Notice2024-01511
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the COtwo Advisors Physical European Carbon Allowance Trust 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
January 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 18 (Friday, January 26, 2024)</title>
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[Federal Register Volume 89, Number 18 (Friday, January 26, 2024)]
[Notices]
[Pages 5273-5283]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-01511]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99409; File No. SR-NYSEARCA-2024-05]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the COtwo Advisors
Physical European Carbon Allowance Trust Under NYSE Arca Rule 8.201-E
(Commodity-Based Trust Shares)
January 22, 2024.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on January 10, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and
[[Page 5274]]
III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the COtwo
Advisors Physical European Carbon Allowance Trust under NYSE Arca Rule
8.201-E (Commodity-Based Trust Shares). The proposed rule change is
available on the Exchange's website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
COtwo Advisors Physical European Carbon Allowance Trust (the
``Trust''), under NYSE Arca Rule 8.201-E, which governs the listing and
trading of Commodity-Based Trust Shares.\4\
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\4\ 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.
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The Trust was formed as a Delaware statutory trust on January 12,
2023.\5\ The Trust has no fixed termination date. The Trust will not be
registered as an investment company under the Investment Company Act of
1940, as amended,\6\ and is not required to register under such act.
The Trust is not a commodity pool for purposes of the Commodity
Exchange Act, as amended.\7\
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\5\ On May 12, 2023, the Trust filed with the Commission a
registration statement on Form S-1 (File No. 333-271910) (the
``Registration Statement'') under the Securities Act of 1933 (15
U.S.C. 77a) (the ``Securities Act''). The description of the
operation of the Trust herein is based, in part, on the Registration
Statement. The Registration Statement in not yet effective and the
Shares will not trade on the Exchange until such time that the
Registration Statement is effective.
\6\ 15 U.S.C. 80a-1.
\7\ 17 U.S.C. 1.
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The sponsor of the Trust is COtwo Advisors LLC, a Delaware limited
liability company (``Sponsor''). State Street Bank and Trust Company
serves as the Trust's administrator (the ``Administrator'') to perform
various administrative, accounting and recordkeeping functions on
behalf of the Trust. Wilmington Trust serves as trustee of the Trust
(the ``Trustee''). State Street Bank and Trust Company serves as the
Trust's transfer agent (the ``Transfer Agent'') and as custodian of the
Trust's cash, if any (``Cash Custodian'').\8\
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\8\ The Cash Custodian is responsible for holding the Trust's
cash as well as receiving and dispensing cash on behalf of the Trust
in connection with the payment of Trust expenses.
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The Exchange represents that the Shares will satisfy the
requirements of NYSE Arca Rule 8.201-E and thereby will qualify for
listing on the Exchange.
Operation of the Trust \9\
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\9\ The description of the operation of the Trust, the Shares,
and the carbon credit industry contained herein are based, in part,
on the Registration Statement. See note 5, supra.
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The investment objective of the Trust will be for the Shares to
reflect the performance of the price of EU Carbon Emission Allowances
for stationary installations (``EUAs''), less the Trust's expenses. The
Trust intends to achieve its objective by investing all of its assets
in EUAs on a non-discretionary basis (i.e., without regard to whether
the value of EUAs is rising or falling over any particular period).
Shares of the Trust will represent units of fractional undivided
beneficial interest in and ownership of the Trust. The Trust's only
ordinary recurring expense will be the Sponsor's annual fee. The Trust
will not hold any assets other than EUAs and, possibly, a very limited
amount of cash to pay Trust expenses. The Trust may also cause the
Sponsor to receive EUAs from the Trust in such a quantity as may be
necessary to pay the Sponsor's annual fee.
The Trust will not invest in futures, options, options on futures,
or swap contracts. The Trust will not hold or trade in commodity
futures contracts, ``commodity interests,'' or any other instruments
regulated by the Commodity Exchange Act. As stated above, the Trust's
Cash Custodian may hold cash proceeds from EUA sales to pay Trust
expenses. All EUAs will be held in the Union Registry (defined below).
The Trust is not a proxy for investing in EUAs. Rather, the Shares
are intended to provide a cost-effective means of obtaining investment
exposure through the securities markets that is similar to an
investment in EUAs. Specifically, the Shares are intended to constitute
a simple and cost-efficient means of gaining investment benefits
similar to those of holding EUAs directly, by providing investors an
opportunity to participate in the EUA market through an investment in
the Shares, instead of the traditional means of purchasing and storing
EUAs. Trust shareholders will be exposed to the risks of investing in
EUAs, as well as to additional risks that are unrelated to EUAs. For
example, the public trading price at which an investor buys or sells
Shares during the day from their broker may be different from the value
of the Trust's holdings. Price differences may relate primarily to
supply and demand forces at work in the secondary trading market for
the Trust's Shares that are closely related to, but not identical to,
the same forces influencing the prices of EUAs, cash and cash
equivalents that constitute the Trust's assets. In addition, EUAs will
have to be sold to pay Trust expenses that would not be associated with
an investment in EUAs. Additional risks related to the Trust's
structure, the Sponsor's management of the Trust, and the tax treatment
of an investment in Shares are further in the Registration Statement.
EUAs and the EUA Industry
Description of EU Emissions Trading Scheme
According to the Registration Statement, the European Union
Emissions Trading System (``EU ETS'') is a ``cap and trade'' system
that caps the total volume of greenhouse gas (``GHG'') emissions from
installations and aircraft operators responsible for around 40% of
European Union (``EU'') GHG emissions.\10\ The EU ETS is the largest
cap and trade system in the world and covers more than 11,000 power
stations and industrial plants in 31 countries, and flights between
airports of participating countries. The EU ETS is administered by the
EU Commission, which issues a predefined amount of EUAs through
auctions or
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\10\ There are two types of EU emissions allowance: (i) general
allowances for stationary installations, or EUA; and (ii) allowances
for the aviation sector (``EUAA''). The Trust will hold EUAs only.
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[[Page 5275]]
free allocation. An EUA represents the right to emit one metric ton of
carbon dioxide equivalent into the atmosphere by operators of
stationary installations (``Covered Entities''). By the end of April
each year, all Covered Entities are required to surrender EUAs equal to
the total volume of actual emissions from their installation for the
last calendar year. EU ETS operators can buy or sell EUAs to achieve EU
ETS compliance.
In 2012, EU ETS operations were centralized into a single EU
registry operated by the EU Commission (the ``Union Registry''), which
covers all countries participating in the EU ETS. According to the
Registration Statement, the Union Registry is an online database that
holds accounts for all entities covered by the EU ETS as well as for
participants (such as the Trust) not covered under the EU ETS. The
Union Registry can be accessed online in a similar manner to online
banking systems. An account must be opened in the Union Registry by a
legal or natural person before being able to participate in the EU ETS
and transact in EUAs. The European Union Transaction Log (``EUTL'')
\11\ checks, records and authorizes all transactions that take place
between accounts in the Union Registry to ensure that transfers are in
accordance with the EU ETS rules. The Union Registry is at all times
responsible for holding the EUAs. All EUAs are held in the Union
Registry.
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\11\ The EUTL is a central transaction log that checks and
records all transactions taking place within the EU ETS. It is run
by the European Commission and provides an easy access to emission
trading data contained in the EUTL. See <a href="https://www.eea.europa.eu/data-and-maps/dashboards/emissions-trading-viewer-1">https://www.eea.europa.eu/data-and-maps/dashboards/emissions-trading-viewer-1</a>.
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Major Holders and Allowance Use Cases
According to the Registration Statement, while there is limited
publicly available data on individuals or individual organizations'
holdings in physical carbon allowances, carbon allowances are primarily
held for three different use cases:
(a) Complying with the EU ETS: Companies that need to surrender
allowances under the EU ETS hold allowances to surrender them annually.
These positions are typically built over time and ultimately
surrendered at time of compliance. Therefore, the largest emitters in
the EU ETS hold a significant amount of allowances, which include
entities such as large utilities with a substantial share of fossil
fuel fired power plants, cement companies, steel producers, chemical
producers, oil and gas majors and airlines.
(b) Providing financial services for hedging purposes or
speculation, such as clearing houses for the European Energy Exchange
or the Intercontinental Exchange, or banks holding allowances for their
clients.
(c) Trading on and speculating around price moves, using physical
emission allowances. This can take many forms, including ``yield
trades'', which includes holding a physical allowance and selling an
EUA future at a premium to gain the yield in the forward curve; or
outright positions for short term or long term speculation.
In addition to holding physical allowances, there is a liquid
secondary futures and options market that is primarily used for hedging
future emissions or speculating.
Trading Location
According to the Registration Statement, the EU ETS is linked to
small emissions trading systems in Europe (Norway, Switzerland, Iceland
and Liechtenstein), but not to any other major cap and trade markets.
Therefore, allowances handed out in the EU ETS are not transferable to
any registry outside of the EU ETS and cannot be used for compliance in
any other cap and trade market.
There are a number of other trading systems globally, and like the
EU ETS, no allowances of any of these systems can be used in any other
system:
(a) Western Climate Initiative (WCI): The State of California and
the Canadian province Quebec created a linked cap and trade market,
that covers >80% of emissions.
(b) Regional Greenhouse Gas Initiative (RGGI): a group of US east
coast states created a linked market that covers power generators only.
(c) The China National ETS: Technically not a cap and trade scheme
(as the amount of allowances is not fixed but calculated according to
historic production of units).
(d) South Korea ETS: A comprehensive market covering the majority
of Korean emissions.
Pricing of Allowances and Trading Volume
According to the Registration Statement, there are currently two
primary avenues for trading EUAs: a primary market and a secondary
market. The primary market involves participation in a regularly
scheduled auction. The secondary market involves transactions between
buyers and sellers on regulated markets. The contracts offered for
trading are the following (1) instruments with a daily expiry,
including spot EUAs and the Daily EUA Future (as defined below), (2)
futures contracts with various maturities; and (3) options on futures
contracts. There are also over-the-counter transactions, but they
comprise a negligible percentage of transactions.
The spot and futures markets for EUAs have existed since 2005 after
the formal launch of the EU ETS on January 1, 2005. Spot EUA contracts
are traded exclusively on the European Energy Exchange AG
(``EEX''),\12\ and futures contracts are traded on EEX, and ICE Endex
Markets B.V. (``ICE Endex'') \13\ and Nasdaq Oslo, although the
latter's market share is marginal. Additionally, options on EUA futures
contracts are traded on EEX and ICE Endex, but not on Nasdaq Oslo.
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\12\ EEX is an exchange under the German Exchange Act and a
Regulated Market (``RM''), as defined in the Markets in Financial
Instruments Directive (Directive 2014/65/EC) (``MIFID II''). As a RM
for spot and derivatives transactions, EEX is supervised by the
Saxon State Ministry for Economic Affairs, Labour and Transport (the
``Exchange Supervisory Authority''). The Exchange Supervisory
Authority is in charge of the legal supervision of EEX and of market
supervision of the trading participants according to the German
Exchange Act. The members of EEX are supervised by the Federal
Financial Supervisory Authority (BaFin). All trading participants
are required to comply with the market abuse regulations within the
German Securities Trading Act. Beside this supervision, the market
behavior at the spot and derivatives markets of all exchange
participants is supervised on a daily basis by the Market
Surveillance Office, an independent body of the exchange according
to Section 7 of the German Exchange Act. See <a href="https://www.esma.europa.eu/sites/default/files/EEX_1.pdf">https://www.esma.europa.eu/sites/default/files/EEX_1.pdf</a>. See also Rules and
Regulations at <a href="https://www.eex.com/en/markets/trading-ressources/rules-and-regulations">https://www.eex.com/en/markets/trading-ressources/rules-and-regulations</a>.
\13\ ICE Endex is regulated in the Netherlands by the Dutch
Authority for the Financial Markets (``AFM'') as a RM, as defined in
MIFID II, which is implemented in Dutch Act on Financial Supervision
(``DFSA''). The license as a RM is obtained under Section 5:26(1) of
the DFSA, resulting in an authorization by the Minister of Dutch
Ministry of Finance to operate a RM and supervised by the AFM. In
the UK, ICE Endex is a Recognized Overseas Investment Exchange by
the Financial Conduct Authority. See https://www.ice.com/endex/
regulation#:~:text=The%20Dutch%20Authority%20for%20Consumers,energy%2
0industry%20and%20wholesale%20trading. ICE Endex is also recognized
by the CFTC as an authorized Foreign Board of Trade. See <a href="https://www.cftc.gov/sites/default/files/idc/groups/public/@otherif/documents/ifdocs/orgiceeregorder170110.pdf">https://www.cftc.gov/sites/default/files/idc/groups/public/@otherif/documents/ifdocs/orgiceeregorder170110.pdf</a>.
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According to the Registration Statement, the EUA markets are
generally liquid. The classifications for market participants include
five basic categories--(1) investment firms or credit institutions, (2)
investment funds, (3) other financial institutions, (4) operators with
compliance obligations and, (5) commercial undertakings which are non-
financial firms without compliance obligations.\14\ According to
[[Page 5276]]
the European Union Transaction Log, there are over 18,773 registry
accounts.\15\ The number of participants in the market have a direct
bearing on the quality of trading. An Oxera report indicates that as
the number of participants trading EUA futures has increased
consistently since January 2017, relative spreads, calculated as the
average quoted spread divided by the closing price, have decreased
significantly--from just under 0.4% in January 2017 to roughly 0.06% in
October 2021.\16\ In a February 2023 publication, Refinitiv estimated
the total EUA market size to be [euro]751.5 billion, up 10% versus
2021.\17\ As of January 2023, the secondary market had average daily
trading volume of [euro]2 billion, with the majority of the liquidity
in the futures market. EUA auctions are held on a near-daily basis
throughout the year, other than between mid-December to mid-January,
when auctions are paused. Twenty-eight countries (25 EU member states
plus Liechtenstein, Norway, and Iceland) have agreed to use EEX to
conduct their regularly scheduled auctions. Germany and Poland have
opted out of the common auction but also utilize the EEX for auctions.
Hence, EUA auctions take place exclusively on EEX. These auctions take
place on a regularly scheduled basis; the number of allowances being
auctioned is disclosed on a schedule prior to auction. Prices achieved
in these auctions are published on various publicly-accessible
websites, including the European Commission's primary website.
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\14\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
(europa.eu).
\15\ See <a href="https://ec.europa.eu/clima/ets/">https://ec.europa.eu/clima/ets/</a>.
\16\ Carbon trading in the European Union: An economic
assessment of market functioning in 2021, Oxera, p. 42 (February 15,
2022); available at <a href="https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf">https://www.oxera.com/wp-content/uploads/2022/02/Oxera-EU-carbon-trading-report-3.pdf</a>.
\17\ See ``Review of Carbon Markets in 2022'' (February 2023):
available at <a href="https://www.refinitiv.com/content/dam/marketing/en_us/documents/gated/reports/carbon-market-year-in-review-2022.pdf">https://www.refinitiv.com/content/dam/marketing/en_us/documents/gated/reports/carbon-market-year-in-review-2022.pdf</a>. The
report presents Refinitiv's assessment of the world's major carbon
markets in 2022 and the total EUA market size includes spot,
auctions and futures.
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Below is a discussion of the secondary markets for EUAs and
associated derivatives. The Trust will only hold EUAs, and will not
hold any of the related derivatives.
Instruments With a Daily Expiry
Instruments with daily expiry include spot EUAs traded on the EEX
and the Daily EUA Future traded on ICE Endex. The Exchange notes that
the settlement and economic outcome for a spot purchase on the EEX and
a same day futures purchase on the ICE Endex are identical (as further
detailed below). In fact, the European Securities Markets Authority
(``ESMA''), in its ``Final Report: Emission Allowances and Associated
Derivatives,'' uses the term ``spot'' EUAs to include both spot EUAs
traded on EEX and the Daily EUA Future traded on ICE Endex.\18\
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\18\ See esma70-445-
38_final_report_on_emission_allowances_and_associated_derivatives.pdf
(europa.eu).
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Spot EUA Market
As noted above, spot EUA contracts are traded exclusively on the
EEX. The current value (spot price) for a EUA is greatly influenced by
a number of factors, including regulatory changes, world events and
general levels of economic activity. The trading hours for spot EUAs on
EEX are 8:00 a.m. to 6:00 p.m. Central European Time (``C.E.T.''), and
trade registrations are possible until 6:45 p.m. C.E.T. Trades
concluded before 4:00 p.m. C.E.T. are settled on the next business day,
or T+1, while trades after 4:00 p.m. C.E.T. are settled on the day
after the first business day, or T+2. In the year-to-date period ended
December 6, 2023, the average daily, monthly and annual trading volumes
of spot EUAs on the EEX was 165,000, 3,332,000 and 39,983,000 EUAs,
respectively. Over the same period, spot EUA contracts traded at their
highest volume of 5,010,000 EUAs on December 1, 2023, and their lowest
volume of 1000 EUAs on January 9, 2023.
The EEX calculates and publishes an EEX end of day index on the
price of EEX EUA spot contracts (the ``EUA End of Day Index''). The
value of the EUA End of Day Index is calculated based on an algorithm
using data regarding the prices of qualifying trades and the average
bids and asks of orders that meet certain order quantity requirements.
In order for data regarding trades and orders to be used for
calculating the value of the EUA End of Day Index, the trades or orders
must satisfy certain requirements regarding (i) quantity of traded
contracts, (ii) quantity of contracts per order, (iii) minimum duration
of the cumulated valid best bid and best ask, and (iv) maximum spread
per contract. The EUA End of Day Index calculation methodology depends
on the number of valid trades and orders which fulfil the product-
specific parameters.\19\ The data used for calculating the EUA End of
Day Index can also come from fair values collected in a price committee
or from other price sources. The EUA End of Day Index price calculated
is then validated against actual market prices.
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\19\ The EUA End of Day Index methodology is available at
<a href="https://www.eex.com/fileadmin/EEX/Downloads/Trading/Specifications/Indeces/DE/20211005_Index_Description_v010.pdf">https://www.eex.com/fileadmin/EEX/Downloads/Trading/Specifications/Indeces/DE/20211005_Index_Description_v010.pdf</a>.
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Daily EUA Futures
Most liquidity in the secondary market is achieved by trading
futures contracts. These contracts have expiration going out as far as
2030. A single day futures contract on EUAs is exclusively traded on
the ICE Endex (the ``Daily EUA Future''), which settles each day at the
close of trading.\20\ The Daily EUA Future is a deliverable contract
where each person with a position open at cessation of trading is
obliged to make or take delivery of EUAs upon the expiration of the
contract at the end of each trading day. Each Daily EUA Future
represents one lot of 1,000 EUAs, with each EUA providing an
entitlement to emit one ton of carbon dioxide equivalent gas.
Generally, Daily EUA Futures trade on ICE Endex from approximately 2:00
a.m. Eastern Time (``E.T.'') to approximately 12:00 p.m. E.T. The
settlement price is fixed each business day and is published by the
exchange at approximately 12:15 E.T. Final cash settlement occurs the
first business day following the expiry day. In the year-to-date period
ended December 6, 2023, the average daily, monthly and annual trading
volumes of Daily EUA Futures was 3,144, 68,758 and 761,046,
respectively, which represents trading volumes of 3,144,000, 68,758,000
and 761,046,000 EUAs, respectively. Over the same period, Daily EUA
Futures traded at their highest volume of 20,473 on July 12, 2023,
representing 20,473,000 EUAs, and their lowest volume of 218 on May 8,
2023, representing 218,000 EUAs.
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\20\ NASDAQ Oslo also offers a single day futures contract on
EUAs, but the contract is not traded. All references to the ``Daily
EUA Future'' refer to the single day EUA futures contract traded on
ICE Endex.
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Comparison of Spot EUA Market and Daily EUA Futures Market
The daily EUA End of Day Index value can be expected to be
substantially identical to the daily settlement price of the Daily EUA
Future. Below is a comparison of the daily EUA End of Day Index value
and the Daily EUA Future settlement price over a recent 45 calendar day
period.
[[Page 5277]]
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EEX End of Day ICE final Difference--EEX
Date Index settlement v. ICE
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12/8/23........................................................ [euro]68.56 [euro]68.56 [euro]0.00
12/7/23........................................................ 69.58 69.58 0.00
12/6/23........................................................ 68.73 68.73 0.00
12/5/23........................................................ 68.54 68.54 0.00
12/4/23........................................................ 70.26 70.26 0.00
12/1/23........................................................ 72.38 72.38 0.00
11/30/23....................................................... 70.69 70.69 0.00
11/29/23....................................................... 70.87 70.87 0.00
11/28/23....................................................... 72.78 72.78 0.00
11/27/23....................................................... 73.45 73.45 0.00
11/24/23....................................................... 76.37 76.37 0.00
11/23/23....................................................... 76.35 76.35 0.00
11/22/23....................................................... 74.96 74.96 0.00
11/21/23....................................................... 75.12 75.12 0.00
11/20/23....................................................... 76.35 76.35 0.00
11/17/23....................................................... 76.28 76.28 0.00
11/16/23....................................................... 76.73 76.73 0.00
11/15/23....................................................... 79.42 79.42 0.00
11/14/23....................................................... 78.29 78.29 0.00
11/13/23....................................................... 77.14 77.14 0.00
11/10/23....................................................... 78.33 78.33 0.00
11/9/23........................................................ 77.03 77.02 0.01
11/8/23........................................................ 75.33 75.33 0.00
11/7/23........................................................ 74.88 74.88 0.00
11/6/23........................................................ 75.46 75.46 0.00
11/3/23........................................................ 77.24 77.24 0.00
11/2/23........................................................ 78.20 78.20 0.00
11/1/23........................................................ 78.10 78.10 0.00
10/31/23....................................................... 78.59 78.59 0.00
10/30/23....................................................... 78.25 78.25 0.00
10/27/23....................................................... 78.84 78.84 0.00
10/26/23....................................................... 79.14 79.14 0.00
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Additionally, the chart below illustrates how closely the Daily EUA
Future, in fact, reflects the EUA spot price during the trading day.
This chart shows the spot prices in continuous trading on the EEX and
the intra-day prices of Daily EUA Futures on ICE Endex, in EUR/tCO2
from January 2018 to January 2022. This shows an average absolute
difference of [euro]0.015 between the daily prices for EUAs on the EEX
and ICE Endex.
[[Page 5278]]
[GRAPHIC] [TIFF OMITTED] TN26JA24.005
(<a href="https://www.esma.europa.eu/sites/default/files/library/esma70-445-38_final_report_on_emission_allowances_and_associated_derivatives.pdf">https://www.esma.europa.eu/sites/default/files/library/esma70-445-38_final_report_on_emission_allowances_and_associated_derivatives.pdf</a>
:p37).
Other EUA Futures Contracts
EEX offers monthly EUA futures contracts for the current and next
two months unless a quarterly or December future expires at that
month's maturity date; quarterly futures for the current and next 11
quarters unless a December future expires at that quarter's maturity
date; and yearly, or December, futures for the next 8 years which
mature in December of each respective year. ICE Endex offers up to
seven December futures contracts, nine quarterly futures contracts,
three August futures contracts and two monthly futures contracts.
Nasdaq Oslo offers a quarterly futures contracts over a rolling six
year period.
Options on EUA Futures Contracts
Options on EUA futures contracts are also traded on EEX and ICE
Endex for the December futures contracts.
Creation and Redemption of Shares
According to the Registration Statement, the Trust 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, which amount may be
revised from time-to-time. The Trust 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 Sponsor and the Transfer Agent (the ``Participant
Agreement'').
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 Trust or the distribution by
the Trust of the amount of EUAs represented by the Creation Units being
created or redeemed. The amount of EUAs required to be delivered to the
Trust in connection with any creation, or paid out upon redemption, is
based on the combined net asset value 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 11:00 a.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.
An Authorized Participant who places a purchase order is
responsible for crediting the Trust's Union Registry account with the
required EUA deposit by 2:00 p.m. New York time on the second business
day following the order date. Upon receipt of the EUA deposit amount in
the Trust's Union Registry account, the Union Registry will notify the
Sponsor that the EUAs have been deposited. Upon receipt of confirmation
from the Union Registry that the EUA deposit amount has been received,
the Administrator will direct DTC to credit the number of Shares
created to the Authorized Participant's DTC account.
According to the Registration Statement, the redemption
distribution due from the Trust will be delivered once the
Administrator notifies the Sponsor that the Authorized Participant has
delivered the Shares to be redeemed to the Trust's DTC account. The
redemption distribution will be delivered to the Authorized Participant
on the second business day following the order date. Once the
Administrator notifies the Sponsor that the Shares have been received
in the Trust's DTC account, the Sponsor instructs the Union Registry to
transfer the redemption EUA amount from the Trust's Union Registry
account to the Authorized Participant's Union Registry account.
[[Page 5279]]
The Sponsor is the only entity that may initiate a withdrawal of
EUAs from the Trust's Union Registry account, and the only accounts
that may receive EUAs from the Trust's Union Registry account are
Authorized Participants' or the Sponsor's Union Registry accounts.
Net Asset Value (``NAV'')
The Trust's NAV is calculated by taking the current market value of
its total assets, less any liabilities of the Trust, and dividing that
total by the total number of outstanding Shares.
The Administrator will calculate the NAV of the Trust once each
Exchange trading day. The NAV for a normal trading day will be released
after the end of the Core Trading Session, which is typically 4 p.m.
New York time. The NAV for the Trust's Shares will be disseminated
daily to all market participants at the same time. The Administrator
will use that day's EUA End of Day Index value, as published by EEX, to
calculate the NAV. The Administrator also converts the value of Euro
denominated assets into US Dollar equivalent using published foreign
currency exchange prices by an independent pricing vendor. Third
parties supplying quotations or market data may include, without
limitation, dealers in the relevant markets, end-users of the relevant
product, information vendors, brokers and other sources of market
information.
Indicative Fund Value (``IFV'')
In order to provide updated information relating to the Trust for
use by investors and market professionals, an updated IFV will be made
available through on-line information services throughout the Exchange
Core Trading Session (normally 9:30 a.m. to 4:00 p.m. E.T.) on each
trading day. The IFV will be calculated by using the prior day's
closing NAV per Share of the Trust as a base and updating that value
throughout the trading day to reflect changes in the most recently
reported bid-ask spread of the spot EUA market on EEX. The IFV
disseminated during NYSE Arca Core Trading Session hours should not be
viewed as an actual real time update of the NAV, because the NAV will
be calculated only once at the end of each trading day based upon the
relevant end of day values of the Trust's investments. Although the IFV
will be disseminated throughout the Core Trading Session, the customary
trading hours for EUAs are 2 a.m. to 12 p.m. Eastern Time. During the
gap in time at the end of each trading day during which the Shares are
traded on the Exchange, but real-time trading prices for EUAs are not
available, the IFV will be calculated based on the end of day price of
EUAs immediately preceding the trading session.
The IFV will be disseminated on a per Share basis every 15 seconds
during regular NYSE Arca Core Trading Session.
Availability of Information
The NAV for the Trust's Shares will be disseminated daily to all
market participants at the same time. The intraday, closing prices, and
settlement prices for EUAs will be readily available from the
applicable futures exchange websites, automated quotation systems,
published or other public sources, or major market data vendors. The
IFV per Share for the Shares will be disseminated by one or more major
market data vendors on at least a 15 second delayed basis as required
by NYSE Arca Rule 8.201-E(e)(2)(v).
Complete real-time data for EUAs and Daily EUA Futures is available
by subscription through on-line information services. Quotation and
last-sale information regarding the Shares will be disseminated through
the facilities of the Consolidated Tape Association. The IFV will be
available through on-line information services. The trading prices for
EUAs and the daily EUA End of Day Index value and historical EUA End of
Day Index values will be disseminated by on-line subscription services
or by one or more major market data vendors during the NYSE Arca Core
Trading Session of 9:30 a.m. to 4:00 p.m. E.T. The EUA End of Day Index
value is also published daily on the EEX website.
EEX also provides on its website, on a daily basis, transaction
volumes and transaction prices for the EUA spot market. ICE Endex
provides on its website, on a daily basis, transaction volumes,
transaction prices, daily settlement prices and historical settlement
prices for Daily EUA Futures that were traded outside of block trades
by EUA futures brokers. In addition, transaction volumes, transaction
prices, daily settlement prices and historical settlement prices for
Daily EUA Futures traded in block trades by futures brokers are
available on a daily basis through a subscription service to ICE Endex.
However, ICE Endex provides the daily settlement price change of the
Daily EUA Future on its website.
In addition, the Trust's website (<a href="http://www.cotwoadvisors.com">www.cotwoadvisors.com</a>) will
contain the following information, on a per Share basis, for the Trust:
(a) the prior business day's end of day closing NAV; (b) the Official
Closing Price \21\ or the midpoint of the national best bid and the
national best offer (``NBBO'') as of the time the NAV is calculated
(``Bid-Ask Price''); (c) calculation of the premium or discount of the
Official Closing Price against the NAV expressed as a percentage of
such NAV; (d) the prospectus; and (e) other applicable quantitative
information. The Trust will also provide website disclosure of its EUA
holdings before 9:30 a.m. E.T. on each trading day.
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
The Trust's website will be publicly available prior to the public
offering of Shares and accessible at no charge. The website disclosure
of the Trust's daily holdings will occur at the same time as the
disclosure by the Trust of the daily holdings to Authorized
Participants so that all market participants are provided daily
holdings information at the same time. Therefore, the same holdings
information will be provided on the public website as well as in
electronic files provided to Authorized Participants. Accordingly, each
investor will have access to the current daily holdings of the Trust
through the Trust's website. 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.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares 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
(Early, Core, and Late Trading Sessions). The Exchange has appropriate
rules to facilitate transactions in the Shares during all trading
sessions. As provided in NYSE Arca Rule 7.6-E, 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.
The Shares will conform to the initial and continued listing
criteria under
[[Page 5280]]
NYSE Arca Rule 8.201-E. The trading of the Shares will be subject to
NYSE Arca Rule 8.201-E(g), which sets forth certain restrictions on
Equity Trading Permit (``ETP'') Holders acting as registered Market
Makers in Commodity-Based Trust Shares to facilitate surveillance. The
Exchange represents that, for initial and continued listing, the Trust
will be in compliance with Rule 10A-3 \22\ under the Act, as provided
by NYSE Arca Rule 5.3-E. A minimum of 10,000 Shares will be outstanding
at the commencement of trading on the Exchange.
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\22\ With respect to the application of Rule 10A-3 (17 CFR
240.10A-3) under the Act, the Trust relies on the exemption
contained in Rule 10A-3(c)(7).
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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.
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 conditions in the underlying carbon
credit 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.\23\
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\23\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------
The Exchange may halt trading during the day in which an
interruption occurs to the dissemination of the IFV, as described
above. If the interruption to the dissemination of the IFV 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. In addition, if the Exchange becomes aware that the NAV
with respect to the Shares is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV is available to all market participants.
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.\24\ 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.
---------------------------------------------------------------------------
\24\ 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.
---------------------------------------------------------------------------
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 believes that the proposal is designed to prevent
fraudulent and manipulative acts and practices and to protect investors
and the public interest, consistent with section 6(b)(5) of the Act.
The Commission has explained that a proposal could satisfy the
requirements of the Act in the first instance by demonstrating that the
listing exchange has entered into a comprehensive surveillance-sharing
agreement (``CSSA'') with a regulated ``market of significant size''
relating to the underlying assets.\25\ The Commission has further
stated that ``[c]onsistent with the discussion of `significant market'
. . . , the Commission has not previously, and does not now, require
that [a] listing exchange be able to enter into a surveillance-sharing
agreement with each regulated spot or derivatives market relating to an
underlying asset, provided that the market or markets with which there
is such an agreement constitute a `significant market.' '' \26\
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\25\ See Securities Exchange Act Release No. 88284 (February 26,
2020), 85 FR 12595 (March 3, 2020) (SR-NYSEArca-2019-39) (Order
Disapproving a Proposed Rule Change, as Modified by Amendment No. 1,
to Amend NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares) and
to List and Trade Shares of the United States Bitcoin and Treasury
Investment Trust Under NYSE Arca Rule 8.201-E).
\26\ See Securities Exchange Act Release No. 83723 (July 26,
2018), 83 FR 37579 (August 1, 2018) (Order Setting Aside Action by
Delegated Authority and Disapproving a Proposed Rule Change, as
Modified by Amendments No. 1 and 2, to List and Trade Shares of the
Winklevoss Bitcoin Trust).
---------------------------------------------------------------------------
The Exchange has entered into a CSSA with ICE Endex. Pursuant to
the CSSA, the Exchange will communicate as needed regarding trading in
the Shares and Daily EUA Futures with ICE Endex, and the Exchange may
obtain trading information regarding trading in the Shares and Daily
EUA Futures from ICE Endex.
The Exchange believes that ICE Endex is a regulated \27\ market of
significant size related to EUAs and that it is reasonably likely that
any bad actor trying to manipulate the price of the Trust would have to
trade the Daily EUA Futures traded on ICE Endex. Therefore, ICE Endex
is an appropriate market to surveil in order to detect and deter fraud
and manipulation of EUAs. The term ``market of significant size''
includes a market as to which (a) there is a reasonable likelihood that
a person attempting to manipulate the Trust Shares would also have to
trade on that market to successfully manipulate the Trust Shares, and
(b) it is unlikely that trading in the Trust Shares would be the
predominant influence on prices in that market.
---------------------------------------------------------------------------
\27\ See note 13, supra.
---------------------------------------------------------------------------
ICE Endex is the only market for trading Daily EUA Futures and it
accounts for 95% of the trading volume for EUAs with ``daily expiry''
(which, as described above, includes spot EUAs and Daily EUA Futures).
While the Trust will hold EUAs traded on EEX, this is economically
equivalent to holding EUAs received after settling Daily EUA Futures
that trade on ICE Endex. As described above, the correlation between
the EUA End of Day Index value that reflects the value of the spot EUAs
traded on EEX and the Daily EUA Future settlement price is nearly
perfect. Thus, on any given day, the value of an EUA purchased on EEX
or an EUA received after settling a Daily EUA Future traded on ICE
Endex is the same.
Given the significant size of ICE Endex, there is a reasonable
likelihood that a market participant attempting to manipulate the Trust
Shares would also have to trade on ICE Endex to successfully manipulate
the Trust Shares. While it is possible that a potential manipulator
could chose to trade only in the spot EUA market
[[Page 5281]]
(EEX), the near-perfect correlation between the EUA End of Day Index
value and the Daily EUA Future settlement price means that a price
distortion in the spot EUA market would be reflected in the Daily EUA
Futures market and vice versa.\28\
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\28\ The Commission has granted several prior proposals to list
and trade shares of physical commodity-based exchange-traded
products, noting in every case that there was at least one regulated
market of significant size for trading futures in the underlying
commodity--whether gold, silver, platinum, palladium or copper--and
the product's listing exchange has entered into surveillance-sharing
agreements with, or held Intermarket Surveillance Group (``ISG'')
membership in common with, that market. See Securities Exchange Act
Release Nos. 61220 (December 22, 2009), 74 FR 68895, 68896 (December
29, 2009) (SR-NYSEArca-2009-94) (notice of proposed rule change
included NYSE Arca's representation that ``[t]he most significant
palladium futures exchanges are the NYMEX and the Tokyo Commodity
Exchange,'' that ``NYMEX is the largest exchange in the world for
trading precious metals futures and options,'' and that NYSE Arca
``may obtain trading information via the Intermarket Surveillance
Group,'' of which NYMEX is a member; 61219 (December 22, 2009), 74
FR 68886, 68887-88 (December 29, 2009) (SR-NYSEArca-2009-95) (notice
of proposed rule change included NYSE Arca's representation that
``[t]he most significant platinum futures exchanges are the NYMEX
and the Tokyo Commodity Exchange,'' that ``NYMEX is the largest
exchange in the world for trading precious metals futures and
options,'' and that NYSE Arca ``may obtain trading information via
the Intermarket Surveillance Group,'' of which NYMEX is a member;
62692 (August 11, 2010), 75 FR 50789, 50790 (August 17, 2010) (SR-
NYSEArca-2010-56) (notice of proposed rule change included NYSE
Arca's representation that ``the most significant gold, silver,
platinum and palladium futures exchanges are the COMEX and the
TOCOM'' and that NYSE Arca ``may obtain trading information via the
Intermarket Surveillance Group,'' of which COMEX is a member; 62875
(September 9, 2010), 75 FR 56156, 56158 (September 15, 2010) (SR-
NYSEArca-2010-71) (notice of proposed rule change included NYSE
Arca's representation that ``the most significant silver, platinum
and palladium futures exchanges are the COMEX and the TOCOM'' and
that NYSE Arca ``may obtain trading information via the Intermarket
Surveillance Group,'' of which COMEX is a member; 63464 (December 8,
2010), 75 FR 77926, 77928 (December 14, 2010) (SR-NYSEArca-2010-95)
(notice of proposed rule change included NYSE Arca's representation
that ``the most significant gold futures exchanges are the COMEX and
the Tokyo Commodity Exchange,'' that ``COMEX is the largest exchange
in the world for trading precious metals futures and options,'' and
that NYSE Arca ``may obtain trading information via the Intermarket
Surveillance Group,'' of which COMEX is a member; 68430 (December
13, 2012), 77 FR 75239, 75240-41 (December 19, 2012) (SR-NYSEArca-
2012-111) (notice of proposed rule change included NYSE Arca's
representation that ``[f]utures on platinum and palladium are traded
on two major exchanges: The New York Mercantile Exchange . . . and
Tokyo Commodities Exchange'' and that NYSE Arca ``may obtain trading
information via the Intermarket Surveillance Group,'' of which COMEX
is a member; 71378 (January 23, 2014), 79 FR 4786, 4786-87 (January
29, 2014) (SR-NYSEArca-2013-137) (notice of proposed rule change
included NYSE Arca's representation that ``COMEX is the largest gold
futures and options exchange'' and that NYSE Arca ``may obtain
trading information via the Intermarket Surveillance Group,''
including with respect to transactions occurring on COMEX pursuant
to CME and NYMEX's membership, or from exchanges ``with which [NYSE
Arca] has in place a comprehensive surveillance sharing
agreement.'').
---------------------------------------------------------------------------
It is unlikely that trading in the Trust Shares would be the
predominant influence on Daily EUA Futures prices traded on ICE Endex
for a number of reasons, including the significant volume in and size
of the EUA daily expiry market. The total EUA market size is
approximately [euro]695.8 billion with approximately [euro]64.1 billion
of that attributable to the Daily EUA Futures market. The daily average
trading volume for EUAs across the secondary market is approximately
[euro]2 billion, with approximately [euro]264.8 million attributable to
trading in the Daily EUA Futures market. The Trust has not yet launched
and cannot predict its future inflows; however, given the size of the
Daily EUA Futures market and the EUA market, as a whole, the Sponsor
does not anticipate that the Trust will have available capital to buy
and sell EUAs in an amount that would move the EUA market.
Based on the foregoing, the Exchange believes that prices on the
Daily EUA Futures market (ICE Endex) can reasonably be relied upon to
reflect the effects on the Daily EUA Futures market caused by a market
participant attempting to manipulate the Trust Shares whether that
attempt is made by directly trading on ICE Endex or indirectly by
trading on the EUA spot market (EEX). In other words, to the extent
that the price of Daily EUA Futures might be affected by trading in
either the futures and spot markets, the price impact of potential
fraud in either market would be reflected by a corresponding change to
the price of the Daily EUA Futures Market (with which the Exchange has
a CSSA).
The Exchange represents that all EUAs held by the Trust will be
held and maintained in the Union Registry and that the Trust will not
invest in futures, options, options on futures, or swap contracts. It
is possible that EUAs and Daily EUA Futures may become listed on other
exchanges that are members of ISG \29\ or with which the Exchange has
in place a comprehensive surveillance sharing agreement. The Exchange
further represents that EEX is the principal market for all EUAs in
which the Trust may invest, that the Exchange has a CSSA in place with
ICE Endex, and that, because of the near-perfect correlation between
the EUA End of Day Index value and the Daily EUA Future settlement
price, the price impact of potential fraud in the spot market on EEX
will be reflected in a corresponding change to the price of futures
traded on ICE Endex.
---------------------------------------------------------------------------
\29\ 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 accounts for trading in the Shares in
connection with ETP Holders' proprietary or customer trades which they
effect through ETP Holders on any relevant market.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the portfolio or reference assets, (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
on the Exchange.
The Trust has represented to the Exchange that it will advise the
Exchange of any failure by the Trust 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 Trust 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 IFV 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 EUAs during the Core and Late Trading Sessions;
and (6) trading information. For example, the Information Bulletin will
advise ETP Holders, prior to the
[[Page 5282]]
commencement of trading, of the prospectus delivery requirements
applicable to the Trust. The Exchange notes that investors purchasing
Shares directly from the Trust will receive a prospectus. ETP Holders
purchasing Shares from the Trust for resale to investors will deliver a
prospectus to such investors.
In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as will be described in the
Registration Statement. The Information Bulletin will also reference
the fact that last sale information regarding EUAs is subject to
regulation by EEX and ICE Endex, that the Commission and the CFTC do
not have jurisdiction over the trading of EUAs as a commodity, and that
jurisdiction over the trading of EUAs is held by the relevant competent
authority of the individual EU member states in which the trading takes
place, namely the Bundesanstalt f[uuml]r Finanzdienstleistungsaufsicht
(BaFIN) in Germany and the Autoriteit Financi[euml]le Markten (AFM) in
the Netherlands.\30\ The Information Bulletin will also discuss any
relief, if granted, by the Commission or the staff from any rules under
the Act.
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\30\ Article 22 of Regulation (EU) No. 596/2014 on market abuse
(market abuse regulation) (``MAR'') requires each EU member state to
designate a single administrative competent authority to ensure that
the provisions of MAR are applied on its territory. Commission
Regulation 596/2014, 2014 O.J. (L 173) 42. For a list of the
competent authorities for each EU Member State. See <a href="https://www.esma.europa.eu/sites/default/files/mar.pdf">https://www.esma.europa.eu/sites/default/files/mar.pdf</a>.
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The Information Bulletin will also disclose the trading hours of
the Shares and that the NAV for the Shares will be calculated after
4:00 p.m. E.T. each trading day. The Information Bulletin will disclose
that information about the Shares will be publicly available on the
Trust's website.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under section 6(b)(5) \31\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Rule 8.201-E. The
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws. The Exchange may obtain information regarding trading
in the Shares and Daily EUA Futures from ICE Endex with which the
Exchange has entered into a CSSA. The Exchange represents that all EUAs
held by the Trust will be held and maintained in the Union Registry and
that the Trust will not invest in futures, options, options on futures,
or swap contracts. The Exchange further represents that EEX is the
principal market for all EUAs in which the Trust may invest, and that
the Exchange can monitor those EUAs through its CSSA with ICE
Endex.\32\
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\32\ See the discussion in the ``Surveillance'' section, supra.
---------------------------------------------------------------------------
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that there is a considerable amount of information on EUAs and Daily
EUA Futures available on public websites and through professional and
subscription services. The trading prices for EUAs and the daily EUA
End of Day Index value and historical EUA End of Day Index values will
be disseminated by on-line subscription services or by one or more
major market data vendors during the NYSE Arca Core Trading Session.
The daily EUA End of Day Index value is also published on the EEX
website. EEX also provides on its website, on a daily basis,
transaction volumes and transaction prices for the EUA spot market.
Additionally, ICE Endex provides on its website, on a daily basis,
transaction volumes, transaction prices, daily settlement prices and
historical settlement prices for Daily EUA Futures that were traded
outside of block trades by EUA futures brokers. In addition,
transaction volumes, transaction prices, daily settlement prices and
historical settlement prices for Daily EUA Futures traded in block
trades by futures brokers are available on a daily basis through a
subscription service to ICE Endex. ICE Endex also provides the daily
settlement price change of the Daily EUA Future on its website.
In addition, the Trust's website (<a href="http://www.cotwoadvisors.com">www.cotwoadvisors.com</a>) will
provide pricing information for EUAs and the Shares. Market prices for
the Shares will be available from a variety of sources including
brokerage firms, information websites and other information service
providers. Quotation and last-sale information regarding the Shares
will be disseminated through the facilities of the Consolidated Tape
Association. The NAV of the Trust will be published on each day that
the NYSE Arca is open for regular trading and will be posted on the
Trust's website. The IFV relating to the Shares will be widely
disseminated by one or more major market data vendors at least once
every 15 seconds as required by NYSE Arca Rule 8.201-E(e)(2)(v). The
Trust's website will also provide its prospectus and other relevant
quantitative information regarding the Shares. The Trust will also
provide website disclosure of its EUA holdings before 9:30 a.m. E.T. on
each trading day. 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.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
regarding trading in the Shares, EUAs and Daily EUA Futures via ISG
from other exchanges that are members of ISG or with which the Exchange
has entered into a CSSA.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
proposed rule change will enhance competition by accommodating Exchange
trading of an additional exchange-traded product relating to physical
carbon credits.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
[[Page 5283]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4e3c3b222b632d2123232b203a3d0e3d2b2d60292138"><span class="__cf_email__" data-cfemail="b5c7c0d9d098d6dad8d8d0dbc1c6f5c6d0d69bd2dac3">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2024-05 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-2024-05. 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 only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEARCA-2024-05 and should
be submitted on or before February 16, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01511 Filed 1-25-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on January 26, 2024.
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.