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SECURITIES AND EXCHANGE COMMISSION (Release No. 34-53521; File No. SR-Amex-2005-072) - page 6 / 32

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silver represented by the contracts traded. Both COMEX and TOCUM permit trading on

margin. COMEX operates through a central clearance system. TOCOM has a similar clearance

system. In each case, the exchange acts as a counterparty for each member for clearing

purposes.

3.

Silver Market Regulation

There is no direct regulation of the global OTC market in silver. However, indirect

regulation of some of the overseas participants does occur. In the United Kingdom,

responsibility for the regulation of financial market participants, including the major

participating members of the LBMA, falls under the authority of the Financial Services

Authority (“FSA”) as provided by the Financial Services and Market Act of 2000 (“FSM Act”).

The Exchange states that under the FSM Act, all UK-based banks, together with other

investment firms, are subject to a range of requirements, including fitness and properness, capital

adequacy, liquidity, and systems and controls. The FSA is responsible for regulating investment

products, including derivatives, and those who deal in investment products. Regulation of spot,

commercial forwards and deposits of silver not covered by the FSM Act is provided for by The

London Code of Conduct for Non-Investment Products, which was established by market

participants in conjunction with the Bank of England, and is a voluntary code of conduct among

market participants.

The Exchange states that participants in the U.S. OTC market for silver are generally

regulated by their institutional supervisors, which regulate their activities in the other markets in

which they operate. For example, participating banks are regulated by the banking authorities.

In the U.S., the Commodities Futures Trading Commission (“CFTC”), an independent

governmental agency with the mandate to regulate commodity futures and options markets in the

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