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SECURITIES AND EXCHANGE COMMISSION (Release No. 34-53521; File No. SR-Amex-2005-072) - page 13 / 32





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3. Liquidity

The Exchange states that the amount of the discount or premium in the trading price

relative to the NAV per Share may be influenced by the non-concurrent trading hours between

the major silver markets and the Amex. While the Silver Shares will trade on the Exchange until

4:15 p.m. ET, the Exchange states that liquidity in the OTC market for silver will be reduced

after the close of the major world silver markets, including London, Zurich, and the COMEX.

As a result, trading spreads and the resulting premium or discount on the Silver Shares may

widen as a result of reduced liquidity.34

The Exchange believes that Silver Shares will not trade at a material discount or premium

to the underlying silver held by the Trust based on potential arbitrage opportunities. Due to the

fact that the Shares can be created and redeemed only in Basket Aggregations, the Exchange

submits that arbitrage opportunities should provide a mechanism to mitigate the effect of any

premiums or discounts that may exist from time to time. If the price of the Shares deviates

enough from the price of silver to create a material discount or premium, an arbitrage

opportunity is created. If the Shares are inexpensive compared to the silver that underlies them,

an arbitrageur may buy the Shares at a discount, immediately redeem them in exchange for

silver, and sell the silver in the cash market at a profit. If the Shares are expensive compared to

the silver that underlies them, an arbitrageur may sell the Shares short, buy enough silver to

Associate General Counsel, Amex, and Florence Harmon, Senior Special Counsel, Division of Market Regulation, Commission, on March 9, 2006.


As noted above in the section titled ‘‘Description of the Silver Market,’’ the period of greatest liquidity in the silver market is typically that time of the day when trading in the European time zones overlaps with trading in the United States, which is when OTC market trading in New York, London, Zurich, and other centers coincides with futures and options trading on the COMEX division of the NYMEX. This period lasts for approximately four hours each New York business day morning.


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