[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Notices]
[Pages 39292-39299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16532]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62402; File No. SR-NYSEArca-2010-56]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change to List and Trade Shares of the ETFS Precious
Metals Basket Trust
June 29, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\
[[Page 39293]]
notice is hereby given that, on June 15, 2010, 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 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\ 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 ETFS Physical PM Basket
Shares of the ETFS Precious Metals Basket Trust pursuant to NYSE Arca
Equities Rule 8.201. The text of the proposed rule change is available
on the Exchange's Web site at http://www.nyse.com, at the Exchange's
principal office 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade ETFS Physical PM Basket
Shares (``Shares'' of the ETFS Precious Metals Basket Trust (``Trust'')
under NYSE Arca Equities Rule 8.201. Under NYSE Arca Equities Rule
8.201, the Exchange may propose to list and/or trade pursuant to
unlisted trading privileges (``UTP'') ``Commodity-Based Trust Shares.''
\3\ The Commission has previously approved listing on the Exchange
under NYSE Arca Equities Rule 8.201 of other issues of Commodity-Based
Trust Shares. The Commission has approved listing on the Exchange of
ETFS Silver Trust,\4\ ETFS Gold Trust,\5\ ETFS Platinum Trust \6\ and
ETFS Palladium Trust (collectively, the ``ETFS Trusts'').\7\ In
addition, The Commission has approved listing on the Exchange of
streetTRACKS Gold Trust and iShares COMEX Gold Trust.\8\ Prior to their
listing on the Exchange, the Commission approved listing of the
streetTRACKS Gold Trust on the New York Stock Exchange (``NYSE'') and
listing of iShares COMEX Gold Trust on the American Stock Exchange LLC
(now known as ``NYSE Amex LLC'').\9\ In addition, the Commission has
approved trading of the streetTRACKS Gold Trust and iShares Silver
Trust on the Exchange pursuant to UTP.\10\ The Commission also has
approved listing of the iShares Silver Trust on the Exchange \11\ and,
previously, listing of the iShares Silver Trust on the American Stock
Exchange LLC.\12\
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\3\ 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.
\4\ Securities Exchange Act Release No. 59781 (April 17, 2009),
74 FR 18771 (April 24, 2009) (SR-NYSEArca-2009-28).
\5\ Securities Exchange Act Release No. 59895 (May 8, 2009), 74
FR 22993 (May 15, 2009) (SR-NYSEArca-2009-40).
\6\ Securities Exchange Act Release No. 61219 (December 22,
2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95).
\7\ Securities Exchange Act Release No. 61220 (December 22,
2009), 74 FR 68895 (December 29, 2009) (SR-NYSEArca-2009-94).
\8\ See Securities Exchange Act Release Nos. 56224 (August 8,
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76)
(approving listing on the Exchange of the streetTRACKS Gold Trust);
56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) (SR-NYSEArca-
2007-43) (order approving listing on the Exchange of iShares COMEX
Gold Trust).
\9\ See Securities Exchange Act Release Nos. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order
approving listing of streetTRACKS Gold Trust on NYSE); 51058
(January 19, 2005), 70 FR 3749 (January 26, 2005) (SR-Amex-2004-38)
(order approving listing of iShares COMEX Gold Trust on the American
Stock Exchange LLC).
\10\ See Securities Exchange Act Release Nos. 53520 (March 20,
2006), 71 FR 14977 (March 24, 2006) (SR-PCX-2005-117) (approving
trading on the Exchange pursuant to UTP of the iShares Silver
Trust); 51245 (February 23, 2005), 70 FR 10731 (March 4, 2005) (SR-
PCX-2004-117) (approving trading on the Exchange of the streetTRACKS
Gold Trust pursuant to UTP).
\11\ See Securities Exchange Act Release No. 58956 (November 14,
2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124)
(approving listing on the Exchange of the iShares Silver Trust)).
\12\ See Securities Exchange Act Release No. 53521 (March 20,
2006), 71 FR 14967 (March 24, 2006) (SR-Amex-2005-72) (approving
listing on the American Stock Exchange LLC of the iShares Silver
Trust).
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The Trust will issue Shares which represent units of fractional
undivided beneficial interest in and ownership of the Trust. The
investment objective of the Trust is for the Shares to reflect the
performance of the price of physical gold, silver, platinum and
palladium in the proportions held by the Trust, less the expenses of
the Trust's operations.\13\
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\13\ See the registration statement for the Trust on Form S-1,
filed with the Commission on April 29, 2010 (No. 333-164769)
(``Registration Statement''). The descriptions of the Trust, the
Shares, the Bullion, and the regulation and operation of the
commodity markets contained herein are based on the Registration
Statement.
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ETFS Services USA LLC is the sponsor of the Trust (``Sponsor''),
The Bank of New York Mellon is the trustee of the Trust
(``Trustee''),\14\ and JPMorgan Chase Bank, N.A. is the custodian of
the Trust (``Custodian'').\15\
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\14\ The Trustee is generally responsible for the day-to-day
administration of the Trust, including keeping the Trust's
operational records. The Trustee's principal responsibilities
include (1)Transferring the Trust's Bullion metal (``Bullion'',
which is physical gold, silver, platinum and palladium) as needed to
pay the Sponsor's Fee in Bullion (Bullion transfers are expected to
occur approximately monthly in the ordinary course), (2) valuing the
Trust's Bullion and calculating the net asset value (``NAV'') of the
Trust and the NAV per Share, (3) receiving and processing orders
from Authorized Participants to create and redeem Baskets and
coordinating the processing of such orders with the Custodian and
DTC, (4) selling the Trust's Bullion as needed to pay any
extraordinary Trust expenses that are not assumed by the Sponsor,
(5) when appropriate, making distributions of cash or other property
to Shareholders, and (6) receiving and reviewing reports from or on
the Custodian's custody of and transactions in the Trust's Bullion.
\15\ The Custodian is responsible for safekeeping for the Trust
Bullion deposited with it by Authorized Participants in connection
with the creation of Baskets. The Custodian is also responsible for
selecting the Zurich Sub-Custodians and its other subcustodians, if
any. The Custodian facilitates the transfer of Bullion in and out of
the Trust through the unallocated Bullion accounts it will maintain
for each Authorized Participant and the unallocated and allocated
Bullion accounts it will maintain for the Trust. The Custodian will
hold at its London, England vault premises that portion of the
Trust's allocated Bullion to be held in London. The Zurich Sub-
Custodians will hold at their Zurich, Switzerland vault premises
that portion of the Trust's allocated platinum and palladium to be
held in Zurich on behalf of the Custodian. The Custodian is
responsible for allocating specific bars of physical gold and silver
and specific plates or ingots of physical platinum and palladium to
the Trust's allocated platinum account. The Custodian will provide
the Trustee with regular reports detailing the Bullion transfers in
and out of the Trust's unallocated and allocated Bullion accounts
and identifying the platinum and palladium plates or ingots held in
the Trust's allocated Bullion account.
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The Exchange represents that the Shares satisfy the requirements of
NYSE Arca Equities Rule 8.201 and thereby qualify for listing on the
Exchange.\16\ The Shares will be book-entry only and individual
certificates will not be issued for the Shares.
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\16\ With respect to application of Rule 10A-3 (17 CFR 240.10A-
3) under the Securities Exchange of 1934 (``Act'') (15 U.S.C. 78a),
the Trust relies on the exemption contained in Rule 10A-3(c)(7).
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The NAV of the Trust is the aggregate value of the Trust's assets
less its liabilities (which include estimated accrued but unpaid fees
and expenses).
[[Page 39294]]
In determining the NAV of the Trust, the Trustee will value the prices
of Bullion metal as determined by the relevant London PM Fixes.\17\
Gold held by the Trust will be valued on the basis of the price of an
ounce of gold as set by the afternoon session of the twice daily fix of
the price of an ounce of gold which starts at 3 p.m. London, England
time and is performed in London by the five members of the London gold
fix. Silver held by the Trust will be valued on the basis of the price
of an ounce of silver as set at approximately 12 noon London time and
performed in London by three market making members of the London
Bullion Market Association (``LBMA''). Platinum held by the Trust will
be valued on the basis of the price of an ounce of platinum as set by
the afternoon session of the twice daily fix of the price of an ounce
of platinum which starts at 2 p.m. London, England time and is
performed in London by the four fixing members of the London Platinum
and Palladium Market (``LPPM''). Palladium held by the Trust will be
valued on the basis of the price of an ounce of palladium as set by the
afternoon session of the twice daily fix of the price of an ounce of
palladium which starts at 2 p.m. London, England time and is performed
in London by the four fixing members of the LPPM.\18\ The Trustee will
determine the NAV of the Trust on each day the NYSE Arca is open for
regular trading, as promptly as practicable after 4 p.m. Eastern Time
(``E.T.''). If no London PM Fixes are made for gold, silver, platinum
or palladium on a particular evaluation day or has not been announced
by 4 p.m. E.T. on a particular evaluation day, the next most recent
London price fix for such metal or metals will be used in the
determination of the NAV of the Trust, unless the Sponsor determines
that such price is inappropriate to use as basis for such
determination.\19\ The Trustee will also determine the NAV per Share,
which equals the NAV of the Trust, divided by the number of outstanding
Shares.
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\17\ Terms relating to the Trust and the Shares referred to, but
not defined, herein are defined in the Registration Statement.
\18\ The operation of the London Fix for gold, silver, platinum
and palladium is described in the registration statements on Form S-
1 for the ETFS Gold, Silver, Platinum and Palladium Trusts,
respectively, and in the Exchange's proposed rule changes pursuant
to Rule 19b-4 under the Act in connection with Exchange listing of
such Trusts. See notes 4-7, supra.
\19\ See discussion under ``Operation of the Trust'', infra,
regarding procedures used when the Sponsor determines that the
Bullion price is inappropriate to use.
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Market Regulation
According to the Registration Statement, the global gold, silver,
platinum and palladium markets are overseen and regulated by both
governmental and self-regulatory organizations. In addition, certain
trade associations have established rules and protocols for market
practices and participants. In the United Kingdom, responsibility for
the regulation of the financial market participants, including the
major participating members of the LBMA and the LPPM, falls under the
authority of the Financial Services Authority (``FSA'') as provided by
the Financial Services and Markets Act 2000 (``FSM Act''). Under the
FSM Act, all UK-based banks, together with other investment firms, are
subject to a range of requirements, including fitness and properness,
capital adequacy, liquidity, and systems and controls.
The FSA is responsible for regulating investment products,
including derivatives, and those who deal in investment products.
Regulation of spot, commercial forwards, and deposits of Bullion not
covered by the FSM Act is provided for by The London Code of Conduct
for Non-Investment Products, which was established by market
participants in conjunction with the Bank of England.
The Tokyo Commodity Exchange (``TOCOM'') has authority to perform
financial and operational surveillance on its members' trading
activities, scrutinize positions held by members and large-scale
customers, and monitor the price movements of futures markets by
comparing them with cash and other derivative markets' prices. To act
as a Futures Commission Merchant Broker, a broker must obtain a license
from Japan's Ministry of Economy, Trade and Industry (METI), the
regulatory authority that oversees the operations of the TOCOM.\20\
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\20\ Additional information regarding operation of the gold,
silver, platinum and palladium markets, and the regulation of these
markets, is described in the Registration Statement and in the
Commission notices of the Exchange's proposed rule changes regarding
listing of the ETFS Trusts. See Securities Exchange Act Release Nos.
59781 (April 17, 2009), 74 FR 18771 (April 24, 2009) (SR-NYSEArca-
2009-28) (notice and order granting accelerated approval regarding
listing of ETFS Silver Trust); 59895 (May 8, 2009), 74 FR 22993 (May
15, 2009) (SR-NYSEArca-2009-40 (notice and order granting
accelerated approval regarding listing of ETFS Gold Trust); 60970
(November 9, 2009), 74 FR 59319 (November 17, 2009) (SR-NYSEArca-
2009-95) (notice regarding listing of ETFS Platinum Trust); 60971
(November 9, 2009), 74 FR 59283 (November 17, 2009) (SR-NYSEArca-
2009-94) (notice regarding listing of ETFS Palladium Trust).
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Operation of the Trust
The Trust is a common law trust formed under New York law pursuant
to the Trust Agreement. The Trust holds Bullion and is expected from
time to time to issue Baskets in exchange for deposits of Bullion and
to distribute Bullion in connection with redemptions of Baskets. The
investment objective of the Trust is for the Shares to reflect the
performance of the prices of physical gold, silver, platinum and
palladium in the proportions held by the Trust, less the Trust's
expenses.
According to the Registration Statement, the Trust is not
registered as an investment company under the Investment Company Act of
1940 and is not required to register under such act. The Trust will not
hold or trade in commodity futures contracts regulated by the Commodity
Exchange Act \21\ (``CEA''), as administered by the Commodity Futures
Trading Commission (``CFTC''). The Trust is not a commodity pool for
purposes of the CEA, and neither the Sponsor nor the Trustee is subject
to regulation as a commodity pool operator or a commodity trading
adviser in connection with the Shares.
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\21\ 7 U.S.C. 1 et seq.
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The Trust expects to create and redeem Shares from time to time but
only in Baskets of 50,000 each. The number of outstanding Shares is
expected to increase and decrease from time to time as a result of the
creation and redemption of Baskets. The creation and redemption of
Baskets requires the delivery to the Trust or the distribution by the
Trust of the amount of Bullion and any cash represented by the Baskets
being created or redeemed. The total amount of Bullion and any cash
required for the creation of Baskets will be based on the combined NAV
of the number of Baskets being created or redeemed. The initial amount
of Bullion required for deposit with the Trust to create Shares will be
1,500 ounces of gold, 55,000 ounces of silver, 200 ounces of platinum
and 300 ounces of palladium per Basket.\22\ The number of ounces of
Bullion required to create a Basket or to be delivered upon a
redemption of a Basket will gradually decrease over time. This is
because the
[[Page 39295]]
Shares comprising a Basket will represent a decreasing amount of
Bullion due to the delivery or sale of the Trust's Bullion to pay the
Sponsor's Fee or the Trust's expenses not assumed by the Sponsor.
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\22\ As of June 11, 2010, the value of a Basket was
approximately $3,285,395. The value of Bullion required for the
creation of a Basket was approximately $1,837,650 for gold ($1225.10
per ounce times 1,500 ounces); $1,003,750 for silver ($18.25 per
ounce times 55,000 ounces); $308,290 for platinum ($1541.45 per
ounce times 200 ounces); and $135,750 for palladium ($452.35 per
ounce times 300 ounces). These values represent weightings for gold,
silver, platinum and palladium in a Basket of approximately 55.93%,
30.55%, 9.38% and 4.13%, respectively.
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The Trustee will determine the NAV of the Trust on each day that
the NYSE Arca is open for regular trading, as promptly as practicable
after 4 p.m. E.T. The NAV of the Trust is the aggregate value of the
Trust's assets less its estimated accrued but unpaid liabilities (which
include accrued expenses). In determining the Trust's NAV, the Trustee
will value the gold held by the Trust based on the London PM Fix price
for an ounce of gold or such other publicly available price as the
Sponsor may deem fairly represents the commercial value of the Trust's
gold, the silver held by the Trust based on the London PM Fix price for
an ounce of silver or such other publicly available price as the
Sponsor may deem fairly represents the commercial value of the Trust's
silver, the platinum held by the Trust based on the London PM Fix price
for an ounce of platinum or such other publicly available price as the
Sponsor may deem fairly represents the commercial value of the Trust's
platinum and the palladium held by the Trust based on the London PM Fix
price for an ounce of palladium or such other publicly available price
as the Sponsor may deem fairly represents the commercial value of the
Trust's palladium. The Trustee will also determine the NAV per Share.
If on a day when the Trust's NAV is being calculated, the London Fix is
not available or has not been announced by 4 p.m. E.T., for any Bullion
metal the price from the next most recent London fix (AM or PM) for
such Bullion metal will be used, unless the Sponsor determines that
such price is inappropriate to use.
The Trust's assets will consist of allocated physical Bullion,
Bullion credited to an unallocated Bullion account and, from time to
time, cash, which will be used to pay expenses not assumed by the
Sponsor. Cash held by the Trust will not generate any income. Each
Share will represent a proportional interest, based on the total number
of Shares outstanding, in the Bullion and any cash held by the Trust,
less the Trust's liabilities (which include accrued but unpaid fees and
expenses). The Sponsor expects that the secondary market trading price
of the Shares will fluctuate over time in response to the prices of
gold, silver, platinum and palladium. In addition, the Sponsor expects
that the trading price of the Shares will reflect the estimated accrued
but unpaid expenses of the Trust.
Investors may obtain on a 24-hour basis gold, silver, platinum and
palladium pricing information based on the spot price for an ounce of
each Bullion metal from various financial information service
providers. Current spot prices are also generally available with bid/
ask spreads from physical Bullion dealers. In addition, the Trust's Web
site (http://www.etfsecurities.com) will provide ongoing pricing
information for gold, silver, platinum and palladium spot prices and
the Shares. Market prices for the Shares will be available from a
variety of sources including brokerage firms, information Web sites and
other information service providers. The NAV of the Trust will be
published by the Sponsor on each day that the NYSE Arca is open for
regular trading and will be posted on the Trust's Web site.
According to the Registration Statement, the most significant gold,
silver, platinum and palladium futures exchanges are the COMEX and the
TOCOM. Trading on these exchanges is based on fixed delivery dates and
transaction sizes for the futures and options contracts traded. The
COMEX operates through a central clearance system. On June 6, 2003,
TOCOM adopted a similar clearance system.
Secondary Market Trading
According to the Registration Statement, while the Trust's
investment objective is for the Shares to reflect the performance of
prices of physical gold, silver, platinum and palladium in the
proportions held by the Trust, less the expenses of the Trust, the
Shares may trade in the secondary market on NYSE Arca at prices that
are lower or higher relative to their NAV per Share. The amount of the
discount or premium in the trading price relative to the NAV per Share
may be influenced by non-concurrent trading hours between the NYSE Arca
and the COMEX, and the London and Zurich Bullion markets. While the
Shares will trade on NYSE Arca until 8 p.m. E.T., liquidity in the
global gold, silver, platinum and palladium markets will be reduced
after the close of the COMEX at 1:30 p.m. E.T. or the London and Zurich
Bullion markets. As a result, during this time, trading spreads, and
the resulting premium or discount, on the Shares may widen.
Creation and Redemption of Shares
The Trust will create and redeem Shares from time to time, but only
in one or more Baskets of 50,000 Shares. The creation and redemption of
Baskets will only be made in exchange for the delivery to the Trust or
the distribution by the Trust of the amount of physical gold, silver,
platinum and palladium and any cash represented by the Baskets being
created or redeemed, the amount of which will be based on the combined
NAV of the number of Shares included in the Baskets being created or
redeemed determined on the day the order to create or redeem Baskets is
properly received.
Authorized Participants are the only persons that may place orders
to create and redeem Baskets, as described in the Registration
Statement.
Creation Procedures
On any business day, an Authorized Participant may place an order
with the Trustee to create one or more Baskets. Creation and redemption
orders will be accepted on ``business days'' the NYSE Arca is open for
regular trading. Settlements of such orders requiring receipt or
delivery, or confirmation of receipt or delivery, of Bullion in the
United Kingdom, Zurich or another jurisdiction will occur on ``business
days'' when (1) Banks in the United Kingdom, Zurich and such other
jurisdiction and (2) the London and Zurich Bullion markets are
regularly open for business. Purchase orders must be placed no later
than 3:59:59 p.m. E.T. on each business day the NYSE Arca is open for
regular trading. By placing a purchase order, an Authorized Participant
agrees to deposit Bullion with the Trust. The creation and redemption
of Baskets will only be made in exchange for the delivery to the Trust
or the distribution by the Trust of the amount of Bullion and any cash
represented by the Baskets being created or redeemed, the amount of
which will be based on the combined NAV of the number of Shares
included in the Baskets being created or redeemed determined on the day
the order to create or redeem Baskets is properly received.
The initial deposit of Bullion into the Trust establishes the
``Bullion Ratio'' such that, for every 1,500 ounces of gold, there will
also be 55,000 ounces of silver, 200 ounces of platinum, and 300 ounces
of palladium. Each Creation Basket Deposit, which is the total deposit
required to create a Basket, will be an amount of Bullion and cash, if
any, that is in the same proportion to the total assets of the Trust
(net of estimated accrued but unpaid fees, expenses and other
liabilities) on the date an order to purchase one or more Baskets is
properly received as the number of Shares comprising the number of
Baskets to be created in
[[Page 39296]]
respect of the deposit bears to the total number of Shares outstanding
on the date such order is properly received. The Bullion component of
any Creation Basket Deposit following the initial deposit shall be
comprised of gold, silver, platinum and palladium in the Bullion
Ratio.\23\
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\23\ The proportion of Bullion comprising a deposit will remain
the same following inception of the Trust. The amount of gold,
silver, platinum and palladium in the required deposit is determined
by dividing the number of ounces of each metal held by the Trust by
the number of Baskets outstanding, as adjusted for the amount of
Bullion constituting estimated accrued but unpaid fees and expenses
of the Trust.
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An Authorized Participant who places a purchase order is
responsible for crediting its Authorized Participant Unallocated
Account with the required Bullion deposit amount by the third business
day in London or Zurich, as applicable, following the purchase order
date. Upon receipt of the Bullion deposit amount, the Custodian, after
receiving appropriate instructions from the Authorized Participant and
the Trustee, will transfer on the third business day following the
purchase order date the Bullion deposit amount from the Authorized
Participant Unallocated Account to the Trust Unallocated Account and
the Trustee will direct DTC to credit the number of Baskets ordered to
the Authorized Participant's DTC account. The expense and risk of
delivery, ownership and safekeeping of Bullion until such Bullion has
been received by the Trust is borne solely by the Authorized
Participant.
Redemption Procedures
According to the Registration Statement, the procedures by which an
Authorized Participant can redeem one or more Baskets will mirror the
procedures for the creation of Baskets. On any business day, an
Authorized Participant may place an order with the Trustee to redeem
one or more Baskets. Redemption orders must be placed no later than
3:59:59 p.m. E.T. on each business day the NYSE Arca is open for
regular trading. A redemption order so received is effective on the
date it is received in satisfactory form by the Trustee. The redemption
procedures allow Authorized Participants to redeem Baskets and do not
entitle an individual Shareholder to redeem any Shares in an amount
less than a Basket, or to redeem Baskets other than through an
Authorized Participant.
By placing a redemption order, an Authorized Participant agrees to
deliver the Baskets to be redeemed through DTC's book-entry system to
the Trust not later than the third business day following the effective
date of the redemption order.
Determination of Redemption Distribution
The redemption distribution from the Trust will consist of a credit
to the redeeming Authorized Participant's Authorized Participant
Unallocated Account representing the amount of the Bullion held by the
Trust evidenced by the Shares being redeemed. Redemption distributions
will be subject to the deduction of any applicable tax or other
governmental charges which may be due.
Creation and Redemption Transaction Fee
To compensate the Trustee for services in processing the creation
and redemption of Baskets, an Authorized Participant will be required
to pay a transaction fee to the Trustee of $500 per order to create or
redeem Baskets. An order may include multiple Baskets. The transaction
fee may be reduced, increased or otherwise changed by the Trustee with
the consent of the Sponsor. The Trustee shall notify DTC of any
agreement to change the transaction fee and will not implement any
increase in the fee for the redemption of Baskets until 30 days after
the date of the notice.
Termination Events
The Trustee will terminate and liquidate the Trust if the aggregate
market capitalization of the Trust, based on the closing price for the
Shares, was less than $350 million (as adjusted for inflation) at any
time after the first anniversary after the Trust's formation and the
Trustee receives, within six months after the last of those trading
days, notice from the Sponsor of its decision to terminate the Trust.
The Trustee will terminate the Trust if the CFTC determines that the
Trust is a commodities pool under the CEA. The Trustee may also
terminate the Trust upon the agreement of the owners of beneficial
interests in the Shares (``Shareholders'') owning at least 75% of the
outstanding Shares.
The Trust has no fixed termination date.
Additional information regarding the Shares and the operation of
the Trust, including termination events, risks, and creation and
redemption procedures, are described in the Registration Statement.
Valuation of Bullion, Definition of Net Asset Value and Adjusted Net
Asset Value (``ANAV'')
On each day that the NYSE Arca is open for regular trading, as
promptly as practicable after 4 p.m., New York time, on such day
(Evaluation Time), the Trustee will evaluate the Bullion held by the
Trust and determine both the ANAV and the NAV of the Trust.
At the Evaluation Time, the Trustee will value the Trust's Bullion
on the basis of that day's London Fix for such metal or, if no London
Fix is made for a metal on such day or has not been announced by the
Evaluation Time, the next most recent London price fix for such metal
determined prior to the Evaluation Time will be used, unless the
Sponsor determines that such price is inappropriate as a basis for
evaluation. In the event the Sponsor determines that the London Fix or
such other publicly available price as the Sponsor may deem fairly
represents the commercial value of the Trust's Bullion metal is not an
appropriate basis for evaluation of the Trust's Bullion metal, it shall
identify an alternative basis for such evaluation to be employed by the
Trustee.
Once the value of the Bullion has been determined, the Trustee will
subtract all estimated accrued but unpaid fees (other than the fees
accruing for such day on which the valuation takes place computed by
reference to the value of the Trust or its assets), expenses and other
liabilities of the Trust from the total value of the Bullion and all
other assets of the Trust (other than any amounts credited to the
Trust's reserve account, if established). The resulting figure is the
ANAV of the Trust. The ANAV of the Trust is used to compute the
Sponsor's Fee.
Liquidity
Liquidity in the OTC market can vary from time to time during the
course of the 24-hour trading day. Fluctuations in liquidity are
reflected in adjustments to dealing spreads--the differential between a
dealer's ``buy'' and ``sell'' prices. The period of greatest liquidity
in the Bullion markets generally occurs at the time of day when trading
in the European time zones overlaps with trading in the United States,
which is when OTC market trading in London, New York, Zurich and other
centers coincides with futures and options trading on the COMEX. This
period lasts for approximately four hours each New York business day
morning.
Availability of Information Regarding Bullion Prices
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of commodities such as gold, silver,
platinum and palladium over the Consolidated Tape. However, there will
be disseminated over the
[[Page 39297]]
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 Bullion
market information available on public Web sites and through
professional and subscription services.
Investors may obtain on a 24-hour basis Bullion pricing information
based on the spot price for an ounce of Bullion from various financial
information service providers, such as Reuters and Bloomberg. Reuters
and Bloomberg provide at no charge on their Web sites delayed
information regarding the spot price of Bullion and last sale prices of
Bullion futures, as well as information about news and developments in
the Bullion market. Reuters and Bloomberg also offer a professional
service to subscribers for a fee that provides information on Bullion
prices directly from market participants. An organization named EBS
provides an electronic trading platform to institutions such as bullion
banks and dealers for the trading of spot Bullion, as well as a feed of
live streaming prices to Reuters and Moneyline Telerate subscribers.
Complete real-time data for Bullion futures and options prices traded
on COMEX are available by subscription from Reuters and Bloomberg.
COMEX also provides delayed futures and options information on current
and past trading sessions and market news free of charge on its Web
site. There are a variety of other public Web sites providing
information on Bullion, ranging from those specializing in precious
metals to sites maintained by major newspapers, such as The Wall Street
Journal. In addition, the London AM Fix and London PM Fix are publicly
available at no charge at or http://www.thebulliondesk.com.
The Trust Web site will provide an intraday indicative value
(``IIV'') per share for the Shares, updated at least every 15 seconds,
as calculated by the Exchange or a third party financial data provider,
during the Exchange's Core Trading Session (9:30 a.m. to 4 p.m. E.T.).
The IIV is calculated by multiplying the indicative spot price of
Bullion by the quantity of Bullion backing each Share as of the last
calculation date. The Trust Web site will also provide the NAV of the
Trust as calculated each business day by the Sponsor. In addition, the
Web site for the Trust will contain the following information, on a per
Share basis, for the Trust: (a) The NAV as of the close of the prior
business day and the mid-point of the bid-ask price \24\ at the close
of trading in relation to such NAV (``Bid/Ask Price''), and a
calculation of the premium or discount of such price against such NAV;
and (b) data in chart format displaying the frequency distribution of
discounts and premiums of the Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters.
The Web site for the Trust will also provide the following information:
The Creation Basket Deposit, the Trust's prospectus, and as the two
most recent reports to stockholders. Finally, the Trust Web site will
also provide the last sale price of the Shares as traded in the US
market. The Exchange will provide on its Web site (http://www.nyx.com)
a link to the Trust's Web site. In addition, the Exchange will make
available over the Consolidated Tape quotation information, trading
volume, closing prices and NAV for the Shares from the previous day.
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\24\ The bid-ask price of the Trust is determined using the
highest bid and lowest offer on the Consolidated Tape as of the time
of calculation of the closing day NAV.
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Criteria for Initial and Continued Listing
The Trust will be subject to the criteria in NYSE Arca Equities
Rule 8.201(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. The minimum number of shares required to be
outstanding is comparable to requirements that have been applied to
previously listed shares of the streetTRACKS Gold Trust, the iShares
COMEX Gold Trust, the iShares Silver Trust, the ETF Trusts and
exchange-traded funds. 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 Equities Rule
7.34(a). The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
Further, NYSE Arca Equities Rule 8.201 sets forth certain
restrictions on ETP Holders acting as registered Market Makers in the
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule
8.201(h), 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 applicable underlying Bullion, related futures or
options on futures, or any other related derivatives. NYSE Arca
Equities Rule 8.201(i) prohibits an ETP Holder acting as a registered
Market Maker in the Shares from using any material nonpublic
information received from any person associated with an ETP Holder or
employee of such person regarding trading by such person or employee in
the underlying Bullion, related futures or options on futures or any
other related derivative (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, as well as a subsidiary or
affiliate of an ETP Holder that is in the securities business. A
subsidiary or affiliate of an ETP Holder that does business only in
commodities or futures contracts would not be subject to Exchange
jurisdiction, but 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 Bullion
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.\25\ In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\26\
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\25\ The Exchange, pursuant to NYSE Arca Equities Rule 7.12, has
discretion to halt trading in the Shares if the London Fixes are not
determined for an extended time period based on extraordinary
circumstances or market conditions.
\26\ See NYSE Arca Equities Rule 7.12.
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (including Commodity-Based
Trust Shares) to monitor trading in the Shares. The Exchange represents
that these
[[Page 39298]]
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 applicable Federal securities laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. 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. Also, pursuant to NYSE
Arca Equities Rule 8.201(h), the Exchange is able to obtain information
regarding trading in the Shares and the underlying Bullion, Bullion
futures contracts, options on Bullion futures, or any other Bullion
derivative, through ETP Holders acting as registered Market Makers, in
connection with such ETP Holders' proprietary or customer trades which
they effect on any relevant market. In addition, the Exchange may
obtain trading information via the Intermarket Surveillance Group
(``ISG'') from other exchanges who are members of the ISG.\27\ COMEX is
an ISG member.
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\27\ A list of ISG members is available at http://www.isgportal.org. The Exchange notes that TOCOM is not an ISG
member and the Exchange does not have in place a comprehensive
surveillance sharing agreement with such market. In addition, the
Exchange does not have access to information regarding Bullion-
related OTC transactions in spot, forwards, options or other
derivatives.
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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 Baskets (including noting that
Shares are not individually redeemable); (2) NYSE Arca Equities Rule
9.2(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 resulting premium or discount on the Shares may widen as a
result of reduced liquidity of Bullion trading during the Core and Late
Trading Sessions after the close of the major world Bullion 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 Trust. The Exchange
notes that investors purchasing Shares directly from the Trust (by
delivery of the Creation Basket Deposit) 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 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 Bullion, that the Commission has no jurisdiction over the
trading of Bullion as physical commodities, and that the CFTC has
regulatory jurisdiction over the trading of Bullion futures contracts
and options on Bullion futures contracts.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \28\ of the Act, in general, and furthers the
objectives of Section 6(b)(5),\29\ in particular, because it is
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments and perfect the
mechanisms of a free and open market and to protect investors and the
public interest. The Exchange believes that the proposed rule change
will facilitate the listing and trading of an additional type of
commodity-based product that will enhance competition among market
participants, to the benefit of investors and the marketplace.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
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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.
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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 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
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-56 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2010-56. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official
[[Page 39299]]
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. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSEArca-2010-56 and should be submitted on or before
July 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16532 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P