[Federal Register Volume 77, Number 92 (Friday, May 11, 2012)]
[Notices]
[Pages 27817-27819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11363]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66930; File No. SR-NYSEArca-2012-18]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To List and Trade Shares of the APMEX Physical-1 
oz. Gold Redeemable Trust Pursuant to NYSE Arca Equities Rule 8.201

May 7, 2012.

I. Introduction

    On March 5, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade Units (``Units'') of the APMEX Physical-1 oz. Gold 
Redeemable Trust (the ``Trust'') pursuant to NYSE Arca Equities Rule 
8.201. The proposed rule change was published for comment in the 
Federal Register on March 26, 2012.\3\ The Commission received no 
comment letters regarding the proposed rule change. This order approves 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 66627 (March 20, 2012), 
77 FR 17539 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade Units \4\ under NYSE Arca 
Equities Rule 8.201. APMEX Precious Metals Management Services, Inc. is 
the manager of the Trust (``Manager'').\5\ Computershare Trust Company 
of Canada is the trustee of the Trust (``Trustee''). RBC Dexia Investor 
Services (``RBC Dexia'') \6\ is the custodian of the Trust 
(``Custodian'') \7\ and the valuation agent of the Trust (``Valuation 
Agent'').
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    \4\ Each Unit will represent an equal, undivided interest in the 
net assets of the Trust attributable to the Units.
    \5\ The Manager is a Delaware corporation and is a wholly owned 
subsidiary of Apmex, Inc. (formerly known as American Precious 
Metals Exchange, Inc.). The Manager is responsible for the day-to-
day activities and administration of the Trust. Additional details 
regarding the Trust are set forth in the Registration Statement for 
the Trust on Form F-1, filed with the Commission on December 23, 
2011 (No. 333-178745) (as amended, ``Registration Statement'').
    \6\ RBC Dexia is affiliated with a broker-dealer. RBC Dexia has 
represented to NYSE Arca that it has put in place and will maintain 
the appropriate information barriers and controls between itself and 
the broker-dealer affiliate so that the broker-dealer affiliate will 
not have access to information concerning the composition and/or 
changes to the Trust's holdings that are not available on the 
Trust's Web site. See Notice, 77 FR at 17540, n.12.
    \7\ The Bank of Nova Scotia, a sub-custodian of RBC Dexia, will 
act as gold custodian for the 1 oz. gold coins that the Trust owns. 
See id.
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    The Trust will issue Units in an initial public offering.\8\ The 
Trust may not issue additional Units following the completion of the 
initial public offering except under certain conditions. NYSE Arca will 
require that a minimum of 1,000,000 Units be outstanding at the start 
of trading.\9\ NYSE Arca represents that the Units satisfy the 
requirements of NYSE Arca Equities Rule 8.201 and thereby qualify for 
listing and trading on the Exchange.\10\
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    \8\ To purchase all of the 1 oz. gold coins, the Manager will 
negotiate on behalf of the Trust for multiple transactions with 
certain authorized distributors; all of the distributors are 
independent of the Manager and any affiliate of the parent company. 
See Notice, 77 FR at 17543. The Manager will not buy and sell 1 oz. 
gold coins for the Trust through its parent company or its 
affiliates. See id.
    \9\ See email from Tim Malinowski, Senior Director, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, and Brian J. 
Baltz, Attorney-Advisor, Commission, dated April 26, 2012.
    \10\ With respect to application of Rule 10A-3 under the Act, 
the Trust relies on the exemption contained in Rule 10A-3(c)(7). See 
Notice, 77 FR at 17540, n.16.
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    The Trust's investment objective is to invest and hold 
substantially all of its assets in 1 oz. gold coins. The Trust will 
hold 1 oz. American Gold Eagle bullion coins and 1 oz. Canadian Gold 
Maple Leaf bullion coins, and is permitted to purchase 1 oz. gold 
bullion bars and rounds. The Trust intends to hold highly liquid 
investments (consisting of short-term certificates of deposit or U.S. 
Government securities) or cash in an amount equal to approximately 
three percent of its total net assets generally to pay expenses and 
cash redemptions.
    The Units will be redeemable weekly at the option of the holder for 
1 oz. gold coins or for cash subject to certain conditions. Generally, 
units redeemed for 1 oz. gold coins will be entitled to receive a 
redemption price equal to 100% of the aggregate net asset value 
(``NAV'') of the redeemed Units determined at 4 p.m., Eastern time, on 
the Thursday on which NYSE Arca and/or the Toronto Stock Exchange 
(``TSX'') is open for trading for the week in respect of which the 
redemption request is processed, or the weekly redemption date and 
time, less the redemption expenses, or the gold redemption amount. 
Redemption requests for 1 oz. gold coins must be for a minimum 
redemption amount of at least $10,000.
    Units will be redeemable on a monthly basis for cash. Units 
redeemed for cash will receive a redemption price equal to 95% of the 
lesser of (i) the volume-weighted average trading price of the Units 
traded on NYSE Arca or, if trading has been suspended on NYSE Arca, the 
trading price of the Units traded on the TSX, for the last five days on 
which the respective exchange is open for trading during the month in 
which the redemption request is processed; or (ii) the NAV of the 
redeemed Units as of 4 p.m., Eastern time, on the last day of the month 
on which NYSE Arca is open for trading during the month in which the 
redemption request is processed (in each case, less any applicable 
taxes). The Trust will retain the remaining 5% of the value of the 
Units.
    Additional information can be found in the Notice and in the 
Registration Statement regarding: the Trust; the Units; the Trust's 
investment objectives, strategies, policies, and restrictions; fees and 
expenses; creation and redemption of Units; the gold bullion market and 
the 1 oz. gold coins; availability of information; trading rules and 
halts; and surveillance procedures.\11\
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    \11\ See Notice and the Registration Statement, supra notes 3 
and 5, respectively.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \12\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\13\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\14\ 
which requires, among other things, that the rules of a national 
securities exchange be 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 to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
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    \12\ 15 U.S.C. 78f.
    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal to list and 
trade Units

[[Page 27818]]

on NYSE Arca is consistent with Section 11(a)(1)(C)(iii) of the 
Act,\15\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for and transactions in securities. Quotation and 
last-sale information for the Units will be available via the 
Consolidated Tape Association. The Trust's Web site, which the Trust 
will launch upon the closing of the initial public offering, will 
provide an intraday indicative value (``IIV'') per share for the Units, 
as calculated by a third-party financial data provider during NYSE 
Arca's Core Trading Session (9:30 a.m. to 4 p.m. Eastern time).\16\ In 
addition, the Trust's Web site will contain the following information, 
on a per-Unit basis, for the Trust: (a) The midpoint of the bid-ask 
price at the close of trading in relation to the NAV as of the time the 
NAV is calculated (``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 Trust's Web site will 
also provide the Trust's prospectus, the two most recent reports to 
stockholders, the last sale price of the Units as traded in the U.S. 
market, and a breakdown of the holdings of the Trust by coin type. In 
addition, NYSE Arca will make available over the Consolidated Tape 
quotation information, trading volume, closing prices, and NAV for the 
Units from the previous day.
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    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \16\ The IIV will be calculated by (i) subtracting the closing 
spot price of gold for the prior business day from the current 
applicable spot price of gold (the ``Spread''); (ii) multiplying the 
Spread by the aggregate number of the Trust's 1 oz. gold coins for 
the prior business day (the ``Adjustment''); (iii) dividing the 
Adjustment by the aggregate number of units of the Trust outstanding 
for the prior business day (the ``Per-Unit Adjustment''); and (iv) 
adding the Per-Unit Adjustment to the NAV per Unit of the Trust for 
the prior business day.
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    The Commission believes that the proposal to list and trade the 
Units is reasonably designed to promote fair disclosure of information 
that may be necessary to price the Units appropriately and to prevent 
trading when a reasonable degree of transparency cannot be assured. As 
discussed above, the Trust will publish on its Web site: A breakdown of 
the holdings of the Trust by coin type, the NAV of the Trust, the IIV 
of the Shares, the Trust's prospectus, and the last sale price of the 
Units as traded in the U.S. market. The Commission notes that the 
Exchange will obtain a representation from the Trust prior to the 
commencement of trading of the Units that the NAV will be calculated 
daily and made available to all market participants at the same 
time.\17\ Under NYSE Arca Equities Rule 7.34(a)(5), if the Exchange 
becomes aware that the NAV is not being disseminated to all market 
participants at the same time, it must halt trading on the NYSE 
Marketplace until such time as the NAV is available to all market 
participants. Additionally, if the IIV is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
disruption occurs; if the interruption persists past the day in which 
it occurred, the Exchange will halt trading no later than the beginning 
of the trading day following the interruption.\18\ Further, the 
Exchange will consider suspension of trading pursuant to NYSE Arca Rule 
8.201(e)(2) if, after the initial 12-month period following 
commencement of trading: (1) The value of gold is no longer calculated 
or available on at least a 15-second delayed basis from a source 
unaffiliated with the Sponsor, Trust, or Custodian, or the Exchange 
stops providing a hyperlink on its Web site to any such unaffiliated 
commodity value; or (2) if the IIV is no longer made available on at 
least a 15-second delayed basis.\19\ NYSE Arca will halt trading in the 
Units on the Exchange if trading in the Units is halted on TSX and in 
the event the Trust directs the Trust's Valuation Agent to suspend the 
calculation of the value of the net assets of the Trust and the 
NAV.\20\ NYSE Arca Equities Rule 8.201(e)(2) also provides that NYSE 
Arca may seek to delist the Units in the event the value of the 
underlying commodity or the IIV is no longer calculated or available as 
required.
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    \17\ See email from Tim Malinowski, Senior Director, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, and Brian J. 
Baltz, Attorney-Advisor, Commission, dated April 26, 2012.
    \18\ See id.
    \19\ More generally, NYSE Arca may halt trading on the Exchange 
in the Units because of market conditions or for reasons that, in 
the Exchange's view, make trading in the Units inadvisable, 
including: (1) The extent to which conditions in the underlying gold 
market have caused disruptions and/or lack of trading; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Additionally, 
trading in the Units will be subject to trading halts caused by 
extraordinary market volatility pursuant to NYSE Arca's ``circuit 
breaker'' rule. See NYSE Arca Equities Rule 7.12.
    \20\ See Notice, supra note 3, 77 FR at 17546.
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    In support of this proposal, NYSE Arca has made representations, 
including:
    (1) The Units will be subject to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.201.
    (2) NYSE Arca's surveillance procedures are adequate to properly 
monitor Exchange trading of the Units in all trading sessions and to 
deter and detect violations of NYSE Arca rules and applicable federal 
securities laws.\21\
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    \21\ To support this, NYSE Arca states that, pursuant to NYSE 
Arca Equities Rule 8.201(g), it is able to obtain information 
regarding trading in the Units, physical gold, gold futures 
contracts, options on gold futures, or any other gold derivative 
from ETP Holders acting as registered Market Makers, in connection 
with their proprietary or customer trades. More generally, NYSE Arca 
states that it has regulatory jurisdiction over its ETP Holders and 
their associated persons, which includes any person or entity 
controlling an ETP Holder. With respect to a subsidiary or affiliate 
of an ETP Holder that does business only in commodities or futures 
contracts, the Exchange states that it 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. Further, NYSE Arca 
states that it may obtain trading information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges that are members 
of the ISG, including the COMEX. The Exchange also states that The 
Investment Industry Regulatory Organization of Canada is a member of 
ISG.
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    (3) 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 Units. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Units; (b) 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 Units; (c) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Units prior to or 
concurrently with the confirmation of a transaction; (d) the 
possibility that trading spreads and the resulting premium or discount 
on the Units may widen as a result of reduced liquidity of gold trading 
during the Core and Late Trading Sessions after the close of the major 
world gold markets; and (e) trading information.

This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \22\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \22\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the

[[Page 27819]]

proposed rule change (SR-NYSEArca-2012-18) is approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11363 Filed 5-10-12; 8:45 am]
BILLING CODE 8011-01-P