[Federal Register: June 26, 2006 (Volume 71, Number 122)]
[Notices]
[Page 36372-36380]
[DOCID:fr26jn06-86]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54013; File No. SR-NYSE-2006-17]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of Proposed Rule Change and Amendment No. 1 Thereto,
and Notice of Filing and Order Granting Accelerated Approval To
Amendment No. 2, Relating to Listing and Trading Shares of the iShares
GSCI Commodity Indexed Trust Under New Rules 1300B and 1301B, et seq.

June 16, 2006.
    On March 7, 2006, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposal to adopt rules that would provide for and govern the trading
of Commodity Trust Shares, including shares (``Shares'') of the
iShares[supreg] GSCI[supreg] Commodity--Indexed Trust (``Trust''). On
March 24, 2006, the Exchange filed Amendment No. 1 to the proposed rule
change. The proposed rule change, as amended, was published for comment
in the Federal Register on April 24, 2006.\3\ On June 15, 2006, the
Exchange filed Amendment No. 2 to the proposed rule change.\4\ The
Commission received one comment letter.\5\ On May 12, 2006, the
Exchange filed a response to those comments.\6\ This order approves the
proposed rule change, as amended by Amendment No. 1. Simultaneously,
the Commission provides notice of filing of Amendment No. 2, grants
accelerated approval of Amendment No. 2, and solicits comments from
interested persons on Amendment No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 53659 (April 17, 2006),
71 FR 21074 (``Notice'').
    \4\ In Amendment No. 2, the Exchange states that: (1) The
Sponsor (defined below) has informed the Exchange that the Trustee
(also defined below) for the Trust will make the net asset value
(``NAV'') for the Trust available to all market participants at the
same time; (2) if the NAV is not disseminated to all market
participants at the same time, the Exchange will halt trading in the
Shares; and (3) if the NAV is not disseminated to all market
participants at the same time, the Exchange will immediately contact
the Commission staff to discuss measures that may be appropriate
under the circumstances.
    \5\ See letter from Kevin Rich, Director and Chief Executive
Officer, DB Commodity Services LLC (``DB''), to Nancy M. Morris,
Secretary, Commission, dated March 17, 2006 (``Rich Letter''). That
letter is available for review on the Commission's Web site at:
http://www.sec.gov/ comments/sr-nyse-2006-17/ srnyse200617-1.pdf.

    \6\ See letter from Mary Yeager, Assistant Secretary, NYSE, to
Nancy M. Morris, Secretary, Commission, dated May 12, 2006 (``Yeager
Letter''). That letter also is available for review on the
Commission's Web site at: http://www.sec.gov/ comments/sr-nyse-2006-

17/ myeager051206.pdf.
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I. Description of Proposal

    The NYSE proposes to adopt rules that would provide for and govern
the trading of Commodity Trust Shares. A Commodity Trust Share is
defined as

    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.

Proposed NYSE Rule 1300B(a). In addition, Proposed NYSE Rule 1301B sets
forth guidelines for specialists in Commodity Trust Shares and other
products whose price is based, in whole or in part, on: (a) The price
of a commodity or commodities; (b) any futures contracts or other
derivatives based on a commodity or commodities; or any indexed based
on either (a) or (b), above.

    Pursuant to Proposed NYSE Rule 1300B, et seq., the Exchange
proposes to list and trade Shares, which fall within the definition of
Commodity Trust Shares (as mentioned above) and are linked to the
performance of the GSCI Total Return Index (``Index'' or ``GSCI-TR'').

Description of the Shares

    The Shares will constitute units of beneficial interest
representing fractional undivided beneficial interests in the net
assets of the Trust (described below). The performance of the Shares is
designed to correspond generally to the performance of the Index before
payment of the Trust's and the Investing Pool's expenses and
liabilities. The investment objective of the Trust is for the
performance of the Shares to correspond to the performance of the Index
before payment of the Trust's and Investing Pool's expenses and
liabilities. As discussed below, the value of the Index reflects the
value of an investment in the Goldman Sachs Commodity Index (``GSCI''),
a production-weighted index of the prices of a diversified group of
futures contracts on physical commodities, together with a Treasury
bill rate of interest that could be earned on funds committed to the
trading of the

underlying futures contracts of the GSCI.
    Substantially all of the assets of the Trust consist of its
holdings of the limited liability company interests (``Investing Pool
Interests'') of iShares[supreg] GSCI Commodity-Indexed Investing Pool
LLC (``Investing Pool'').\7\ In turn, the Investing Pool holds long
positions in futures contracts on the GSCI Excess Return Index
(``CERFs''), which are listed on the Chicago Mercantile Exchange
(``CME'').
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    \7\ Investing Pool Interests are the only securities in which
the Trust may invest.
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    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 hold cash or
Short-Term Securities \8\ to post as margin to collateralize the
Investing Pool's CERF positions.\9\ The Investing Pool will earn
interest on the assets used to collateralize its holdings of CERFs.
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    \8\ ``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.
    \9\ 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. As a result of these arrangements, the Investing Pool will be
subject to substantially greater initial margin requirements than
other market participants buying a CERF, but it will not be required
to pay any additional amounts to its FCM as variation margin if the
value of the CERFs declines.
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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. 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. Trading of CERFs commenced on the CME
Globex electronic trading platform effective March 12, 2006, for trade
date March 13, 2006. CERFs are listed and traded separately from the
GSCI futures contracts and options on futures contracts.

Management of the Trust and Investing Pool

    Both the Trust and the Investing Pool are commodity pools managed
by the Sponsor. The Sponsor is registered as a commodity pool operator
with the Commodity Futures Trading Commission (``CFTC''),\10\ and its
primary business function is to act as Sponsor and commodity pool
operator of the Trust and manager of the Investing Pool (``Manager'').
As Manager, the Sponsor 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.
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    \10\ Neither the Trust nor the Investing Pool is an investment
company registered under the Investment Company Act of 1940.
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    The advisor to the Investing Pool (``Advisor'') is Barclays Global
Fund Advisors, a California corporation and an indirect subsidiary of
Barclays Bank PLC. The Advisor 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 (as
discussed below). 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. 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.
    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); (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.\11\
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.
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    \11\ 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, (b) 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.
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    The Exchange states that 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.

Related Indices

    The GSCI, the GSCI-ER, and the Index are administered, calculated,
and published by Goldman, Sachs & Co. (``Index Sponsor''),\12\ a
subsidiary of The Goldman Sachs Group Inc. The Index Sponsor is a
broker-dealer.\13\ The index values for the three indexes, the Index,
the GSCI, and the GSCI-ER, are updated and disseminated at least every
15 seconds by one or more major market data vendors during the time the
Shares trade on the Exchange.\14\ The settlement prices for the three
indexes are also widely disseminated by one or more major market data
vendors.
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    \12\ See telephone conversation between Michael Cavalier,
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior
Special Counsel, Commission, on April 13, 2006 (``April 13 Telephone
Conversation'').
    \13\ Id.
    \14\ See telephone conversation between Michael Cavalier,
Assistant General Counsel, NYSE, and Florence E. Harmon, Senior
Special Counsel, Commission, on June 1, 2006 (`` June 1 Telephone
Conversation'').
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a. GSCI Index
    The GSCI, upon which the Index is based, is a proprietary 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
Exchange states that 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 contracts to be included in the GSCI[supreg] must satisfy
several sets of eligibility criteria established by the Index
Sponsor.\15\ First, the Index Sponsor identifies those contracts that
meet the general criteria for eligibility. Second, the contract volume
and weight requirements are applied and the number of contracts is
determined, which serves to reduce the list of eligible contracts. At
that point, the list of designated contracts for the relevant period is
complete.
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    \15\ See GSCI[supreg] Manual at http://www.gs.com/gsci. Goldman,

Sachs & Co. is the Index Sponsor for both the Index and the
GSCI[supreg]. See April 13 Telephone Conversation.
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    The value of the GSCI[supreg] on any given day is equal to the
total dollar weight of the GSCI[supreg] divided by a normalizing
constant that assures the continuity of the GSCI[supreg] over time. The
total dollar weight of the GSCI[supreg] is the sum of the dollar weight
of each index component. The dollar weight of each such index component
on any given day is equal to:
     The daily contract reference price,
     Multiplied by the appropriate contract production weights
(``CPWs''), and
     During a roll period, the appropriate ``roll weights''
(discussed below).\16\
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    \16\ If the price is not made available or corrected by 4 p.m.
New York time, the Index Sponsor, if it deems such action to be
appropriate under the circumstances, will determine the appropriate
daily contract reference price for the applicable futures contract
in its reasonable judgment for purposes of the relevant GSCI[supreg]
calculation. 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; telephone conversation between Florence
E. Harmon, Senior Special Counsel, Commission; John Carey, Assistant
General Counsel, Exchange; and Michael Cavalier, Assistant General
Counsel, Exchange, on April 10, 2006 (``April 10 Telephone
Conversation'').
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    These factors, along with the contract daily return for each Index
component, are described in more detail in the Notice. Additionally,
this information is publicly available each business day on the Index
Sponsor's Web site at http://www.gs.com/gsci \17\ and the relevant

futures exchanges, and/or from major market data vendors. 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.
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    \17\ The CPWs are available in the GSCI[supreg] manual on the
GSCI[supreg] Web site (http://www.gs.com/gsci) and are published on

Reuters. The roll weights are not published but can be determined
from the rules in the GSCI Manual. See telephone conversation
between Florence E. Harmon, Senior Special Counsel, Commission, and
John Carey, Assistant General Counsel, Exchange, on May 18, 2006
(``May 18 Telephone Conversation'').
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    The composition of the GSCI[supreg] is reviewed on a monthly basis
by the Index Sponsor 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 procedures.\18\ This procedure is
undertaken to allow the GSCI[supreg] to shift from contracts that have
lost substantial liquidity into more liquid contracts during the course
of a given year.\19\ As a result, it is possible that the composition
or weighting of the GSCI[supreg] will change on one or more of these
monthly Valuation Dates. In addition, regardless of whether any changes
have occurred during the year, the Index Sponsor reevaluates the
composition of the GSCI[supreg] at the conclusion of each year, based
on the above criteria. Other commodities that satisfy such criteria, if
any, will be added to the GSCI[supreg]. Commodities included in the
GSCI[supreg] which no longer satisfy such criteria, if any, will be
deleted.
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    \18\ The Index Sponsor, Goldman, Sachs & Co. (``Goldman
Sachs''), which calculates and maintains the GSCI[supreg] and the
Index, is a broker-dealer. Therefore, appropriate firewalls must
exist around the personnel who have access to information concerning
changes and adjustment to an index and the trading personnel of the
broker-dealer. Accordingly, the Exchange states that the Index
Sponsor has represented that it: (i) Has implemented and maintained
procedures reasonably designed to prevent the use and dissemination
by personnel of the Index Sponsor, 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 checks the
application of such procedures as they relate to such personnel of
the Index Sponsor directly responsible for such changes. In
addition, the Policy Committee members are subject to written
policies with respect to material, non-public information. See
telephone conversation between Florence E. Harmon, Senior Special
Counsel, Commission; John Carey, Assistant General Counsel,
Exchange; and Michael Cavalier, Assistant General Counsel, Exchange,
on April 14, 2006 (``April 14 Telephone Conversation II'') and May
18 Telephone Conversation.
    \19\ See also ``Contract Expirations'' in Notice, supra, note 3.
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    The Index Sponsor has established a Policy Committee to assist it
with the operation of the GSCI[supreg].\20\ The principal purpose of
the Policy Committee is to advise the Index Sponsor with respect to,
among other things, the calculation of the GSCI[supreg], the
effectiveness of the GSCI[supreg] as a measure of commodity futures
market performance, and the need for changes in the composition or the
methodology of the GSCI[supreg]. The Policy Committee acts solely in an
advisory and consultative capacity. All decisions with respect to the
composition, calculation and operation of the GSCI[supreg] and the
Index are made by the Index Sponsor.\21\
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    \20\ The component selections for the GSCI[supreg] would
obviously affect the Index. See telephone conversation between
Florence E. Harmon, Senior Special Counsel, Commission, and Michael
Cavalier, Assistant General Counsel, Exchange, on April 12, 2006
(``April 12 Telephone Conversation'').
    \21\ The Exchange states that the Index Sponsor has represented
that the Policy Committee members are subject to written policies
with respect to material, non-public information. See telephone
conversation between Florence E. Harmon, Senior Special Counsel,
Commission, and Michael Cavalier, Assistant General Counsel,
Exchange, on May 15, 2006 (``May 15 Telephone Conversation'').
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b. The GSCI-TR Index
    The Index, to which the performance of the Shares is linked, was
established in May of 1991. The GSCI-TR 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.\22\
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    \22\ The Exchange states that it recently listed and is trading
another derivative product, the Barclays iPath Exchange-Traded
Notes, whose return is based on the GSCI-TR. See Securities Exchange
Act Release No. 53849 (May 22, 2006), 71 FR 30706 (May, 30, 2006)
(SR-NYSE-2006-20). The description of the GSCI-TR in regards to that
product is comparable as that herein because it states that the
GSCI-TR reflects the ``excess returns'' that are potentially
available through an unleveraged investment in the contracts
comprising the GSCI, which is in effect the GSCI-ER. See telephone
conversation between Florence E. Harmon, Senior Special Counsel,
Commission, and Michael Cavalier, Assistant General Counsel,
Exchange, on June 14, 2006 (``June 14 Telephone Conversation'').
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c. The GSCI-ER
    The GSCI-ER, to which the performance of the CERFs held by the
Investing Pool is linked, was also established in May of 1991. The
GSCI-ER is calculated based on the same commodities included in the
GSCI, and it reflects the returns that are potentially available
through a rolling \23\

uncollaterized investment in the contracts comprising the GSCI.\24\
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    \23\ 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.
    \24\ In the event the Trust utilizes any index that is a
successor to or similar to the GSCI-ER or the GSCI-TR, 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 conversation between Michael Cavalier, Assistant General
Counsel, NYSE, and Florence E. 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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d. Calculation of Related Indexes
    The Index Sponsor makes the official calculations of the
GSCI[supreg], the GSCI-TR, and the GSCI-ER (collectively, ``Related
Indexes''). While the intraday and closing values of the Related
Indexes are calculated by Goldman Sachs, a broker-dealer, a number of
factors provide for the independent verification of these intraday and
closing values.\25\ The calculation methodology is public and
transparent, and the factors included in the Index calculation, such as
the CPWs, are available in the GSCI Manual found on GSCI's Web site at
http://www.gs.com/gsci and are published on Reuters; the roll weights

are not published but can be determined from the rules in the GSCI
Manual.\26\ This calculation is performed continuously and is reported
on Reuters page GSCI[supreg] and will be updated on Reuters at least
every 15 seconds during business hours on each day on which the offices
of the Index Sponsor in New York City are open for business (a ``GSCI
Business Day'').\27\ The settlement price for the Index is also
reported on Reuters page GSCI[supreg] on each GSCI Business Day between
4 p.m. and 6 p.m., New York time. The intraday and settlement prices
for the Index and GSCI-ER are also reported on Bloomberg page GSCIER
(index).
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    \25\ The Index Sponsor calculates the level of the Related
Indexes intraday and at the end of the day. The intraday calculation
is based on feeds of real-time data relating to the underlying
commodities and updates intermittently approximately every 15
seconds. In the GSCI market, trades are quoted or settled against
the end-of-day value, not against the value at any other particular
time of the day. With respect to the end-of-day closing level of the
index, the Index Sponsor uses independent feeds from at least two
vendors for each of the underlying commodities in the index to
verify closing prices and limit moves. A number of commodities
market participants independently verify the correctness of the
disseminated intraday Index value and closing Index value.
Additionally, the closing Index values are audited by a major
independent accounting firm. See May 18 Telephone Conference.
    \26\ See id.
    \27\ Thus, this intraday index value of the Index (and the
GSCI[supreg] and GSCI-ER) will be updated and disseminated at least
every 15 seconds by a major market data vendor during the time the
Shares trade on the Exchange. April 13 Telephone Conference. The
intraday information with respect to the Index (and GSCI[supreg] and
GSCI-ER) reported on Reuters is derived solely from trading prices
on the principal trading markets for the various Index components.
For example, the Index currently includes contracts traded on ICE
Futures and the LME, both of which are located in London and
consequently have trading days that end several hours before those
of the U.S.-based markets on which the rest of the Index components
are traded. During the portion of the New York trading day when ICE
Futures and LME are closed, the last reported prices for Index
Components traded on ICE Futures or LME are used to calculate the
intraday Index information disseminated on Reuters.
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    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.\28\
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    \28\ See ``Calculation of the Index,'' infra.
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Margin and Its Impact on Return

    The Investing Pool will deposit margin with a value equal to 100%
of the value of each CERF position at the time it is established.
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 Exchange states that 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.

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 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.\29\
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    \29\ See April 10 Telephone Conference.
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    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. The Trust will disseminate the NAV
per Share to all market participants at the same time.

Creation and Redemption Process

    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.
    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
Basket of Shares 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.
    The Trust will offer and redeem 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. Similarly,
Baskets will be redeemed 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 on the Business Day the
redemption request is 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, creation and redemption 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. Additional information about the creation and
redemption process is set forth in the Notice.

Dissemination of Information Relating to the Shares, Trust Holdings,
and Related 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 Trust \30\ will be calculated
and disseminated daily.\31\ 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.
---------------------------------------------------------------------------

    \30\ See telephone conversation between Florence E. Harmon,
Senior Special Counsel, Commission, and Michael Cavalier, Assistant
General Counsel, Exchange, on June 15, 2006 (``June 15 Telephone
Conversation'') (authorizing change from ``Fund'' to ``Trust'').
    \31\ In Amendment No. 2, the Exchange states that the NAV will
be distributed to all market participants at the same time.
---------------------------------------------------------------------------

    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 major 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 on 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, a major market data vendor will disseminate at
least every 15 seconds (during the time that the Shares trade on the
Exchange) updated index values for the GSCI, the Index, and the GSCI-
ER.\32\ Daily settlement values for the GSCI, the Index, and the GSCI-
ER are also widely disseminated.\33\
---------------------------------------------------------------------------

    \32\ See June 1 Telephone Conversation. 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 Notice lists the trading hours for each of the Index
commodities underlying the futures contracts.
    \33\ See April 13 Telephone Conference.
---------------------------------------------------------------------------

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 Consolidated Tape Association
(``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.\34\ 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.
---------------------------------------------------------------------------

    \34\ See telephone conservation between Michael Cavalier,
Assistant General Counsel, NYSE, and Florence E. 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.

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; (iv) the NAV of the Shares is not distributed to all market
participants at the same time; \35\ or (v) 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.
---------------------------------------------------------------------------

    \35\ In the event that the Index value, the Indicative Value, or
simultaneous distribution of the NAV is not available, the Exchange
will immediately contact the Commission to discuss measures that may
be appropriate.
---------------------------------------------------------------------------

    Additionally, the Exchange will file a proposed rule change
pursuant to Rule 19b-4 under the Act,\36\ seeking approval to continue
trading the Shares and unless approved, the Exchange will commence
delisting the Shares if:
---------------------------------------------------------------------------

    \36\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

     The Index Sponsor substantially changes 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; \37\ or
---------------------------------------------------------------------------

    \37\ See 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.

Similarly, the Manager of the Investing Pool will utilize the most
recent CERF settlement price to calculate NAV, unless ``extraordinary
circumstances'' arise, which unless temporary in nature, would require
Commission approval of an Exchange proposed rule change pursuant to
Rule 19b-4.\38\
---------------------------------------------------------------------------

    \38\ See June 15 Telephone Conservation.
---------------------------------------------------------------------------

Exchange Trading Rules and Policies

    The Exchange states that the Shares are subject to all applicable
equity trading rules. The Shares will trade between the hours of 9:30
a.m. and 4:15 p.m. ET and will be subject to the equity margin rules of
the Exchange.\39\ A minimum of three Baskets, representing 150,000
Shares will be outstanding at the commencement of trading on the
Exchange. The original listing fee applicable to the Shares will be
$5,000. The annual continued listing fee for the Shares will be $2,000.
The Exchange states that 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.\40\
---------------------------------------------------------------------------

    \39\ See June 1 Telephone Conference (exchange citing NYSE Rule
431).
    \40\ See Rule 10A-3(c)(7), 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------

    The Exchange is adopting 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 Specialists' 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.
    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.

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.\41\ 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, if the Indicative
Value per Share updated at least every 15 seconds is no longer
calculated or available, or if the NAV

per Share is not available to all market participants at the same
time.\42\
---------------------------------------------------------------------------

    \41\ NYSE Rule 80B.
    \42\ In such events, the Exchange would immediately contact the
Commission to discuss measures that may be appropriate under the
circumstances.
---------------------------------------------------------------------------

Specialists' Trading Obligations

    As a result of application of proposed NYSE Rule 1300B(b), the
specialist in a relevant security,\43\ 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 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 security in
another market center.
---------------------------------------------------------------------------

    \43\ 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.
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 Indextm).
---------------------------------------------------------------------------

    Under NYSE Rule 1301B(a), the member organization acting as
specialist in the relevant 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 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 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 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.

Surveillance

    The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Shares. 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 Rules 476 and 1301B 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.\44\
---------------------------------------------------------------------------

    \44\ 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 Futures, 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 and CERFs 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.
All these surveillance arrangements constitute comprehensive
surveillance sharing arrangements.

Due Diligence

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

Information Memorandum

    The Exchange will distribute an Information Memorandum to its
members in connection with the trading in the Shares. The Information
Memorandum will discuss the special characteristics and risks of
trading this type of security. Specifically, the Information
Memorandum, 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.\45\ The
Information Memorandum will also reference that the Trust is subject to
various fees and expenses described in the Registration Statement.
Finally, the Information Memorandum will also note to members language
in the Registration Statement regarding prospectus delivery
requirements for the Shares.\46\ The Information Memorandum 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.
---------------------------------------------------------------------------

    \45\ 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.
    \46\ The Registration Statement provides:
    Because new Shares can be created and issued on an ongoing
basis, at any point during the life of the Trust, a
``distribution'', as such term is used in the Securities Act, will
be occurring. Authorized Participants, other broker-dealers and
other persons are cautioned that some of their activities may result
in their being deemed participants in a distribution in a manner
that would render them statutory underwriters and subject them to
the prospectus-delivery and liability provisions of the Securities
Act.
    For example, an Authorized Participant, other broker-dealer firm
or its client will be deemed a statutory underwriter if it purchases
a Basket from the Trust, breaks the Basket down into the constituent
Shares and sells the Shares to its customers; or if it chooses to
couple the creation of a supply of new Shares with an active selling
effort involving solicitation of secondary market demand for the
Shares. A determination of whether a particular market participant
is an underwriter must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or
its client in the particular case, and the examples mentioned above
should not be considered a complete description of all the
activities that would lead to designation as an underwriter and
subject them to the prospectus-delivery and liability provisions of
the Securities Act.
---------------------------------------------------------------------------

II. Discussion

    After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\47\ In particular, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of section
6(b)(5) of the Act,\48\ which requires, among other things, that the
Exchange's rules be designed to promote just and equitable principles
of trade, to remove impediments to and perfect the mechanism of a free
and open market and a national market system and, in general, to
protect investors and the public interest.
---------------------------------------------------------------------------

    \47\ In approving this proposal, the Commission has considered
its impact on efficiency, competition and capital formation. 15
U.S.C. 78c(f).
    \48\ 15 U.S.C. 78s(b)(5).
---------------------------------------------------------------------------

    The Commission received one comment letter on the Exchange's
proposed rule change, in which DB raised a number of concerns. DB
argues that CERFs were created specifically for the Trust, have no
other bona fide economic purpose, and therefore that the CERF market is
illiquid and susceptible to manipulation.\49\ In this regard, CERFs are
futures contracts on the GSCI-ER, an index whose value is based on the
prices of the commodities contracts that comprise the GSCI-ER.
Manipulation of the CERFs market would drive the price of CERFs out-of-
line with the price of the commodities contracts on which its value is
based, providing a potential arbitrage opportunity.\50\ Moreover, as
the Exchange also states, it has comprehensive surveillance sharing
arrangements with futures exchanges trading the contracts that comprise
the GSCI-ER. The Exchange also states that the CME and the NYSE have
surveillance procedures in place to monitor the trading of CERFs and
Shares, respectively, and through their participation in the ISG can
access relevant trading information from each other's market.
---------------------------------------------------------------------------

    \49\ See Rich Letter, supra note 5, at 1-2.
    \50\ Information is available about the NAV of the Trust, the
market value of the Shares, and pricing information about the value
of the commodities contracts that underlie CERFs, which is reflected
in the Index, the GSCI and the GSCI-ER.
---------------------------------------------------------------------------

    DB argues that no information is disclosed about the criteria the
Manager would use to value the Investing Pool's long position in CERFs
if it determines that the most recent CERF settlement price is an
inappropriate basis for calculating NAV. According to DB, because the
most recent CERF settlement price may not be a reliable measurement of
value as a consequence of thin CERF trading, the Manager may exercise
his discretion frequently. In response, the NYSE states that the
Sponsor has told the Exchange that the alternate evaluation procedures
would be applied only in ``extraordinary circumstances,'' such as when
commodities representing a substantial weighting of the GSCI are
experiencing extreme volatility in the spot market, where trading in
some or all of the futures contracts in the underlying GSCI commodities
has been suspended, or when operational issues are causing the
dissemination of inaccurate market information.\51\ The Commission
notes that the Exchange has committed to commence delisting of the
Shares if the Index Sponsor and the Manager of the Investing Pool
deviate from using the most recent CERF settlement price in calculating
the Index and NAV, respectively, except in ``extraordinary
circumstances'' on a temporary basis.
---------------------------------------------------------------------------

    \51\ See Yeager Letter, supra at note 6, at 4.
---------------------------------------------------------------------------

    Further, DB stated that the proposed calculation of the Indicative
Value of the Trust is flawed. This comment references language in the
original proposal that has since been modified. As originally proposed,
the Indicative Value was to be ``calculated based on cash and
collateral in a Basket Amount divided by 50,000, adjusted to reflect
the market value of the Index commodities through investments held by
the Investing Pool, i.e., CERFs'' (emphasis added). This ambiguous
language has been clarified; \52\ 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.
---------------------------------------------------------------------------

    \52\ See supra at note 34.
---------------------------------------------------------------------------

A. Surveillance

    The Commission finds that the proposed rules provide the NYSE with
the tools necessary to adequately monitor trading in the Shares and are
designed to prevent fraudulent and manipulative acts and practices.\53\
Information sharing agreements with primary markets are an important
part of a self-regulatory organization's ability to monitor for trading
abuses in derivative products. The Commission believes that the
Exchange's comprehensive surveillance sharing agreements with the
NYMEX, the Kansas City Board of Trade, ICE Futures, and the LME for the
purpose of providing information in connection with trading of
Commodity Trust Shares create the basis for the NYSE to monitor for
fraudulent and manipulative trading practices. The Exchange represents
that all of the other trading venues on which current Index components
and CERFs are traded are members of the ISG, and the Exchange has
access to all relevant trading information with respect to those
contracts without any further action.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Moreover, NYSE Rules 476 and 1301B require Exchange specialists,
upon the Exchange's request, 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. Furthermore, the Exchange believes that it also
has the authority to request any other information from its member--
including floor brokers, specialists and ``upstairs'' firms--to fulfill
its regulatory obligations.

B. Dissemination of Information

    The Commission believes that sufficient venues exist for obtaining
reliable information so that investors in the Shares can monitor the
underlying Index relative to the Indicative Value of their Shares.
There is a considerable amount of information about the Index and its
components and the CERFs available through public Web sites and
professional subscription services, including Reuters and Bloomberg.
Real time information about the trading of the component futures
contracts and the CERFs and their daily settlement prices are available
from one or more major market data vendors. Delayed information is
often available from futures exchanges trading the underlying Index
components and the CERFs. The official calculation of the Index made by
the Index Sponsor is performed continuously and is reported on Reuters
page GSCI (or any successor or replacement page) and will be updated on
Reuters at least 15 seconds during business hours during the time the
Shares trade on the Exchange. The settlement price for the Index is
reported on Reuters Page GSCI at the end of each GSCI Business Day and
on Bloomberg page GSCIER (index). While the Index is calculated by a
broker-dealer, a number of independent sources verify both the intraday
and closing Index values.

C. Listing and Trading

    The Commission finds that the Exchange's proposed rules and
procedures for the listing and trading of the proposed Shares are
consistent with the Act. The Shares will trade as equity securities
subject to NYSE rules including, among others, rules governing equity
margins, specialist responsibilities, account opening, and customer
suitability requirements. The Commission believes that the listing and
delisting criteria for the Shares should help to maintain a minimum
level of liquidity and therefore minimize the potential for
manipulation of the Shares. Finally, the Commission notes that the
Information Memorandum that the Exchange will distribute will inform
members and member organizations about the terms, characteristics and
risks in trading the Shares, including their prospectus delivery
obligations.

D. Amendment No. 2

    The changes proposed by Amendment No. 2 are designed to ensure that
certain material information--i.e., the NAV for the Trust--is made
available to all market participants at the same time. The Commission
believes that these proposed changes strengthen the proposed rule
change and do not raise any new regulatory issues. Therefore, the
Commission finds good cause to approve Amendment No. 2 to the proposed
rule change prior to the 30th day after the amendment is published for
comment in the Federal Register.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 2
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 Commissions 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 by July 17, 2006.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\54\ that the proposed rule change (SR-NYSE-2006-17), as amended by
Amendment No. 1, is hereby approved, and that Amendment No. 2 to the
proposed rule change be, and hereby is, approved on an accelerated
basis.
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    \54\ 15 U.S.C. 78s(b)(2).
    \55\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\55\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-9985 Filed 6-23-06; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register: August 3, 2010 (Volume 75, Number 148)]
[Notices]
[Page 45610-45611]
[DOCID:fr03au10-56]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP05-92-007]

Liberty Gas Storage LLC; Notice of Amendment

    Take notice that on July 26, Liberty Gas Storage LLC (``Liberty''),
101 Ash Street, San Diego, CA 92101, filed in the above referenced
docket, an application pursuant to section 7 of the Natural Gas Act
(NGA), to amend its Application to Amend Certificate of Public
Convenience and Necessity that was filed with the Commission on
December 14, 2009, all as more fully set forth in the application which
is on file with the Commission and open to public inspection. The
filing may also be viewed on the Web at http://www.ferc.gov using the
``eLibrary'' link. Enter the docket number excluding the last three
digits in the docket number field to access the document. For
assistance, please contact FERC Online Support at
<EMAIL_ADDRESS>or toll free at<PHONE_NUMBER>, or TTY,
contact<PHONE_NUMBER>.
    Any questions regarding this application should be directed to
William Rapp, Liberty Gas Storage, 101 Ash Street, San Diego, CA 92101,
phone<PHONE_NUMBER>.
    The filing is available for review at the Commission in the Public
Reference Room or may be viewed on the Commission's Web site at http://
www.ferc.gov using the eLibrary link. Enter the docket number excluding
the last three digits in the docket number field to access the
document. For assistance, contact FERC at<EMAIL_ADDRESS>or
call toll-free,<PHONE_NUMBER> or TYY,<PHONE_NUMBER>.
    There are two ways to become involved in the Commission's review of
this project. First, any person wishing to obtain legal status by
becoming a party to the proceedings for this project should, on or
before the comment date stated below file with the Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, a
motion to intervene in accordance with the requirements of the
Commission's Rules of Practice and Procedure (18 CFR 385.214 or
385.211) and the Regulations under the NGA (18 CFR 157.10). A person
obtaining party status will be placed on the service list maintained by
the Secretary of the Commission and will receive copies of all
documents filed by the applicant and by all other parties. A party must
submit 14 copies of filings made in the proceeding with the Commission
and must mail a copy to the applicant and to every other party. Only
parties to the proceeding can ask for court review of Commission orders
in the proceeding.
    However, a person does not have to intervene in order to have
comments considered. The second way to participate is by filing with
the Secretary of the Commission, as soon as possible, an original and
two copies of comments in support of or in opposition to this project.
The Commission will consider these comments in determining the
appropriate action to be taken, but the filing of a comment alone will
not serve to make the filer a party to the proceeding. The Commission's
rules require that persons filing comments in opposition to the project
provide copies of their protests only to the party or parties directly
involved in the protest.

    Persons who wish to comment only on the environmental review of
this project should submit an original and two copies of their comments
to the Secretary of the Commission. Environmental commentors will be
placed on the Commission's environmental mailing list, will receive
copies of the environmental documents, and will be notified of meetings
associated with the Commission's environmental review process.
Environmental commentors will not be required to serve copies of filed
documents on all other parties. However, the non-party commentors will
not receive copies of all documents filed by other parties or issued by
the Commission (except for the mailing of environmental documents
issued by the Commission) and will not have the right to seek court
review of the Commission's final order.
    The Commission strongly encourages electronic filings of comments,
protests and interventions in lieu of paper using the eFiling link at
http://www.ferc.gov. Persons unable to file electronically should
submit an original and 14 copies of the protest or intervention to the
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
eLibrary link and is available for review in the Commission's Public
Reference Room in Washington, DC. There is an eSubscription link on the
Web site that enables subscribers to receive email notification when a
document is added to a subscribed docket(s). For assistance with any
FERC Online service, please e-mail<EMAIL_ADDRESS>or call
(866) 208-3676 (toll free). For TTY, call<PHONE_NUMBER>.
    Comment Date: August 17, 2010.

Kimberly D. Bose,
Secretary.
[FR Doc. 2010-18969 Filed 8-2-10; 8:45 am]
BILLING CODE 6717-01-P