Notice2021-26712
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the Franklin Responsibly Sourced Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 10, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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[Federal Register Volume 86, Number 235 (Friday, December 10, 2021)]
[Notices]
[Pages 70555-70560]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-26712]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93720; File No. SR-NYSEArca-2021-73]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To List and Trade Shares of the Franklin Responsibly
Sourced Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust
Shares)
December 6, 2021.
I. Introduction
On August 23, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
Franklin Responsibly Sourced Gold ETF (``Fund''), a series of the
Franklin Templeton Holdings Trust (``Trust''), under NYSE Arca Rule
8.201-E. The proposed rule change was published for comment in the
Federal Register on September 8, 2021.\3\ On September 29, 2021,
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a
longer period within which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to approve or disapprove the proposed rule change.\5\
The Commission has received no comments on the proposed rule change.
The Commission is publishing this order to institute proceedings
pursuant to Section 19(b)(2)(B) of the Act \6\ to determine whether to
approve or disapprove the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92840 (September 1,
2021), 86 FR 50385 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 93179, 86 FR 55033
(October 5, 2021). The Commission designated December 7, 2021, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change \7\
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\7\ Additional information regarding the Fund, the Trust and the
Shares, including investment strategies, creation and redemption
procedures, and portfolio holdings can be found in the Notice, supra
note 3.
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The Exchange proposes to list and trade Shares of the Fund \8\
under NYSE Arca Rule 8.201-E, which governs the listing and trading of
Commodity-Based Trust Shares \9\ on the Exchange. The Sponsor of the
Fund is Franklin Holdings, LLC, a Delaware limited liability company.
BNY Mellon Asset Servicing, a division of The Bank of New York Mellon
(``BNYM''), serves as the Fund's administrator (``Administrator'') and
transfer agent (the ``Transfer Agent''). Delaware Trust Company, a
subsidiary of the Corporation Service Company serves as trustee of the
Trust (``Trustee''). J.P. Morgan Chase Bank, N.A., London branch is the
custodian of the Fund's Gold Bullion (as defined in the Registration
Statement) (the ``Gold Custodian'').\10\ BNYM will serve as the
custodian of the Fund's cash, if any (the ``Cash Custodian'').
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\8\ On April 22, 2021, the Trust submitted to the Commission on
a confidential basis its draft registration statement on Form S-1
under the Securities Act of 1933 (``Registration Statement''). The
Registration Statement is not yet effective, and the Exchange will
not commence trading in Shares until the Registration Statement
becomes effective.
\9\ Commodity-Based Trust Shares are securities issued by a
trust that represent investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
Trust. The Exchange represents that the Shares will satisfy the
requirements of NYSE Arca Rule 8.201-E and thereby qualify for
listing on the Exchange and that the Trust relies on the exemption
contained in Rule 10A-3(c)(7) regarding the application of Rule 10A-
3 (17 CFR 240.10A-3) under the Act.
\10\ The Gold Custodian is responsible for safekeeping the
Fund's gold pursuant to the Allocated Gold Account Agreement and the
Unallocated Gold Account Agreement. The Gold Custodian will
facilitate the transfer of gold in and out of the Fund through (i)
the unallocated gold accounts it may maintain for each Authorized
Participant (as defined below) or unallocated gold accounts that may
be maintained for an Authorized Participant by another London
Precious Metals Clearing Limited clearing bank, and (ii) the
unallocated and allocated gold accounts it will maintain for the
Fund. The Gold Custodian is responsible for allocating specific bars
of gold to the Fund Allocated Account. As used herein, ``Fund
Allocated Account'' means the allocated gold account of the Trust
established with the Gold Custodian on behalf of the Fund by the
Allocated Gold Account Agreement, to be used to hold gold that is
transferred from the Fund Unallocated Account to be held by the Fund
in allocated form; the ``Fund Unallocated Account'' means the
unallocated gold account of the Trust established with the Gold
Custodian on behalf of the Fund by the Unallocated Gold Account
Agreement, to be used to facilitate the transfer of gold in and out
of the Fund. The Gold Custodian will provide the Fund with regular
reports detailing the gold transfers into and out of the Fund
Unallocated Account and the Fund Allocated Account and identifying
the gold bars held in the Fund Allocated Account.
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Exchange's Description of the Operation of the Trust and Fund
The investment objective of the Fund will be for the Shares to
reflect the performance of the price of gold bullion, less the expenses
of the Fund's operations. Shares of the Fund will represent units of
fractional undivided beneficial interest in and ownership of the net
assets of the Fund.
The Fund seeks to predominantly hold responsibly sourced gold
bullion, defined as London Good Delivery gold bullion bars produced
after January 2012 in accordance with London Bullion Market
Association's (``LBMA'') Responsible Gold Guidance (the ``Guidance'').
From time to time, in certain circumstances a portion of the Fund's
assets may include pre-2012 LBMA gold bullion (i.e., London Good
Delivery gold bars produced prior to January 2012 which was not subject
to the Guidance), including, for example, due to availability
constraints. In those circumstances, the Gold Custodian will seek to
replace any pre-2012 LBMA gold bullion in the Fund Allocated Account
with LBMA good delivery bars produced after January 2012 as soon as is
practicable.
[[Page 70556]]
The Guidance is a mandatory governance framework for the
responsible sourcing of gold applicable to LBMA approved good delivery
refiners that is designed to promote the integrity of the global supply
chain for the wholesale gold markets. Among other things, the Guidance
includes measures to address environmental issues, avoid materials from
conflict-afflicted areas, and combat money laundering, financing of
terrorism, and human rights abuses, including child labor. The Guidance
requires each LBMA good delivery refinery to undergo a comprehensive
audit, at least annually, in order to confirm compliance with the
LBMA's minimum requirements related to the responsible sourcing of gold
and to publicly report results (audits are made available on the LBMA
website). The audits, among other aspects, focus on the refiner's
management systems and controls, and whether they are robust and
appropriate to addressing the refiner's risk profile. Additional
information regarding the LBMA's efforts to promote ethical sourcing of
gold and a copy of the current version of the Guidance is available at
<a href="https://www.lbma.org.uk/responsible-sourcing">https://www.lbma.org.uk/responsible-sourcing</a>.
The Fund will not trade in gold futures, options, or swap contracts
on any futures exchange or over-the-counter (``OTC''). The Fund will
not hold or trade in commodity futures contracts, ``commodity
interests,'' or any other instruments regulated by the Commodity
Exchange Act. The Fund's Cash Custodian may hold cash proceeds from
gold sales and other cash received by the Fund.
The Shares are intended to constitute a simple and cost-efficient
means of gaining investment benefits similar to those of holding gold
bullion directly, by providing investors an opportunity to participate
in the responsibly sourced gold market through an investment in the
Shares, instead of the traditional means of purchasing, storing and
insuring gold.
Operation of the Gold Market
The global gold trading market consists of OTC transactions in
spot, forwards, and options and other derivatives, together with
exchange-traded futures and options.
The OTC gold market includes spot, forward, and option and other
derivative transactions conducted on a principal-to-principal basis.
While this is a global, nearly 24-hour per day market, its main centers
are London, New York, and Zurich.
According to the Registration Statement, most OTC market trades are
cleared through London. The LBMA plays an important role in setting OTC
gold trading industry standards. A London Good Delivery Bar (as
described below), which is acceptable for delivery in settlement of any
OTC transaction, will be acceptable for delivery to the Fund, as
discussed below.
The most significant gold futures exchange is COMEX, operated by
Commodities Exchange, Inc., a subsidiary of New York Mercantile
Exchange, Inc., and a subsidiary of the Chicago Mercantile Exchange
Group (the ``CME Group''). Other commodity exchanges include the Tokyo
Commodity Exchange (``TOCOM''), the Multi Commodity Exchange of India
(``MCX''), the Shanghai Futures Exchange, the Shanghai Gold Exchange,
ICE Futures US (the ``ICE''), and the Dubai Gold & Commodities
Exchange. The CME Group and ICE are members of the Intermarket
Surveillance Group (``ISG'').
The London Gold Bullion Market
According to the Registration Statement, most trading in physical
gold is conducted on the OTC market and is predominantly cleared
through London. In addition to coordinating market activities, the LBMA
acts as the principal point of contact between the market and its
regulators. A primary function of the LBMA is its involvement in the
promotion of refining standards by maintenance of the ``London Good
Delivery Lists,'' which are the lists of LBMA accredited melters and
assayers of gold. The LBMA also coordinates market clearing and
vaulting, promotes good trading practices and develops standard
documentation.
The term ``loco London'' refers to gold bars physically held in
London that meet the specifications for weight, dimensions, fineness
(or purity), identifying marks (including the assay stamp of an LBMA
acceptable refiner), and appearance set forth in the good delivery
rules promulgated by the LBMA from time to time. Gold bars meeting
these requirements are known as ``London Good Delivery Bars.''
The unit of trade in London is the troy ounce, whose conversion
between grams is: 1,000 grams = 32.1507465 troy ounces and 1 troy ounce
= 31.1034768 grams. A London Good Delivery Bar is acceptable for
delivery in settlement of a transaction on the OTC market. Typically
referred to as 400-ounce bars, a London Good Delivery Bar must contain
between 350 and 430 fine troy ounces of gold, with a minimum fineness
(or purity) of 995 parts per 1,000 (99.5%), be of good appearance and
be easy to handle and stack. The fine gold content of a gold bar is
calculated by multiplying the gross weight of the bar (expressed in
units of 0.025 troy ounces) by the fineness of the bar.
Creation and Redemption of Shares
According to the Registration Statement, the Fund will create and
redeem Shares on a continuous basis in one or more Creation Units. A
Creation Unit equals a block of 50,000 Shares. The Fund will issue
Shares in Creation Units to certain authorized participants
(``Authorized Participants'') on an ongoing basis. Each Authorized
Participant must be a registered broker-dealer or other securities
market participant such as a bank or other financial institution which
is not required to register as a broker-dealer to engage in securities
transactions, a participant in The Depository Trust Company (``DTC''),
and have entered into an agreement with the Administrator (the
``Participant Agreement''), and has established an unallocated gold
account with the Gold Custodian or another London Precious Metals
Clearing Limited clearing bank.
Creation Units may be created or redeemed only by Authorized
Participants. The creation and redemption of Creation Units is only
made in exchange for the delivery to the Fund or the distribution by
the Fund of the amount of gold represented by the Creation Units being
created or redeemed. The amount of gold required to be delivered to the
Fund in connection with any creation, or paid out upon redemption, is
based on the combined NAV of the number of Shares included in the
Creation Units being created or redeemed as determined on the day the
order to create or redeem Creation Units is properly received and
accepted. Orders must be placed by 3:59:59 p.m. New York time. The day
on which the Administrator receives a valid purchase or redemption
order is the order date. Creation Units may only be issued or redeemed
on a day that the Exchange is open for regular trading.
According to the Registration Statement, the total deposit required
to create each Creation Unit, or a Creation Unit Gold Delivery Amount,
is an amount of gold and cash, if any, that is in the same proportion
to the total assets of the Fund (net of estimated accrued expenses and
other liabilities) on the date the order to purchase is properly
received as the number of Shares to be created under the purchase order
is in proportion to the total number of Shares outstanding on the date
the order is received. An Authorized Participant who places a purchase
order is
[[Page 70557]]
responsible for transferring the Creation Unit Gold Delivery Amount to
the Fund Unallocated Account. Upon receipt, the Administrator will
direct DTC to credit the number of Creation Units ordered to the
Authorized Participant's DTC account. The Gold Custodian will transfer
the Creation Unit Gold Delivery Amount from the Fund Unallocated
Account to the Fund Allocated Account by allocating to the Fund
Allocated Account specific bars of gold which the Gold Custodian holds,
or instructing a sub-custodian to allocate specific bars of gold held
by or for the sub-custodian.
The redemption distribution from the Fund consists of a credit to
the redeeming Authorized Participant's unallocated account in the
amount of the Creation Unit Gold Delivery Amount. The Creation Unit
Gold Delivery Amount for redemptions is the number of ounces of gold
held by the Fund to be paid out upon redemption of a Creation Unit. The
Gold Custodian will transfer the redemption amount from the Fund
Allocated Account to the Fund Unallocated Account and, thereafter, to
the redeeming Authorized Participant's unallocated account.
Net Asset Value
To determine the Fund's NAV, the Administrator will value the gold
held by the Fund on the basis of the LBMA Gold Price PM, as published
by the ICE Benchmark Administration Limited (the ``IBA''). IBA operates
electronic auctions for spot, unallocated loco London gold, providing a
market-based platform for buyers and sellers to trade. The auctions are
run at 10:30 a.m. and 3:00 p.m. London time for gold. The final auction
prices are published to the market as the LBMA Gold Price AM and the
LBMA Gold Price PM, respectively.
The Administrator will calculate the NAV on each day the Exchange
is open for regular trading, at the earlier LBMA Gold Price PM for the
day or 12:00 p.m. New York time. If no LBMA Gold Price (AM or PM) is
made on a particular evaluation day or if the LBMA Gold Price PM has
not been announced by 12:00 p.m. New York time on a particular
evaluation day, the next most recent LBMA Gold Price AM or PM will be
used in the determination of the NAV, unless the Sponsor determines
that such price is inappropriate to use as the basis for such
determination.
Once the value of the gold has been determined, the Administrator
will subtract all estimated accrued expenses and other liabilities of
the Fund from the total value of the gold and all other assets of the
Fund. The resulting figure is the NAV. The Administrator will determine
the NAV per Share by dividing the NAV of the Fund by the number of
Shares outstanding as of the close of trading on the Exchange.
Availability of Information Regarding Gold
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a commodity such as gold over the
Consolidated Tape. However, there will be disseminated over the
Consolidated Tape the last sale price for the Shares, as is the case
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of
information about gold and gold markets available on public websites
and through professional and subscription services.
Investors may obtain gold pricing information on a 24-hour basis
based on the spot price for an ounce of gold from various financial
information service providers, such as Reuters and Bloomberg.
Reuters and Bloomberg, for example, provide at no charge on their
websites delayed information regarding the spot price of gold and last
sale prices of gold futures, as well as information about news and
developments in the gold market. Reuters and Bloomberg also offer a
professional service to subscribers for a fee that provides information
on gold prices directly from market participants. Complete real-time
data for gold futures and options prices traded on the COMEX are
available by subscription from Reuters and Bloomberg. There are a
variety of other public websites providing information on gold, ranging
from those specializing in precious metals to sites maintained by major
newspapers. In addition, the LBMA Gold Price is publicly available at
no charge at <a href="http://www.lbma.org">www.lbma.org</a>.uk.
Availability of Information
The intraday indicative value (``IIV'') per Share for the Shares
will be disseminated by one or more major market data vendors. The IIV
will be calculated based on the amount of gold held by the Fund and a
price of gold derived from updated bids and offers indicative of the
spot price of gold.\11\
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\11\ The IIV on a per Share basis disseminated during the
Exchange's Core Trading Session, as defined in NYSE Arca Rule 7.34-
E, should not be viewed as a real-time update of the NAV, which is
calculated once a day.
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The Fund's website will contain the following information, on a per
Share basis: (a) The Official Closing Price \12\ and a calculation of
the premium or discount of such Official Closing Price against the
Fund's NAV; and (b) data in chart format displaying the frequency
distribution of discounts and premiums of the Official Closing Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. The website for the Fund will also provide
its prospectus. In addition, information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services. Information regarding the previous day's closing
price and trading volume information for the Shares will be published
daily in the financial section of newspapers.
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\12\ The term ``Official Closing Price'' is defined in NYSE Arca
Rule 1.1(ll) as the reference price to determine the closing price
in a security for purposes of Rule 7-E Equities Trading, and the
procedures for determining the Official Closing Price are set forth
in that rule.
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Criteria for Initial and Continued Listing
The Fund will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
A minimum of 100,000 Shares will be required to be outstanding at
the start of trading, which is equivalent to 1,384 fine ounces of gold
or approximately $2,500,000 as of July 22, 2021. The Exchange believes
that the anticipated minimum number of Shares outstanding at the start
of trading is sufficient to provide adequate market liquidity.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Fund subject to the Exchange's existing rules
governing the trading of equity securities. Trading in the Shares on
the Exchange will occur in accordance with NYSE Arca Rule 7.34-E(a).
The Exchange has appropriate rules to facilitate transactions in the
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-E
Commentary .03, the minimum price variation (``MPV'') for quoting and
entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00, for which the MPV for order entry is $0.0001.
Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on
ETP Holders acting as registered Market Makers in the Shares to
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder
acting as a registered Market Maker in the Shares is required to
provide the Exchange with information relating to its trading in the
underlying gold, any related futures or options on futures, or any
other related derivatives.
[[Page 70558]]
Commentary .04 of NYSE Arca Rule 11.3-E requires an ETP Holder acting
as a registered Market Maker, and its affiliates, in the Shares to
establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of any material nonpublic
information with respect to such products, any components of the
related products, any physical asset or commodity underlying the
product, applicable currencies, underlying indexes, related futures or
options on futures, and any related derivative instruments (including
the Shares).
As a general matter, the Exchange has regulatory jurisdiction over
its ETP Holders and their associated persons, which include any person
or entity controlling an ETP Holder. To the extent the Exchange may be
found to lack jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or futures contracts, the
Exchange could obtain information regarding the activities of such
subsidiary or affiliate through surveillance sharing agreements with
regulatory organizations of which such subsidiary or affiliate is a
member.
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 conditions in the underlying gold
market have caused disruptions and/or lack of trading, 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 will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\13\ The Exchange will halt trading in the Shares if the
NAV of the Fund is not calculated or disseminated daily. The Exchange
may halt trading during the day in which an interruption occurs to the
dissemination of the IIV, as described above. If the interruption to
the dissemination of the IIV persists past the trading day in which it
occurs, the Exchange will halt trading no later than the beginning of
the trading day following the interruption.
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\13\ See NYSE Arca Rule 7.12-E.
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Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority Inc. (``FINRA''), on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws.\14\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
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\14\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\15\
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\15\ For a list of the current members of ISG, see
<a href="http://www.isgportal.org">www.isgportal.org</a>.
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Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able
to obtain information regarding trading in the Shares and the
underlying gold through ETP Holders acting as registered Market Makers,
in connection with such ETP Holders' proprietary or customer trades
through ETP Holders which they effect on any relevant market.
In addition, the Exchange also has a general policy prohibiting the
improper distribution of material, non-public information by its
employees.
All statements and representations made in this filing regarding
(a) the description of the portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
listing rules specified in this rule filing shall constitute continued
listing requirements for listing the Shares of the Fund on the
Exchange.
The Trust has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The procedures for
purchases and redemptions of Shares in Creation Units (including noting
that Shares are not individually redeemable); (2) NYSE Arca Rule 9.2-
E(a), which imposes a duty of due diligence on its ETP Holders to learn
the essential facts relating to every customer prior to trading the
Shares; (3) how information regarding the IIV is disseminated; (4) the
requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (5) the possibility that trading spreads
and the premium or discount on the Shares may widen as a result of
reduced liquidity of gold trading during the Core and Late Trading
Sessions after the close of the major world gold markets; and (6)
trading information. For example, the Information Bulletin will advise
ETP Holders, prior to the commencement of trading, of the prospectus
delivery requirements applicable to the Fund. The Exchange notes that
investors purchasing Shares directly from the Fund will receive a
prospectus. ETP Holders purchasing Shares from the Fund for resale to
investors will deliver a prospectus to such investors.
In addition, the Information Bulletin will reference that the Fund
is subject to various fees and expenses as will be described in the
Registration Statement. The Information Bulletin will also reference
the fact that there is no regulated source of last sale information
regarding physical gold, that the Commission has no jurisdiction over
the trading of gold as a physical commodity, and that the CFTC has
regulatory
[[Page 70559]]
jurisdiction over the trading of gold futures contracts and options on
gold futures contracts.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-73 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \16\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposal. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\17\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposal's consistency with Section 6(b)(5) of the Act,
which requires, among other things, that the rules of a national
securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade,'' and ``to protect investors and the public
interest.'' \18\
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\17\ Id.
\18\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
[SRO] that proposed the rule change.'' \19\ The description of a
proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all
be sufficiently detailed and specific to support an affirmative
Commission finding,\20\ and any failure of an SRO to provide this
information may result in the Commission not having a sufficient basis
to make an affirmative finding that a proposed rule change is
consistent with the Act and the applicable rules and regulations.\21\
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\19\ 17 CFR 201.700(b)(3).
\20\ See id.
\21\ See id.
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The Commission is concerned that certain aspects of the proposal
are not sufficiently described and that the Exchange has not met its
burden to demonstrate that the proposed rule change is consistent with
the Act and the rules and regulations issued thereunder. For example,
with respect to creation and redemption of Shares, the Exchange states
that the Gold Custodian will transfer the Creation Unit Gold Delivery
Amount from the Fund Unallocated Account to the Fund Allocated Account
by allocating to the Fund Allocated Account specific bars of gold which
the Gold Custodian holds, or instructing a sub-custodian to allocate
specific bars of gold held by or for the sub-custodian.\22\ However,
the Exchange does not explain how this process will take place or
provide sufficient details on how the costs involved will be allocated.
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\22\ See Notice, supra note 3, 86 FR at 50388.
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Furthermore, the Commission is concerned that the Exchange does not
adequately explain how other aspects of the proposal are designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and to protect investors and the
public interest, as required by Section 6(b)(5) of the Act. The
Exchange states that the Administrator will value the gold held by the
Fund using the LBMA Gold Price PM as published by the IBA.\23\ This
suggests that currently there is no price difference between
responsibly sourced gold and non-responsibly sourced gold, but the
Exchange does not provide sufficient evidence for the Commission to
conclude that the price of responsibly sourced gold in the OTC spot
market for gold is not different than for non-responsibly sourced gold.
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\23\ Id.
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For these reasons, the Commission believes it is appropriate to
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \24\
to determine whether the proposal should be approved or disapproved.
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\24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with Section 6(b)(5) or any other provision of the Act,
or the rules and regulations thereunder. Although there do not appear
to be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\25\
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\25\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by January 3, 2022. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
January 14, 2022.
The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal in addition to any
other comments they may wish to submit about the proposed rule change.
In this regard, the Commission seeks commenters' views regarding the
Exchange's proposal to list and trade the Shares is adequately designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and to protect investors and
the public interest, consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7c0e091019511f1311111912080f3c0f191f521b130a"><span class="__cf_email__" data-cfemail="0c7e796069216f6361616962787f4c7f696f226b637a">[email protected]</span></a>. Please include
File Number SR-NYSEArca-2021-73 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2021-73. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use
[[Page 70560]]
only one method. The Commission will post all comments on the
Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2021-73 and should be submitted
by January 3, 2022. Rebuttal comments should be submitted by January
14, 2022.
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\26\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26712 Filed 12-9-21; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.