation/redemption activity
of Shares. April 13 Telephone Conference.
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    The Trust will simultaneously contribute to the Investing Pool the
CERFs (and any cash or securities) received from the Authorized
Participant in return for an increase in its Investing Pool Interests.
If an EFP is executed in connection with the redemption of one or more
Baskets, an Authorized Participant will transfer to the Trust the
interests being redeemed and the Trust will transfer to the Authorized
Participant CERFs, cash or Short-Term Securities. In order to obtain
the CERFs, cash or Short-Term Securities to be transferred to the
Authorized Participant, the Trust will redeem an equivalent portion of
its interest in the Investing Pool Interests.

d. The Index and the GSCI-ER

    The Index and the GSCI-ER were established in May of 1991. The
Index reflects the value of an investment in the GSCI-ER together with
a Treasury bill return. The GSCI-ER reflects the returns that are
potentially available through a rolling uncollaterized investment in
the contracts comprising the GSCI.
    Because futures contracts have scheduled expirations, or delivery
months, as one contract nears expiration it becomes necessary to close
out the position in that delivery month and establish a position in the
next available delivery month. This process is referred to as
``rolling'' the position forward. The GSCI-ER is designed to reflect
the return from rolling each contract included in the GSCI in this
manner into the next available delivery month as it nears expiration.
This is accomplished by selling the position in the first delivery
month and purchasing a position of equivalent value in the second
delivery month. If the price of the second contract is lower than the
price of the first contract, the ``rolling'' process results in a
greater quantity of the second contract being acquired for the same
value. Conversely, if the price of the second contract is higher than
the price of the first contract, the ``rolling'' process results in a
smaller quantity of the second contract being acquired for the same
value.
    The GSCI itself is an index on a production-weighted basket of
principal physical commodities that satisfy specified criteria. The
GSCI reflects the level of commodity prices at a given time and is
designed to be a measure of the performance over time of the markets
for these commodities. The commodities represented in the GSCI are
those physical commodities on which active and liquid contracts are
traded on trading facilities in major industrialized countries. The
commodities included in the GSCI are weighted, on a production basis,
to reflect the relative significance (in the view of the Index Sponsor,
in consultation with its Policy Committee described below) of those
commodities to the world economy. The fluctuations in the level of the
GSCI are intended generally to correlate with changes in the prices of
those physical commodities in global markets.
    The Index Sponsor makes the official calculations of the value of
the Index.\14\ At present, this calculation is performed continuously
and is reported on Reuters Page GSCI and is updated on Reuters at least
every fifteen seconds during NYSE trading hours for the Shares and
during business hours on each Business Day on which the offices of
Goldman, Sachs in New York City are open for business. In the event
that the Exchange is open for business on a day that is not a GSCI
Business Day, the Exchange will not permit trading of the Shares on
that day.\15\ The settlement prices for the Index and GSCI-ER are also
reported on Reuters Page GSCI at the end of each GSCI Business Day and
on Bloomberg page GSCIER index.
---------------------------------------------------------------------------

    \14\ Goldman, Sachs & Co., which is a broker/dealer, calculates
the GSCI and GSCI-ER. April 13 Telephone Conference.
    \15\ See ``Calculation of the Index,'' infra.
---------------------------------------------------------------------------

e. The Policy Committee

    The Index Sponsor has established a Policy Committee to assist it
with the operation of the GSCI.\16\ The principal purpose of the Policy
Committee is to advise the Index Sponsor with respect to, among other
things, the calculation of the GSCI, the effectiveness of the GSCI as a
measure of commodity futures market performance and the need for
changes in the composition or the methodology of the GSCI. The Policy
Committee acts solely in an advisory and consultative capacity. All
decisions with respect to the composition,

calculation and operation of the GSCI are made by the Index
Sponsor.\17\
---------------------------------------------------------------------------

    \16\ The GSCI is a separate index from the Index; however, the
value of the Index (and GSCI-ER index) is derived from the GSCI, as
described below. The component selection for the GSCI would
obviously affect the Index and the GSCI-ER. April 13 Telephone
Conference.
    \17\ As mentioned above, Goldman, Sachs & Co., a broker-dealer,
is the Index Sponsor of the GSCI, the GSCI-ER and the Index, and in
that capacity the company calculates those indices. Goldman, Sachs &
Co. has represented to the Trust Sponsor that they: (i) Have or
will, prior to issuance of the Shares, put in place policies
reasonably designed to prevent the use and dissemination by Goldman,
Sachs & Co. employees in violation of applicable laws, rules and
regulations, of material, non-public information relating to changes
in the composition or method of computation or calculation of the
Index; and (ii) periodically check the application of such policies
as they related to Goldman, Sachs & Co. employees directly
responsible for such changes. In addition, the Policy Committee
members are subject to written policies with respect to material,
non-public information. April 13 Telephone Conference.
---------------------------------------------------------------------------

    The Policy Committee generally meets in October of each year. Prior
to the meeting, the Index Sponsor determines the commodities to be
included in the GSCI for the following calendar year and the weighting
factors for each commodity. The Policy Committee's members receive the
proposed composition of the GSCI in advance of the meeting and discuss
the composition at the meeting. The Index Sponsor also consults the
Policy Committee on any other significant matters with respect to the
calculation and operation of the GSCI. The Policy Committee may, if
necessary or practicable, meet at other times during the year as issues
arise that warrant its consideration.
    The Policy Committee currently consists of eight persons, three of
whom are employees of the Index Sponsor or its affiliates and five of
whom are not affiliated with the Index Sponsor.

f. Composition of the GSCI

    Because the value of the Index (which the Shares track) reflects
the futures contracts included in the GSCI, the Exchange describes
below the index methodology for the GSCI.\18\ In order to be included
in the GSCI, a contract must satisfy the following eligibility
criteria:
---------------------------------------------------------------------------

    \18\ Telephone conference between Michael Cavalier, Assistant
General Counsel, NYSE, and Florence Harmon, Senior Special Counsel,
Commission, on April 14, 2006 (``April 14 Telephone Conference'').
---------------------------------------------------------------------------

    (i) The contract must:
    (a) Be in respect of a physical commodity and not a financial
commodity;
    (b) Have a specified expiration or term, or provide in some other
manner for delivery or settlement at a specified time, or within a
specified period, in the future; and
    (c) Be available, at any given point in time, for trading at least
five months prior to its expiration or such other date or time period
specified for delivery or settlement.
    (ii) The commodity must be the subject of a contract that:
    (a) Is denominated in U.S. dollars;
    (b) Is traded on or through an exchange, facility or other
platform, referred to as a ``trading facility,'' that has its principal
place of business or operations in a country that is a member of the
Organization for Economic Cooperation and Development and:
    (1) Makes price quotations generally available to its members or
participants (and, if the Index Sponsor is not such a member or
participant, to the Index Sponsor) in a manner and with a frequency
that is sufficient to provide reasonably reliable indications of the
level of the relevant market at any given point in time;
    (2) Makes reliable trading volume information available to the
Index Sponsor with at least the frequency required by the Index Sponsor
to make the monthly determinations;
    (3) Accepts bids and offers from multiple participants or price
providers; and
    (4) Is accessible by a sufficiently broad range of participants.
    (iii) The price of the relevant contract that is used as a
reference or benchmark by market participants, referred to as the
``daily contract reference price,'' generally must have been available
on a continuous basis for at least two years prior to the proposed date
of inclusion in the GSCI. In appropriate circumstances, however, the
Index Sponsor, in consultation with its Policy Committee, may determine
that a shorter time period is sufficient or that historical daily
contract reference prices for that contract may be derived from daily
contract reference prices for a similar or related contract. The daily
contract reference price may be (but is not required to be) the
settlement price or other similar price published by the relevant
trading facility for purposes of margining transactions or for other
purposes.
    (iv) At and after the time a contract is included in the GSCI, the
daily contract reference price for that contract must be published
between 10 a.m. and 4 p.m., New York time, on each Business Day
relating to that contract by the trading facility on or through which
it is traded and must generally be available to all members of, or
participants in, that trading facility (and, if the Index Sponsor is
not such a member or participant, to the Index Sponsor) on the same day
from the trading facility or through a recognized third-party data
vendor. Such publication must include, at all times, daily contract
reference prices for at least one expiration or settlement date that is
five months or more from the date the determination is made, as well as
for all expiration or settlement dates during that five-month period.
    (v) Volume data with respect to the contract must be available for
at least the three months immediately preceding the date on which the
determination is made.
    (vi) A contract that is not included in the GSCI at the time of
determination and that is based on a commodity that is not represented
in the GSCI at that time must, in order to be added to the GSCI at that
time, have a total dollar value traded, over the relevant period, as
the case may be and annualized, of at least $15 billion. The total
dollar value traded is the dollar value of the total quantity of the
commodity underlying transactions in the relevant contract over the
period for which the calculation is made, based on the average of the
daily contract reference prices on the last day of each month during
the period.
    (vii) A contract that is already included in the GSCI at the time
of determination and that is the only contract on the relevant
commodity included in the GSCI must, in order to continue to be
included in the GSCI after that time, have a total dollar value traded,
over the relevant period, as the case may be and annualized, of at
least $5 billion and at least $10 billion during at least one of the
three most recent annual periods used in making the determination.
    (viii) A contract that is not included in the GSCI at the time of
determination and that is based on a commodity on which there are one
or more contracts already included in the GSCI at that time must, in
order to be added to the GSCI at that time, have a total dollar value
traded, over the relevant period, as the case may be and annualized, of
at least $30 billion.
    (ix) A contract that is already included in the GSCI at the time of
determination and that is based on a commodity on which there are one
or more contracts already included in the GSCI at that time must, in
order to continue to be included in the GSCI after that time, have a
total dollar value traded, over the relevant period, as the case may be
and annualized, of at least $10 billion and at least $20 billion during
at least one of the three most recent annual periods used in making the
determination.
    (x) A contract that is:
    (a) Already included in the GSCI at the time of determination must,
in order to continue to be included after that time, have a reference
percentage dollar weight of at least 0.10%. The ``reference

percentage dollar weight'' of a contract represents the current value
of the quantity of the underlying commodity that is included in the
Index at a given time. This figure is determined by multiplying the
contract production weight of a contract, or ``CPW,'' by the average of
its daily contract reference prices on the last day of each month
during the relevant period. These amounts are summed for all contracts
included in the GSCI and each contract's percentage of the total is
then determined. The CPW of a contract is its weight in the Index.
    (b) Not included in the GSCI at the time of determination must, in
order to be added to the GSCI at that time, have a reference percentage
dollar weight of at least 0.75%.
    (xi) In the event that two or more contracts on the same commodity
satisfy the eligibility criteria:
    (a) Such contracts will be included in the GSCI in the order of
their respective total quantity traded during the relevant period
(determined as the total quantity of the commodity underlying
transactions in the relevant contract), with the contract having the
highest total quantity traded being included first, provided that no
further contracts will be included if such inclusion would result in
the portion of the GSCI attributable to that commodity exceeding a
particular level.
    (b) If additional contracts could be included with respect to
several commodities at the same time, that procedure is first applied
with respect to the commodity that has the smallest portion of the GSCI
attributable to it at the time of determination. Subject to the other
eligibility criteria described above, the contract with the highest
total quantity traded on that commodity will be included. Before any
additional contracts on the same commodity or on any other commodity
are included, the portion of the GSCI attributable to all commodities
is recalculated. The selection procedure described above is then
repeated with respect to the contracts on the commodity that then has
the smallest portion of the GSCI attributable to it.
    Beginning in 2007, in order for a contract to be included in the
GSCI: (i) The trading facility in which the contract is traded must
allow market participants to execute spread transactions, through a
single order entry, between the pairs of contract expirations included
in the GSCI that at any given point in time will be involved in the
rolls to be effected in the next three roll periods; and (ii) a
contract that is not included in the GSCI at the time of determination
must, in order to be added to the GSCI at that time, have a reference
percentage dollar weight of at least 1.00%.
    The contracts currently included in the GSCI are all futures
contracts traded on the New York Mercantile Exchange, Inc. (``NYM''),
the ICE Futures (``ICE''), the CME, the Chicago Board of Trade
(``CBT''), the Coffee, Sugar & Cocoa Exchange, Inc. (``CSC''), the New
York Cotton Exchange (``NYC''), the Kansas City Board of Trade
(``KBT''), the COMEX Division of the New York Mercantile Exchange, Inc.
(``CMX'') and the London Metal Exchange (``LME'').
    The futures contracts currently included in the GSCI, their
percentage dollar weights (as of January 20, 2006), their market
symbols and the exchanges on which they are traded, trading hours (New
York time), Average Daily Trading Volume (``ADTV'') for 2005, and units
per contract are as follows:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        PDW 01/20/06                                                             ADTV
              Commodity                   (percent)          Market symbol            Trading Facility        (contracts)       Units  (per contract
--------------------------------------------------------------------------------------------------------------------------------------------------------
Crude Oil............................           30.05  CL.......................  NYM.....................         237,535  1,000 bbls
Brent Crude Oil......................           13.81  LCO......................  ICE.....................         114,628  1,000 gal
Natural Gas..........................           10.30  NG.......................  NYM.....................          76,139  10,000 gal
Heating Oil..........................            8.16  HO.......................  NYM.....................          76,139  10,000 gal
Gasoline.............................            7.84  HU.......................  NYM.....................          52,406  42,000 gal
Gas Oil..............................            4.41  LGO......................  ICE.....................          41,561  100 Mtons
Live Cattle..........................            2.88  LC.......................  CME.....................          23,173  40,000 lbs
Wheat................................            2.47  W........................  CBT.....................          38,838  5,000 bushels
Aluminum.............................            2.88  IA.......................  LME.....................         120,568  25 Mtons
Corn.................................            2.46  C........................  CBT.....................         101,308  5,000 bushels
Copper...............................            2.37  IC.......................  LME.....................          76,116  25 Mtons
Soybeans.............................            1.77  S........................  CBT.....................          73,957  5,000 bushels
Lean Hogs............................            2.00  LH.......................  CME.....................          16,449   40,000 lbs
Gold.................................            1.73   GC......................  CMX.....................          63,232   100 oz
Sugar................................            1.30  SB.......................  CSC.....................          51,822   112,000 lbs
Cotton...............................            0.99  CT.......................  NYC.....................          15,335   50,000 lbs
Red Wheat............................            0.90  KW.......................  KBT.....................          14,613   5,000 bushels
Coffee...............................            0.80  KC.......................  CSC.....................          15,888   37,500 lbs
Standard Lead........................            0.29  IL.......................  LME.....................          16,128  25 Mtons
Feeder Cattle........................            0.78  FC.......................  CME.....................           4,042  40,000 lbs
Zinc.................................            0.54  IZ.......................  LME.....................          42,070  25 Mtons
Primary Nickel.......................            0.82  IN.......................  LME.....................          13,812   6 Mtons
Cocoa................................            0.23  CC.......................  CSC.....................          10,291  10 Mtons
Silver...............................            0.20  SI.......................  CMX.....................          22,017  5,000 oz
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The hours of trading (New York time) of the commodities in the
chart above are as follows:

----------------------------------------------------------------------------------------------------------------
              Commodity                       Trading facility                  Trading hours (NY time)
----------------------------------------------------------------------------------------------------------------
Crude Oil...........................  NYM............................  10 am-2:30 pm.
Brent Crude Oil.....................  ICE............................  8 pm-5:00 pm (next day).
Natural Gas.........................  NYM............................  10 am-2:30 pm.
Heating Oil.........................  NYM............................  10:05 am-2:30 pm.

Gasoline............................  NYM............................  10:05 am-2:30 pm.
Gas Oil.............................  ICE............................  8 pm-5:00 pm (next day).
Live Cattle.........................  CME............................  10:05 am-2 pm.
Wheat...............................  CBT............................  10:30 am-2:15 pm.
Aluminum............................  LME............................  6:55 am-12 pm.
Corn................................  CBT............................  10:30 am-2:15 pm.
Copper..............................  LME............................  7 am-12 pm.
Soybeans............................  CBT............................  10:30 am-2:15 pm.
Lean Hogs...........................  CME............................  9:10 am-1 pm.
Gold................................  CMX............................  8:20 am-1:30 pm.
Sugar...............................  CSC............................  9 am-12 pm.
Cotton..............................  NYC............................  10:30 am-2:15 pm.
Red Wheat...........................  KBT............................  10:30 am-2:15 pm.
Coffee..............................  CSC............................  9:15 am-12:30 pm.
Standard Lead.......................  LME............................  7:05 am-11:50 am.
Feeder Cattle.......................  CME............................  10:05 am-2 pm.
Zinc................................  LME............................  7:10 am-11:55 am.
Primary Nickel......................  LME............................  7:10 am-11:55 am.
Cocoa...............................  CSC............................  8 am-11:50 am.
Silver..............................  CMX............................  8:25 am-1:25 pm.
----------------------------------------------------------------------------------------------------------------

    The quantity of each of the contracts included in the GSCI is
determined on the basis of a five-year average, referred to as the
``world production average,'' of the production quantity of the
underlying commodity as published by the United Nations Statistical
Yearbook, the Industrial Commodity Statistics Yearbook and other
official sources. However, if a commodity is primarily a regional
commodity, based on its production, use, pricing, transportation or
other factors, the Index Sponsor, in consultation with its Policy
Committee, may calculate the weight of that commodity based on
regional, rather than world, production data. At present, natural gas
is the only commodity the weights of which are calculated on the basis
of regional production data, with the relevant region defined as North
America.
    The five-year moving average is updated annually for each commodity
included in the GSCI, based on the most recent five-year period (ending
approximately two years prior to the date of calculation and moving
backwards) for which complete data for all commodities is available.
The CPWs used in calculating the GSCI are derived from world or
regional production averages, as applicable, of the relevant
commodities, and are calculated based on the total quantity traded for
the relevant contract and the world or regional production average, as
applicable, of the underlying commodity. However, if the volume of
trading in the relevant contract, as a multiple of the production
levels of the commodity, is below specified thresholds, the CPW of the
contract is reduced until the threshold is satisfied. This is designed
to ensure that trading in each contract is sufficiently liquid relative
to the production of the commodity.
    In addition, the Index Sponsor performs this calculation on a
monthly basis and, if the multiple of any contract is below the
prescribed threshold, the composition of the GSCI is reevaluated, based
on the criteria and weighting procedure described above. This procedure
is undertaken to allow the GSCI to shift from contracts that have lost
substantial liquidity into more liquid contracts during the course of a
given year. As a result, it is possible that the composition or
weighting of the GSCI will change on one or more of these monthly
evaluation dates. The likely circumstances under which the Index
Sponsor would be expected to change the composition of the Index during
a given year, however, are: (i) A substantial shift of liquidity away
from a contract included in the Index as described above; or (ii) an
emergency, such as a natural disaster or act of war or terrorism, that
causes trading in a particular contract to cease permanently or for an
extended period of time. In either event, the Index Sponsor will
consult with the Policy Committee in connection with the changes to be
made and will publish the nature of the changes, through Web sites,
news media or other outlets, with as much prior notice to market
participants as is reasonably practicable. Moreover, regardless of
whether any changes have occurred during the year, the Index Sponsor
reevaluates the composition of the GSCI, in consultation with its
Policy Committee, at the conclusion of each year, based on the above
criteria. Other commodities that satisfy that criteria, if any, will be
added to the GSCI. Commodities included in the GSCI that no longer
satisfy that criteria, if any, will be deleted.
    The Index Sponsor, in consultation with its Policy Committee, also
determines whether modifications in the selection criteria or the
methodology for determining the composition and weights of and for
calculating the GSCI are necessary or appropriate in order to assure
that the GSCI represents a measure of commodity market performance. The
Index Sponsor has the discretion to make any such modifications, in
consultation with its Policy Committee.

g. Total Dollar Weight of the GSCI

    The total dollar weight of the GSCI is the sum of the dollar weight
of each of the underlying commodities. The dollar weight of each such
commodity on any given day is equal to:
     The daily contract reference price;
     Multiplied by the appropriate CPW; and
     During a roll period, the appropriate ``roll weights''
(discussed below).
    The daily contract reference price used in calculating the dollar
weight of each commodity on any given day is the most recent daily
contract reference price made available by the relevant trading
facility, except that the daily contract reference price for the most
recent prior day will be used if the exchange is closed or otherwise
fails to publish a daily contract reference price on that day. In
addition, if the trading facility fails to make a daily contract
reference price available or publishes a daily contract reference price
that, in the reasonable judgment of the Index Sponsor, reflects
manifest error, the relevant calculation will be delayed until the
price is made available or

corrected; provided, that, if the price is not made available or
corrected by 4 p.m. New York time, the Index Sponsor may, if it deems
that action to be appropriate under the circumstances, determine the
appropriate daily contract reference price for the applicable futures
contract in its reasonable judgment for purposes of the relevant GSCI
calculation.\19\
---------------------------------------------------------------------------

    \19\ If such actions by the Index Sponsor are implemented on
more than a temporary basis, the Exchange will contact the
Commission Staff and, as necessary, file a proposed rule change
pursuant to Rule 19b-4 seeking Commission approval to continue to
trade the Shares. Unless approved for continued trading, the
Exchange would commence delisting proceedings. See ``Continued
Listing Criteria,'' infra; April 10 Telephone Conference.
---------------------------------------------------------------------------

h. Calculation of the GSCI-ER

    The value of the GSCI-ER on any GSCI Business Day is equal to the
product of: (i) The value of the GSCI-ER on the immediately preceding
GSCI Business Day multiplied by (ii) one plus the sum of the contract
daily return \20\ on the GSCI Business Day on which the calculation is
made. The value of the GSCI-ER has been normalized such that its
hypothetical level on January 2, 1970 was 100.
---------------------------------------------------------------------------

    \20\ The contract daily return on any given day is equal to the
sum, for each of the commodities included in the GSCI, of the
applicable daily contract reference price on the relevant contract
multiplied by the appropriate CPW and the appropriate ``roll
weight,'' divided by the total dollar weight of the GSCI on the
preceding day, minus one.
    The ``roll weight'' of each commodity reflects the fact that the
positions in contracts must be liquidated or rolled forward into
more distant contract expirations as they near expiration. If actual
positions in the relevant markets were rolled forward, the roll
would likely need to take place over a period of days. Since the
GSCI is designed to replicate the performance of actual investments
in the underlying contracts, the rolling process incorporated in the
GSCI also takes place over a period of days at the beginning of each
month, referred to as the ``roll period.'' On each day of the roll
period, the ``roll weights'' of the first nearby contract
expirations on a particular commodity and the more distant contract
expiration into which it is rolled are adjusted, so that the
hypothetical position in the contract on the commodity that is
included in the GSCI is gradually shifted from the first nearby
contract expiration to the more distant contract expiration.
---------------------------------------------------------------------------

i. Calculation of the Index

    The value of the Index on any GSCI Business Day is equal to the
product of: (i) The value of the Index on the immediately preceding
GSCI Business Day multiplied by (ii) one plus the sum of the contract
daily return and the Treasury bill return on the GSCI Business Day on
which the calculation is made, multiplied by (iii) one plus the
Treasury bill return for each non-GSCI Business Day since the
immediately preceding GSCI Business Day. The Treasury bill return is
the return on a hypothetical investment in the GSCI at a rate equal to
the interest rate on a specified U.S. Treasury bill.

j. Valuation of CERFs; Computation of Trust's Net Asset Value

    On each Business Day on which the NYSE is open for regular trading,
as soon as practicable after the close of regular trading of the Shares
on the NYSE (normally, 4:15 p.m., New York time), the Trustee will
determine the net asset value (``NAV'') of the Trust and per share as
of that time.
    The Trustee will value the Trust's assets based upon the
determination by the Manager, which may act through the Investing Pool
Administrator, of the NAV of the Investing Pool. The Manager will
determine the NAV of the Investing Pool as of the same time that the
Trustee determines the NAV of the Trust.
    The Manager will value the Investing Pool's long position in CERFs
on the basis of that day's announced CME settlement price for the CERF.
The value of the Investing Pool's CERF position (including any related
margin) will equal the product of: (i) The number of CERF contracts
owned by the Investing Pool and (ii) the settlement price on the date
of calculation. If there is no announced CME settlement price for the
CERF on a Business Day, the Manager will use the most recently
announced CME settlement price unless the Manager determines that that
price is inappropriate as a basis for evaluation. The daily settlement
price for the CERF is established by the CME shortly after the close of
trading in Chicago at 2:40 p.m. New York time on each trading day.\21\
---------------------------------------------------------------------------

    \21\ April 10 Telephone Conference.
---------------------------------------------------------------------------

    Once the value of the CERFs and interest earned on any assets
posted as margin and any other assets of the Investing Pool has been
determined, the Manager will subtract all accrued expenses and
liabilities of the Investing Pool as of the time of calculation in
order to calculate the net asset value of the Investing Pool. The
Manager, or the Investing Pool Administrator on its behalf, will then
calculate the value of the Trust's Investing Pool Interest and provide
this information to the Trustee.
    Once the value of the Trust's Investing Pool Interests have been
determined and provided to the Trustee, the Trustee will subtract all
accrued expenses and other liabilities of the Trust from the total
value of the assets of the Trust, in each case as of the calculation
time. The resulting amount is the NAV of the Trust. The Trustee will
determine the NAV per Share by dividing the NAV of the Trust by the
number of Shares outstanding at the time the calculation is made.
    The NAV for each Business Day on which the NYSE is open for regular
trading will be distributed through major market data vendors and will
be published online at http://www.iShares.com, or any successor

thereto. The Trust will update the NAV as soon as practicable after
each subsequent NAV is calculated.

k. Creations of Baskets

    The Trust will offer Shares on a continuous basis on each business
day, but only in Baskets consisting of 50,000 Shares. Baskets will be
typically issued only in exchange for an amount of CERFs and cash (or,
in the discretion of the Trustee, Short-Term Securities in lieu of
cash) equal to the Basket Amount for the Business Day on which the
creation order was received by the Trustee. The Basket Amount for a
Business Day will have a per Share value equal to the NAV as of such
day. However, orders received by the Trustee after 2:40 p.m., New York
time, will be treated as received on the next following Business Day.
The Trustee will notify the Authorized Participants of the Basket
Amount on each Business Day prior to the opening of the Exchange.
    Before the Trust will issue any Baskets to an Authorized
Participant, that Authorized Participant must deliver to the Trustee a
written creation order indicating the number of Baskets it intends to
purchase and providing other details with respect to the procedures by
which the Baskets will be transferred. The Trustee will acknowledge the
creation order unless it or the Sponsor decides to refuse the order as
described in the prospectus.
    Upon the transfer of the required consideration of CERFs and cash
(or, in the discretion of the Trustee, Short-Term Securities in lieu of
cash) in the amounts, and to the accounts, specified by the Trustee,
and the Trustee's transaction fee per Basket (described below), the
Trustee will deliver the appropriate number of Baskets to the
Depository Trust Company (``DTC'') account of the Authorized
Participant. In limited circumstances and with the approval of the
Trustee, Baskets may be created for cash, in which case the Authorized
Participant will be required to pay any additional issuance costs,
including the costs to the Investing Pool of establishing the
corresponding CERF position.
    Only Authorized Participants can transfer the required
consideration and receive Baskets in exchange. Authorized Participants
may act for their own accounts or as agents for broker-dealers,

custodians, and other securities market participants that wish to
create or redeem Baskets. An Authorized Participant will have no
obligation to create or redeem Baskets for itself or on behalf of other
persons. An order for one or more baskets may be placed by an
Authorized Participant on behalf of multiple clients. The Sponsor and
the Trustee will maintain a current list of Authorized Participants.
    No Shares will be issued unless and until the Trustee receives
confirmation that: (i) The required consideration has been received in
the account or accounts specified by the Trustee; and (ii) the Manager
confirms that Investing Pool Interests with an initial value equal to
the consideration received for the Shares have been issued to the
Trust. It is expected that delivery of the Shares will be made against
transfer of consideration on the next Business Day (T+1) following the
Business Day on which the creation order is received by the Trustee. If
the Trustee has not received the required consideration for the Shares
to be delivered on the delivery date, by 11 a.m., New York time, the
Trustee may cancel the creation order.\22\
---------------------------------------------------------------------------

    \22\ The price at which the Shares trade should be disciplined
by arbitrage opportunities created by the ability to purchase or
redeem shares of the Trust in Basket size. This should help ensure
that the Shares will not trade at a material discount or premium to
their net asset value or redemption value.
---------------------------------------------------------------------------

l. Redemptions of Baskets

    Authorized Participants may typically surrender Baskets in exchange
only for an amount of CERFs and cash (or, in the discretion of the
Trustee, Short-Term Securities in lieu of cash) equal to the Basket
Amount on the Business Day the redemption request is received by the
Trustee. However, redemption requests received by the Trustee after
2:40 p.m., New York time (or, on any day on which the CME is scheduled
to close early, after the close of trading of CERFs on the CME on such
day), will be treated as received on the next following Business Day.
Holders of Baskets who are not Authorized Participants will be able to
redeem their Baskets only through an Authorized Participant. It is
expected that Authorized Participants may redeem Baskets for their own
accounts or on behalf of Shareholders who are not Authorized
Participants, but they are under no obligation to do so.
    Before surrendering Baskets for redemption, an Authorized
Participant must deliver to the Trustee a written request indicating
the number of Baskets it intends to redeem and providing other details
with respect to the procedures by which the required Basket Amount will
be transferred. The Trustee will acknowledge the redemption order
unless it or the Sponsor decides to refuse the redemption order as
described in the Trust prospectus.
    After the delivery by the Authorized Participant to the Trustee's
DTC account of the total number of Shares to be redeemed by an
Authorized Participant, the Trustee will deliver to the order of the
redeeming Authorized Participant redemption proceeds consisting of
CERFs and cash (or, in the discretion of the Trustee, Short-term
Securities in lieu of cash). In connection with a redemption order, the
redeeming Authorized Participant authorizes the Trustee to deduct from
the proceeds of redemption a transaction fee per Basket (described
below). In limited circumstances and with the approval of the Trustee,
Baskets may be redeemed for cash, in which case the Authorized
Participants will be required to pay any additional redemption costs,
including the costs to the Investing Pool of liquidating the
corresponding CERF position. The Trust will receive these redemption
proceeds pursuant to the Trust's contemporaneous redemption of
Investing Pool Interests of corresponding value. Shares can be
surrendered for redemption only in Baskets consisting of 50,000 Shares
each.
    It is expected that delivery of the CERFs, cash or Short-term
Securities to the redeeming Shareholder will be made against transfer
of the Baskets on the next Business Day following the Business Day on
which the redemption request is received by the Trustee. If the
Trustee's DTC account has not been credited with the total number of
Shares to be redeemed pursuant to the redemption order by 11 a.m., New
York time, on the delivery date, the Trustee may cancel the redemption
order. DTC will accept the Shares for settlement through its book-entry
settlement system. Shares do not have any voting rights.

m. Fees and Expenses of the Trustee

    Each order for the creation of Baskets must be accompanied by a
payment to the Trustee of a transaction fee per Basket of $10.00
multiplied by the number of CERFs included in the Basket Amount. For
redemption orders, the redeeming Authorized Participant will authorize
the Trustee to deduct from the proceeds of the redemption a transaction
fee per Basket equal to $10.00 multiplied by the number of CERFs
included in the Basket Amount, plus any expenses, taxes or charges
(such as stamp taxes or stock transfer taxes or fees) related to the
creation or surrender for redemption. The Trustee will be entitled to
reimburse itself from the assets of the Trust for all expenses and
disbursements incurred by it for extraordinary services it may provide
to the Trust or in connection with any discretionary action the Trustee
may take to protect the Trust or the interests of the holders to the
extent not paid by the Sponsor.

n. Dissemination of Information Relating to the Shares, Trust Holdings,
and Relevant Indices

    The Web site for the Trust (http://www.iShares.com), which will be

publicly accessible at no charge, will contain the following
information: (i) The prior Business Day's NAV and the reported closing
price; (ii) 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''); (iii)
calculation of the premium or discount of such price against such NAV;
(iv) data in chart form displaying the frequency distribution of
discounts and premiums of the Bid-Ask Price against the NAV, within
appropriate ranges for each of the four previous calendar quarters; (v)
the prospectus; (vi) the holdings of the Trust, including CERFs, cash
and Treasury securities; (vii) the Basket Amount; and (viii) other
applicable quantitative information. The Exchange on its Web site at
http://www.nyse.com will include a hyperlink to the Trust's Web site at

http://www.iShares.com.

    As described above, the NAV for the Fund will be calculated and
disseminated daily. The NYSE also intends to disseminate, during NYSE
trading hours for the Trust on a daily basis by means of CTA/CQ High
Speed Lines information with respect to the Indicative Value (as
discussed below), recent NAV, and Shares outstanding. The Exchange will
also make available on http://www.nyse.com daily trading volume,

closing prices, and the NAV.
    Real-time information is available about the Trust's holdings in
the Investing Pool. Various data vendors and news publications publish
futures prices and data. Futures quotes and last sale information for
the commodities underlying the Index and the CERFs are widely
disseminated through a variety of market data vendors worldwide,
including Bloomberg and Reuters. In addition, complete real-time data
for such futures, including the CERFs, is available by subscription
from Reuters and Bloomberg. The futures exchanges or which the
underlying commodities

and CERFs trade also provide delayed futures information on current and
past trading sessions and market news generally free of charge on their
respective Web sites. The specific contract specifications for the
futures contracts are also available from the futures exchanges on
their Web sites as well as other financial informational sources.
    As stated above, major market data vendors will disseminate at
least every 15 seconds (during the time that the Shares trade on the
Exchange) the GSCI and Index values. Additionally, major market data
vendors will disseminate at least every 15 seconds (during the time
that the Shares trade on the Exchange) the value of the GSCI-ER, which
the CERFs (held by the Investing Pool) trading on CME are designed to
track.\23\ Daily settlement values for the GSCI, the Index, and the
GSCI-ER are also widely disseminated.\24\
---------------------------------------------------------------------------

    \23\ The value of a Share may accordingly be influenced by non-
concurrent trading hours between the NYSE and the various futures
exchanges on which the futures contracts based on the Index
commodities are traded. While the Shares will trade on the NYSE from
9:30 a.m. to 4:15 p.m. New York time, the table above lists the
trading hours for each of the Index commodities underlying the
futures contracts.
    \24\ April 13 Telephone Conference.
---------------------------------------------------------------------------

o. Indicative Value

    In order to provide updated information relating to the Trust for
use by investors, professionals, and other persons, the Exchange will
disseminate through the facilities of CTA an updated Indicative Value
on a per Share basis as calculated by Bloomberg. The Indicative Value
will be disseminated at least every 15 seconds from 9:30 a.m. to 4:15
p.m. New York time. The Indicative Value will be calculated based on
the cash and collateral in a Basket Amount divided by 50,000, adjusted
to reflect the market value of the investments held by the Investing
Pool, i.e., CERFs.\25\ The Indicative Value will not reflect price
changes to the price of an underlying commodity between the close of
trading of the futures contract at the relevant futures exchange and
the close of trading on the NYSE at 4:15 p.m. New York time.
---------------------------------------------------------------------------

    \25\ Telephone conference between Michael Cavalier, Assistant
General Counsel, NYSE, and Florence Harmon, Senior Special Counsel,
Commission, on April 5, 2006 (authorizing clarification of
sentence).
---------------------------------------------------------------------------

    When the market for futures trading for each of the Index
commodities is open, the Indicative Value can be expected to closely
approximate the value per Share of the Basket Amount. However, during
NYSE trading hours 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 Value on a per Share basis disseminated during
NYSE 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 Value 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 creation or redemption of the Shares.

p. Other Characteristics of the Shares

i. General Information

    A minimum of three Baskets, representing 150,000 Shares, will be
outstanding at the commencement of trading on the Exchange.
    Trading in Shares on the Exchange will be effected normally until
4:15 p.m. each day on which the Exchange is open for trading. The
minimum trading increment for Shares on the Exchange will be $0.01.

ii. Fees

    The Exchange original listing fee applicable to the listing of the
Trust will be $5,000. The annual continued listing fee for the Trust
will be $2,000.

iii. Continued Listing Criteria

    Under the applicable continued listing criteria, the Shares may be
delisted as follows: (i) Following the initial twelve-month period
beginning upon the commencement of trading of the Shares, there are
fewer than 50 record and/or beneficial holders of the Shares for 30 or
more consecutive trading days; (ii) the value of the Index ceases to be
calculated or available on at least a 15-second basis from a source
unaffiliated with the Sponsor, the Trust or the Trustee; (iii) the
Indicative Value ceases to be available on at least a 15-second delayed
basis; or (iv) such other event shall occur or condition exist that, in
the opinion of the Exchange, makes further dealings on the Exchange
inadvisable. In addition, the Exchange will remove Shares from listing
and trading upon termination of the Trust.
    Additionally, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act,\26\ seeking approval to continue
trading the Shares and unless approved, the Exchange will commence
delisting the Shares if:
---------------------------------------------------------------------------

    \26\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    Additionally, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act,\27\ seeking approval to continue
trading the Notes and unless approved, the Exchange will commence
delisting the Shares if:
---------------------------------------------------------------------------

    \27\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

     The Index Sponsor substantially change either the Index
component selection methodology or the weighting methodology;
     If a new component is added to the Index (or pricing
information is used for a new or existing component) that constitutes
more than 10% of the weight of the Index with whose principal trading
market the Exchange does not have a comprehensive surveillance sharing
agreement; \28\ or
---------------------------------------------------------------------------

    \28\ April 10 Telephone Conference.
---------------------------------------------------------------------------

     If a successor or substitute index is used in connection
with the Shares. The filing will address, among other things the
listing and trading characteristics of the successor or substitute
index and the Exchange's surveillance procedures applicable thereto.

q. Exchange Trading Rules and Policies

    The Shares are considered ``securities'' pursuant to NYSE Rule 3
and are subject to all applicable trading rules.
    The Trust is exempt from corporate governance requirements in
section 303A of the NYSE Listed Company Manual, including the
Exchange's audit committee requirements in Section 303A.06.\29\
---------------------------------------------------------------------------

    \29\ See Rule 10A-3(c)(7), 17 CFR 240.10A-3(c)(7) (stating that
a listed issuer is not subject to the requirements of Rule 10A-3 if
the issuer is organized as a trust or other unincorporated
association that does not have a board of directors and the
activities of the issuer are limited to passively owning or holding
securities or other assets on behalf of or for the benefit of the
holders of the listed securities).
    See also Securities Exchange Act Release No. 48745 (November 4,
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33, SR-NASD-
2002-77, et al.) (specifically noting that the corporate governance
standards will not apply to, among others, passive business
organizations in the form of trusts); Securities Exchange Act
Release No. 47654 (April 25, 2003), 68 FR 18787 (April 16, 2003)
(noting in Section II(F)(3)(c) that ``SROs may exclude from Exchange
Act Rule 10A-3's requirements issuers that are organized as trusts
or other unincorporated associations that do not have a board of
directors or persons acting in a similar capacity and whose
activities are limited to passively owning or holding (as well as
administering and distributing amounts in respect of) securities,
rights, collateral or other assets on behalf of or for the benefit
of the holders of the listed securities.'')
---------------------------------------------------------------------------

    The Exchange will adopt new NYSE Rule 1300B (``Commodity Trust
Shares'') to deal with issues related to the trading of the Shares.
Specifically, for purposes of NYSE Rules 13 (``Definitions of
Orders''), 36.30 (``Communications Between Exchange and Members'
Offices''), 98

(``Restrictions on Approved Person Associated with a Specialist's
Member Organization), 104 (``Dealings by Specialists''), 105(m)
(``Guidelines for Specialist's'' Specialty Stock Option Transactions
Pursuant to Rule 105''), 460.10 (``Specialists Participating in
Contests''), 1002 (``Availability of Automatic Feature''), and 1005
(``Order May Not Be Broken Into Smaller Accounts''), the Shares will be
treated similar to Investment Company Units.\30\
---------------------------------------------------------------------------

    \30\ In particular, proposed NYSE Rule 1300B provides that NYSE
Rule 105(m) is deemed to prohibit an equity specialist, his member
organization, other member, allied member or approved person in such
member organization or officer or employee thereof from acting as a
market maker or functioning in any capacity involving market-making
responsibilities in the applicable futures contracts, except as
otherwise provided therein.
---------------------------------------------------------------------------

    When these Rules discuss Investment Company Units, references to
the word index (or derivative or similar words) will be deemed to be
references to the applicable commodity or commodity index price and
reference to the word security (or derivative or similar words) will be
deemed to be references to the Commodity Index Trust Shares.
    The Exchange does not currently intend to exempt Commodity Trust
Shares from the Exchange's ``Market-on-Close/Limit-on-Close/Pre-Opening
Price Indications'' Policy, although the Exchange may do so by means of
a rule change in the future if, after having experience with the
trading of the Shares, the Exchange believes such an exemption is
appropriate.

i. Trading Halts

    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading on the Exchange in the Shares may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. These may include
(1) the extent to which trading is not occurring in the underlying
commodities or (2) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present. In addition, trading in Shares is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange's
``circuit breaker'' rule.\31\ The Exchange will halt trading in the
Shares if the value of the Index is no longer calculated or available
on at least a 15-second basis through one or more major market data
vendors during the time the Shares trade on the NYSE, or if the
Indicative Value per Share updated at least every 15 seconds is no
longer calculated or available.\32\
---------------------------------------------------------------------------

    \31\ NYSE Rule 80B.
    \32\ In such events, the Exchange would immediately contact the
Commission to discuss measures that may be appropriate under the
circumstances.
---------------------------------------------------------------------------

ii. Specialists' Trading Obligations

    New Supplementary Material .10 to proposed NYSE Rule 1301B would
apply the provisions of proposed Rule 1300B(b) and Rule 1301B to
certain securities listed on the Exchange pursuant to section 703.19
(``Other Securities'') of the NYSE Listed Company Manual. Specifically,
proposed NYSE Rules 1300B(b) and 1301B will apply to securities listed
under section 703.19 where the price of such securities is based in
whole or part on the price of a commodity or commodities, a commodities
index, or any futures contracts or other derivatives based thereon.
Examples of the securities to which Supplementary Material .10 will
apply are the subjects of the following File Nos.: (i) SR-NYSE-2006-16
(proposal to list and trade Index-Linked Securities of Barclays Bank
PLC linked to the performance of the Dow Jones-AIG Commodity Index
Total ReturnTM); (ii) SR-NYSE-2006-19 (proposal to list and
trade Index-Linked Securities of Barclays Bank PLC linked to the
performance of the Goldman Sachs Crude Oil Total Return
IndexTM); and (iii) File No. SR-NYSE-2006-20 (proposal to
list and trade Index-Linked Securities of Barclays Bank PLC linked to
the performance of the GSCI Total Return Index TM).
    As a result of application of proposed NYSE Rule 1300B(b), the
specialist in a relevant security listed under section 703.19
(``Section 703.19 security''), the specialist's member organization and
other specified persons will be prohibited under paragraph (m) of NYSE
Rule 105 Guidelines from acting as market maker or functioning in any
capacity involving market-making responsibilities in the physical
commodities included in, or options, futures or options on futures on,
the index underlying the relevant section 703.19 security, or any other
derivatives (collectively, ``derivative instruments'') based on such
index. A specialist entitled to an exemption under NYSE Rule 98 from
paragraph (m) of NYSE Rule 105 Guidelines could act in a market making
capacity in physical commodities included in, or derivative instruments
based on such index, other than as a specialist in the same section
703.19 security in another market center.
    Under proposed NYSE Rule 1301B(a), the member organization acting
as specialist in a Section 703.19 security: (i) Will be obligated to
conduct all trading in the specialty security in its specialist
account, (subject only to the ability to have one or more investment
accounts, all of which must be reported to the Exchange); (ii) will be
required to file with the Exchange and keep current a list identifying
all accounts for trading in the physical commodities included in, or
derivative instruments based on the relevant index, which the member
organization acting as specialist may have or over which it may
exercise investment discretion; and (iii) will be prohibited from
trading in physical commodities included in, or derivative instruments
based on the relevant index, in an account in which a member
organization acting as specialist, controls trading activities which
have not been reported to the Exchange as required by proposed NYSE
Rule 1301B.
    Under Rule 1301B(b), the member organization acting as specialist
in a relevant section 703.19 security will be required to make
available to the Exchange such books, records or other information
pertaining to transactions by the member organization and other
specified persons for its or their own accounts in derivative
instruments on an index underlying such section 703.19 security or any
commodity included in such index, as may be requested by the Exchange.
This requirement is in addition to existing obligations under Exchange
rules regarding the production of books and records. Under proposed
NYSE Rule 1301B(c), in connection with trading derivative instruments
based on an index underlying a relevant section 703.19 security in
which the member organization acts as specialist, the specialist could
not use any material nonpublic information received from any person
associated with a member or employee of such person regarding trading
by such person or employee in derivative instruments based on the
underlying index or in any commodity included in such index.

r. Surveillance

    The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Shares and the Index
components. The Exchange will rely upon existing NYSE surveillance
procedures governing equities with respect to surveillance of the
Shares. The Exchange believes that these procedures are adequate to
monitor Exchange trading of the Shares, to detect violations of
Exchange rules, consequently deterring manipulation. In this regard,
the Exchange currently has

the authority under NYSE Rule 476 to request the Exchange specialist in
the Shares to provide NYSE Regulation with information that the
specialist uses in connection with pricing the Shares on the Exchange,
including specialist proprietary or other information regarding
securities, commodities, futures, options on futures or other
derivative instruments. The Exchange believes it also has authority to
request any other information from its members--including floor
brokers, specialists and ``upstairs'' firms--to fulfill its regulatory
obligations.\33\
---------------------------------------------------------------------------

    \33\ As a general matter, the Exchange has regulatory
jurisdiction over its member organizations and any person or entity
controlling a member organization. The Exchange also has regulatory
jurisdiction over a subsidiary or affiliate of a member organization
that is in the securities business. A member organization subsidiary
or affiliate that does business only in commodities would not be
subject to NYSE jurisdiction, but the Exchange could obtain certain
information regarding the activities of such subsidiary or affiliate
through reciprocal agreements with regulatory organizations of which
such subsidiary or affiliate is a member.
---------------------------------------------------------------------------

    With regard to the Index components, the Exchange can obtain market
surveillance information, including customer identity information, with
respect to transactions occurring on the New York Mercantile Exchange
(``NYMEX''), the Kansas City Board of Trade, ICE and the LME, pursuant
to its comprehensive information sharing agreements with each of those
exchanges. All of the other trading venues on which current Index
components are traded are members of the Intermarket Surveillance Group
(``ISG'') and the Exchange therefore has access to all relevant trading
information with respect to those contracts without any further action
being required on the part of the Exchange. If at any time the Index
Sponsor includes in the Index a contract traded on any other market
which is not a member or affiliate of the ISG and with respect to which
the Exchange does not have a preexisting comprehensive information
sharing agreement previously reviewed and found acceptable by the
Commission, then, prior to the inclusion of such contract in the Index,
the Exchange will: (i) Enter into adequate information sharing
arrangements with that other market; and (ii) contact the Commission to
discuss measures that may be appropriate under the circumstances,
including whether the Exchange should file proposed rule change seeking
Commission approval prior to the inclusion of the new contract in the
Index.

s. Due Diligence

    Before a member, member organization, allied member or employee
thereof recommends a transaction in the Shares, such person must
exercise due diligence to learn the essential facts relative to the
customer pursuant to NYSE Rule 405, and must determine that the
recommendation complies with all other applicable Exchange and Federal
rules and regulations. A person making such recommendation should have
a reasonable basis for believing, at the time of making the
recommendation, that the customer has sufficient knowledge and
experience in financial matters that he or she may reasonably be
expected to be capable of evaluating the risks and any special
characteristics of the recommended transaction, and is financially able
to bear the risks of the recommended transaction.

t. Information Memo

    The Exchange will distribute an information memo (``Memo'') to its
members in connection with the trading in the Shares. The Memo will
discuss the special characteristics and risks of trading this type of
security. Specifically, the Memo, among other things, will discuss what
the Shares are, that Shares are not individually redeemable but are
redeemable only in Baskets of 50,000 shares or multiples thereof, how a
Basket is created and redeemed, applicable Exchange rules, the
Indicative Value, dissemination information, trading information and
the applicability of suitability rules, and exemptive relief granted by
the Commission from certain rules under the Act.\34\ The Memo will also
reference that the Trust is subject to various fees and expenses
described in the Registration Statement. Finally, the Memo will also
note to members language in the Registration Statement regarding
prospectus delivery requirements for the Shares. The Memo will also
reference the fact that there is no regulated source of last sale
information regarding physical commodities and that the Commission has
no jurisdiction over the trading of physical commodities or the futures
contracts on which the value of the shares is based.
---------------------------------------------------------------------------

    \34\ The applicable rules are: Rule 10a-1; Rule 200(g) of
Regulation SHO; section 11(d)(1) and Rule 11d1-2; and Rules 101 and
102 of Regulation M under the Act.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the basis under the Act for this
proposed rule change is the requirement under section 6(b)(5) \35\ that
an exchange have rules that are designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to, and perfect the
mechanism of a free and open market and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change would 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

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization 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 NYSE has requested accelerated approval of the proposed rule
change prior to the thirtieth day after the date of publication of
notice in the Federal Register, following the conclusion of a 15-day
comment period. While the Commission will not grant accelerated
approval at this time, the Commission will consider granting
accelerated approval of the proposal at the close of the abbreviated
comment period of 15 days from the date of publication of the proposal
in the Federal Register.

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<EMAIL_ADDRESS>Please include

File No. SR-NYSE-2006-17 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2006-17. 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-NYSE-2006-17 and should be submitted on or before May 9,
2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-6077 Filed 4-21-06; 8:45 am]

BILLING CODE 8010-01-P