[Federal Register Volume 87, Number 79 (Monday, April 25, 2022)]
[Notices]
[Pages 24357-24366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-08678]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94746; File No. SR-NYSEArca-2021-73]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade
Shares of the Franklin Responsibly Sourced Gold ETF Under NYSE Arca
Rule 8.201-E (Commodity-Based Trust Shares)
April 19, 2022.
I. Introduction
On August 23, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares of the Franklin Responsibly Sourced Gold ETF
under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares). The
proposed rule change was published for comment in the Federal Register
on September 8, 2021.\3\ On September 29, 2021, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\5\ On December 6, 2021,
the Commission instituted proceedings pursuant to Section 19(b)(2)(B)
of the Act \6\ to determine whether to approve or disapprove the
proposed rule change.\7\ On February 23, 2022, pursuant to Section
19(b)(2) of the Act,\8\ the Commission designated a longer period
within which to issue an order approving or disapproving the proposed
rule change.\9\ On March 25, 2022, the Exchange filed Amendment No. 1
to the proposed rule change.\10\ This Amendment No. 1, set forth in
Item II below, replaces SR-NYSE Arca-2021-73 as originally filed and
supersedes such filing in its entirety. The Commission has received no
comment letters on the proposal. The Commission is publishing this
notice to solicit comments on the proposed rule change, as modified by
Amendment No. 1, from interested persons, and is approving the proposed
rule change, as modified by Amendment No. 1, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92840 (September 1,
2021), 86 FR 50385.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 93179, 86 FR 55033
(October 5, 2021).
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 93720, 86 FR 70555
(December 10, 2021).
\8\ 15 U.S.C. 78s(b)(2).
\9\ See Securities Exchange Act Release No. 94302, 87 FR 11761
(March 2, 2022). The Commission designated May 6, 2022, as the date
by which the Commission shall either approve or disapprove the
proposed rule change.
\10\ Amendment No. 1 is available on the Commission's website at
https://www.sec.gov/comments/sr-nysearca-2021-73/srnysearca202173.htm. Among other things, Amendment No. 1 to the
proposed rule change provided greater detail with respect to the
operation of the Trust (as defined herein) and the Fund (as defined
herein), including the assets held by the Fund, the LBMA Responsible
Sourcing Programme (as described herein), the Responsible Gold
Guidance (as described herein), creations and redemptions of the
Fund's Shares (as defined herein), determination of net asset value
of the Fund's Shares, and availability of information for the Fund's
Shares. Amendment No. 1 also made additional and revised
representations, including that all gold held by the Fund will be
London Good Delivery bars and the information related to the Shares
that will be provided on the Fund's website. Finally, Amendment No.
1 provided clarifications and technical edits to the proposed rule
change.
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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
Franklin Responsibly Sourced Gold ETF (the ``Fund''), under NYSE Arca
Rule 8.201-E.\11\ The Fund is a series of the Franklin Templeton
Holdings Trust, a Delaware statutory trust (the ``Trust''). Under NYSE
Arca Rule 8.201-E, the Exchange may propose to list and/or trade
Commodity-Based Trust Shares pursuant to unlisted trading privileges
(``UTP'').\12\
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\11\ On April 22, 2021, the Trust submitted to the Commission
its confidential draft registration statement on Form S-1 (the
``Registration Statement'') under the Securities Act of 1933 (15
U.S.C. 77a) (the ``Securities Act''). The Registrant confidentially
submitted amendments to the Registration Statement on September 7,
2021, October 5, 2021, January 14, 2022 and February 22, 2022. The
Jumpstart Our Business Startups Act, enacted on April 5, 2012, added
Section 6(e) to the Securities Act. Section 6(e) of the Securities
Act provides that an ``emerging growth company'' may confidentially
submit to the Commission a draft registration statement for
confidential, non-public review by the Commission staff prior to
public filing, provided that the initial confidential submission and
all amendments thereto shall be publicly filed not later than 21
days before the date on which the issuer conducts a road show, as
such term is defined in Securities Act Rule 433(h)(4), or 15 days
prior to anticipated effectiveness in the case of an issuer who will
not conduct a road show. An emerging growth company is defined in
Section 2(a)(19) of the Securities Act as an issuer with less than
$1,070,000,000 total annual gross revenues during its most recently
completed fiscal year. The Fund meets the definition of an emerging
growth company and consequently has submitted its Form S-1
Registration Statement on a confidential basis with the Commission.
The Registration Statement in [sic] not yet effective and the Shares
will not trade on the Exchange until such time that the Registration
Statement is effective.
\12\ 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 Fund will not be registered as an investment company under the
Investment Company Act of 1940, as amended,\13\ and is not required to
register under such act. The Fund is not a commodity pool for purposes
of the Commodity Exchange Act, as amended.\14\
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\13\ 15 U.S.C. 80a-1.
\14\ 17 U.S.C. 1.
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The sponsor of the Fund is Franklin Holdings, LLC, a Delaware
limited liability company (``Sponsor''). BNY Mellon Asset Servicing, a
division of The Bank of New York Mellon (``BNYM''), serves as the
Fund's administrator (the ``Administrator'') and transfer agent (the
``Transfer Agent'').
[[Page 24358]]
Delaware Trust Company, a subsidiary of the Corporation Service
Company, serves as trustee of the Trust (the ``Trustee''). The
custodian of the Fund's gold bullion (``Custodian'') currently is the
London branch of J.P. Morgan Chase Bank, N.A.\15\ BNYM will serve as
the custodian of the Fund's cash, if any (the ``Cash Custodian'').
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\15\ The Custodian is responsible for safekeeping the Fund's
gold bullion. The Custodian will facilitate the transfer of gold in
and out of the Fund through (i) the unallocated gold accounts it may
maintain for each Authorized Participant (as defined below) or
unallocated gold accounts that may be maintained for an Authorized
Participant by another London Precious Metals Clearing Limited
(``LPMCL'') clearing bank, and (ii) the unallocated and allocated
gold accounts it will maintain for the Fund. As used herein, ``Fund
Allocated Account'' means the allocated gold account of the Trust
established with the Custodian on behalf of the Fund to be used to
hold gold that is transferred from the Fund Unallocated Account to
be held by the Fund in allocated form; the ``Fund Unallocated
Account'' means the unallocated gold account of the Trust
established with the Custodian on behalf of the Fund to be used to
facilitate the transfer of gold in and out of the Fund Allocated
Account. The Custodian is responsible for allocating specific bars
of gold into and out of the Fund Allocated Account. The Custodian
will provide the Fund with regular reports detailing the gold
transfers into and out of the Fund Unallocated Account and the Fund
Allocated Account and identifying the gold bars held in the Fund
Allocated Account.
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The Commission has previously approved listing on the Exchange
under NYSE Arca Rules 5.2-E(j)(5) and 8.201-E of the shares of other
precious metals and gold-based commodity trusts, including the
GraniteShares Gold MiniBAR Trust; \16\ GraniteShares Gold Trust; \17\
Merk Gold Trust; \18\ ETFS Gold Trust; \19\ ETFS Platinum Trust \20\
and ETFS Palladium Trust (collectively, the ``ETFS Trusts''); \21\
APMEX Physical-1 oz. Gold Redeemable Trust; \22\ Sprott Gold Trust;
\23\ SPDR Gold Trust (formerly the streetTRACKS Gold Trust); \24\
iShares Silver Trust; \25\ iShares COMEX Gold Trust; \26\ and Long
Dollar Gold Trust.\27\ Prior to their listing on the Exchange, the
Commission approved listing of shares of the streetTRACKS Gold Trust on
the New York Stock Exchange (``NYSE'') \28\ and listing of shares of
iShares COMEX Gold Trust and iShares Silver Trust on the American Stock
Exchange LLC. \29\ In addition, the Commission has approved trading of
shares of the streetTRACKS Gold Trust and iShares Silver Trust on the
Exchange pursuant to UTP.\30\
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\16\ Securities Exchange Act Release No. 84257 (September 21,
2018), 83 FR 48877 (September 27, 2018) (SR-NYSEArca-2018-55).
\17\ Securities Exchange Act Release No. 81077 (July 5, 2017),
82 FR 32024 (July 11, 2017) (SR-NYSEArca-2017-55).
\18\ Securities Exchange Act Release No. 71378 (January 23,
2014), 79 FR 4786 (January 29, 2014) (SR-NYSEArca-2013-137).
\19\ Securities Exchange Act Release No. 59895 (May 8, 2009), 74
FR 22993 (May 15, 2009) (SR-NYSEArca-2009-40).
\20\ Securities Exchange Act Release No. 61219 (December 22,
2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95).
\21\ Securities Exchange Act Release No. 61220 (December 22,
2009), 74 FR 68895 (December 29, 2009) (SR-NYSEArca-2009-94).
\22\ Securities Exchange Act Release No 66930 (May 7, 2012), 77
FR 27817 (May 11, 2012) (SR-NYSEArca-2012-18).
\23\ Securities Exchange Act Release No. 61496 (February 4,
2010), 75 FR 6758 (February 10, 2010) (SR-NYSEArca-2009-113).
\24\ See Securities Exchange Act Release No. 56224 (August 8,
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76).
\25\ 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).
\26\ See Securities Exchange Act Release No. 56224 (August 8,
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76)
(approving listing on the Exchange of the streetTRACKS Gold Trust);
Securities Exchange Act Release No. 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).
\27\ See Securities Exchange Act Release No. 79518 (December 9,
2016), 81 FR 90876 (December 15, 2016) (SR-NYSEArca-2016-84) (order
approving listing and trading of shares of the Long Dollar Gold
Trust).
\28\ See Securities Exchange Act Release No. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order
approving listing of streetTRACKS Gold Trust on the NYSE).
\29\ See Securities Exchange Act Release Nos. 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); 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).
\30\ 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).
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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.\31\
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\31\ With respect to the application of Rule 10A-3 (17 CFR
240.10A-3) under the Act, the Fund relies on the exemption contained
in Rule 10A-3(c)(7).
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Operation of the Trust and Fund 32
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\32\ The description of the operation of the Trust, the Fund,
the Shares, and the gold market contained herein are based, in part,
on the Registration Statement. See note 11, supra.
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The investment objective of the Fund will be for the Shares to
reflect the performance of the price of gold bullion, less the Fund's
expenses. The Fund's only ordinary recurring expense is the Sponsor's
annual fee. The assets of the Fund include only gold bullion and cash,
if any. Shares of the Fund will represent units of fractional undivided
beneficial interest in and ownership of the net assets of the Fund.
The Fund seeks to hold only ``responsibly sourced gold'' in its
Fund Allocated Account. The Fund defines responsibly sourced gold for
this purpose as London Good Delivery gold bullion bars that were
refined on or after January 1, 2012 (referred to herein as ``post-2012
gold'').\33\ All post-2012 gold has been refined in accordance with
London Bullion Market Association's (``LBMA'') Responsible Gold
Guidance (the ``Gold Guidance'').\34\ To facilitate this, in
transferring gold into and out of the Fund Allocated Account, the
Custodian will, on a best efforts basis and subject to available
liquidity, seek to allocate post-2012 gold. If, due to a lack of
liquidity, the Custodian is
[[Page 24359]]
unable to allocate post-2012 gold, the Custodian will do so as soon as
reasonably practicable. All gold held by the Fund will be London Good
Delivery bars.
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\33\ LBMA Good Delivery gold bullion bars refined prior to
January 1, 2012 are referred to herein as ``pre-2012 gold.''
\34\ LBMA Good Delivery gold bars are currently fungible in the
London OTC gold market. The Fund is not aware of and does not
anticipate bifurcated pricing to develop with respect to the trading
of the post-2012 gold to be held by the Fund. In the London market,
precious metals are traded directly between two parties, without the
involvement of an exchange. This system depends on all the bars
having exactly the same specification. As described further herein,
the requirements for a Good Delivery listed bar (of approximately
400 troy ounces for gold) cover: Fine ounce weight; purity; and
physical appearance (including marking and surface quality). No
other refined gold products produced by accredited refiners fall
within the scope of the Good Delivery List as defined herein. Per
World Gold Council estimates, the London OTC market comprises
approximately 70% of global gold notional trading volume. As noted
above, the market in London trades 400 ounce Good Delivery gold bars
which are stored in the member vaults of the LPMCL and the Bank of
England. Only gold bars that meet the LBMA's Good Delivery standards
are acceptable in settlement of a loco London contract (i.e., where
the bullion traded is physically held in London). Currently, there
are no pricing distinctions in the London OTC gold market based on
individual features or characteristics of particular gold bars that
are accepted as LBMA Good Delivery gold bars in settlement of a loco
London contract such as country of origin or the date on which the
gold was refined. Specifically, both pre-2012 gold and post-2012
gold are acceptable in settlement of OTC transactions in the London
gold market, and there is no separate pricing or trading market for
post-2012 gold. The Fund has no indication or basis to expect that
separate markets will develop, particularly given that the Gold
Guidance under the LBMA Responsible Sourcing Programme has been in
existence for over nine years and to date there has been no
deviation, even with the operation of similar gold-based exchange-
traded funds in the US and Europe. See, for example, VanEck
Merk[supreg] Gold Trust (OUNZ) (https://www.vaneck.com/us/en/blogs/gold-investing/ounz-holds-responsibly-sourced-gold/) and Invesco
Physical Gold ETC (https://www.invesco.com/uk/en/etf/insights/our-commitment-towards-responsible-gold.html), both of which state in
fund website and marketing materials that they hold 100% LBMA gold
refined/minted in 2012 or later. To the Fund's knowledge, these
funds have not encountered any issues in holding only post-2012
gold.
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Under normal market conditions, the Fund therefore expects to hold
only post-2012 gold in the Fund Allocated Account. The Fund, however,
may temporarily deviate from this policy in unusual market conditions,
such as in the event of a temporary supply constraint or lack of
availability, in which case the Fund will seek to come back into
conformity with the policy as soon as reasonably practical. For
example, at the time of a creation transaction in the Fund's Shares,
only pre-2012 gold may be readily available to the Custodian. In such
circumstances, the Custodian would allocate such gold to the Fund
Allocated Account on a temporary basis until such time as the Custodian
is able to swap out the pre-2012 gold for post-2012 gold (including,
but not limited to, in connection with redemption transactions).
The LBMA Responsible Sourcing Programme and Responsible Gold Guidance
As described above, the Fund seeks to hold only post-2012 gold. The
Gold Guidance is the specific document that underpins the LBMA's
Responsible Sourcing Programme, a mandatory governance framework and
audit program applicable to LBMA approved Good Delivery refiners
designed to promote the ethical sourcing of the global supply chain for
the wholesale gold markets. The Responsible Sourcing Programme is based
on the five-step framework for risk-based due diligence codified in the
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals
from Conflict-Affected and High-Risk Areas (2010) and the requirements
detailed in the OECD Gold Supplement (2012). The Gold Guidance includes
measures to address environmental and sustainability considerations
(for example, management of harmful chemicals or pollutants associated
with the gold mining process), avoid materials from conflict-afflicted
areas, and combat money laundering, financing of terrorism, and human
rights abuses, including child labor. Since January 1, 2012, each LBMA
Good Delivery refinery has been required to undergo a comprehensive
audit, at least annually, in order to confirm compliance with the
LBMA's minimum requirements related to the responsible sourcing of gold
as set forth in the Gold Guidance and to publicly report results
(audits are made available on the LBMA website). The audits, among
other aspects, focus on the refiner's management systems and controls,
and whether they are robust and appropriate to address the refiner's
risk profile with respect to priority focus areas as identified above.
Additional information regarding the LBMA's efforts to promote ethical
sourcing of gold and a copy of the current version of the Gold Guidance
is available at https://www.lbma.org.uk/responsible-sourcing.
The Fund will not trade in gold futures, options, or swap contracts
on any futures exchange or over-the-counter (``OTC''). The Fund will
not hold or trade in commodity futures contracts, ``commodity
interests,'' or any other instruments regulated by the Commodity
Exchange Act. As stated above, the Fund's Cash Custodian may hold cash
proceeds from gold sales and other cash received by the Fund. The
Fund's gold will be held in London.
The Fund is not a proxy for investing in physical gold. 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 gold. Specifically, the Shares are intended to
constitute a simple and cost-efficient means of gaining investment
benefits similar to those of holding gold bullion directly, by
providing investors an opportunity to participate in the gold market
through an investment in the Shares, instead of the traditional means
of purchasing, storing and insuring gold.
Operation of the Gold Market
The global gold trading market consists of OTC transactions in
spot, forwards, and options and other derivatives, together with
exchange-traded futures and options.
The OTC gold market includes spot, forward, and option and other
derivative transactions conducted on a principal-to-principal basis.
While this is a global, nearly 24-hour per day market, its main centers
are London, New York, and Zurich.
According to the Registration Statement, most OTC market trades are
cleared through London. The LBMA plays an important role in setting OTC
gold trading industry standards. A London Good Delivery Bar (as
described below), which is acceptable for delivery in settlement of any
OTC transaction, will be acceptable for delivery to the Fund, as
discussed below.
The most significant gold futures exchange is COMEX, operated by
Commodities Exchange, Inc., a subsidiary of New York Mercantile
Exchange, Inc., and a subsidiary of the Chicago Mercantile Exchange
Group (the ``CME Group''). Other commodity exchanges include the Tokyo
Commodity Exchange (``TOCOM''), the Multi Commodity Exchange of India
(``MCX''), the Shanghai Futures Exchange, the Shanghai Gold Exchange,
ICE Futures US (the ``ICE''), and the Dubai Gold & Commodities
Exchange. The CME Group and ICE are members of the Intermarket
Surveillance Group (``ISG'').
The London Gold Bullion Market
According to the Registration Statement, most trading in physical
gold is conducted on the OTC market and is predominantly cleared
through London. In addition to coordinating market activities, the LBMA
acts as the principal point of contact between the market and its
regulators. A primary function of the LBMA is its involvement in the
promotion of refining standards by maintenance of the ``London Good
Delivery Lists,'' which are the lists of LBMA accredited melters and
assayers of gold (``Good Delivery List''). The LBMA also coordinates
market clearing and vaulting, promotes good trading practices and
develops standard documentation.
The term ``loco London'' refers to gold bars physically held in
London that meet the specifications for weight, dimensions, fineness
(or purity), identifying marks (including the assay stamp of an LBMA
acceptable refiner), and appearance set forth in the good delivery
rules promulgated by the LBMA from time to time. Gold bars meeting
these requirements are known as ``London Good Delivery Bars.''
The unit of trade in London is the troy ounce, whose conversion
between grams is: 1,000 grams = 32.1507465 troy ounces and 1 troy ounce
= 31.1034768 grams. A London Good Delivery Bar is acceptable for
delivery in settlement of a transaction on the OTC market. Typically
referred to as 400-ounce bars, a London Good Delivery Bar must contain
between 350 and 430 fine troy ounces of gold, with a minimum fineness
(or purity) of 995 parts per 1,000 (99.5%), be of good appearance and
be easy to handle and stack. The fine gold content of a gold bar is
calculated by multiplying the gross weight of the bar (expressed in
units of 0.025 troy ounces) by the fineness of the bar.
Creation and Redemption of Shares
According to the Registration Statement, the Fund will create and
redeem Shares on a continuous basis in one or more Creation Units. A
Creation Unit equals a block of 50,000 Shares.
[[Page 24360]]
The Fund will issue Shares in Creation Units to certain authorized
participants (``Authorized Participants'') on an ongoing basis. Each
Authorized Participant must be a registered broker-dealer or other
securities market participant such as a bank or other financial
institution which is not required to register as a broker-dealer to
engage in securities transactions, a participant in The Depository
Trust Company (``DTC''), and have entered into an agreement with the
Sponsor and the Administrator (the ``Participant Agreement''), and have
established an unallocated gold account with the Custodian or another
LPMCL clearing bank.
Creation Units may be created or redeemed only by Authorized
Participants. The creation and redemption of Creation Units is only
made in exchange for the delivery to the Fund or the distribution by
the Fund of the amount of gold represented by the Creation Units being
created or redeemed. The amount of gold required to be delivered to the
Fund in connection with any creation, or paid out upon redemption, is
based on the combined 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 3:59:59 p.m. New York time. The
day on which the Administrator receives a valid purchase or redemption
order is the order date. Creation Units may only be issued or redeemed
on a day that the Exchange is open for regular trading.
According to the Registration Statement, the Fund only holds gold
and cash, and transacts in-kind. Each outstanding Share represents a
fractional, undivided interest in the gold bullion held by the Fund.
The in-kind creation and redemption transactions in Creation Unit
aggregations are based on a specified quantity/number of ounces of gold
bullion, which proportionately reflects the amount of gold bullion
represented by the Shares outstanding at the time of creation or
redemption.\35\ The total deposit required to create each Creation
Unit, or a ``Creation Unit Gold Delivery Amount,'' is an amount of gold
and cash, if any, that is in the same proportion to the total assets of
the Fund (net of estimated accrued expenses and other liabilities) on
the date the order to purchase is properly received as the number of
Shares to be created under the purchase order is in proportion to the
total number of Shares outstanding on the date the order is received.
An Authorized Participant who places a purchase order is responsible
for transferring the Creation Unit Gold Delivery Amount to the Fund
Unallocated Account.\36\ Upon receipt, the Administrator will direct
DTC to credit the number of Creation Units ordered to the Authorized
Participant's DTC account. The Custodian will transfer the Creation
Unit Gold Delivery Amount from the Fund Unallocated Account to the Fund
Allocated Account by allocating to the Fund Allocated Account specific
bars of gold which the Custodian holds, or instructing a sub-custodian
to allocate specific bars of gold held by or for the sub-custodian. As
noted above, the Custodian will, on a best efforts basis and subject to
available liquidity, seek to allocate post-2012 gold to the Fund
Allocated Account.
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\35\ The amount of gold represented by each Share of the Fund
will decrease over the life of the Fund due to the sales of gold
necessary to pay the Sponsor's fee and Fund expenses. The gradual
decline in the amount of gold bullion represented by the Shares will
occur regardless of whether the trading price of the Shares rises or
falls in response to changes in the price of gold.
\36\ Authorized Participants will not deliver specific physical
gold bars to the Fund Unallocated Account in connection with
creation transactions; rather, the Authorized Participant must
maintain a designated unallocated account with the Custodian in
order to transact in the Fund's Shares and with the Fund Unallocated
Account which functions like a ledger, and the Custodian is then
solely responsible for allocating specific gold bars with the
requested features (i.e., post-2012 gold) from the Fund Unallocated
Account (which, again, functions like a ledger) to the Fund
Allocated Account. Gold is delivered to and distributed by the Fund
through credits and debits between the Authorized Participant's
unallocated account and the Fund Unallocated Account. When an
Authorized Participant creates a Creation Unit aggregation of Fund
Shares, gold will be transferred from the Authorized Participant to
the Custodian via a debit to the Authorized Participant's
unallocated account and a credit to the Fund Unallocated Account.
Typically on the same business day, the Custodian then allocates the
gold to the Fund Allocated Account and stores the gold for
safekeeping. All gold represented by a credit to any unallocated
account represents a right to receive a specified quantity of fine
ounces of gold. Thus, there is no way for Authorized Participants to
deposit specified pre- or post-2012 gold with the Fund in exchange
for Creation Units, as Authorized Participants have no role in (or
control over) the process of selecting or allocating specific gold
bars for delivery to the Fund Allocated Account.
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The redemption distribution from the Fund consists of a credit to
the redeeming Authorized Participant's unallocated account in the
amount of the Creation Unit Gold Delivery Amount. The Creation Unit
Gold Delivery Amount for redemptions is the number of ounces of gold
held by the Fund to be paid out upon redemption of a Creation Unit. The
Custodian will transfer the redemption amount from the Fund Allocated
Account to the Fund Unallocated Account and, thereafter, to the
redeeming Authorized Participant's unallocated account.
Net Asset Value (``NAV'')
To determine the Fund's NAV, the Administrator will value the gold
held by the Fund on the basis of the LBMA Gold Price PM, as published
by the ICE Benchmark Administration Limited (the ``IBA''). IBA operates
electronic auctions for spot, unallocated loco London gold, providing a
market-based platform for buyers and sellers to trade. The auctions are
run at 10:30 a.m. and 3:00 p.m. London time for gold. The final auction
prices are published to the market as the LBMA Gold Price AM and the
LBMA Gold Price PM, respectively.\37\
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\37\ The LBMA Gold Price is the global benchmark price for
unallocated gold delivered in London. According to the IBA,
producers, the investment community, banks and central banks,
fabricators, jewelers and other consumers as well as market
participants from around the globe, transact during the IBA Gold
Auctions and use the benchmarks as reference prices. The LBMA Gold
Price facilitates spot, monthly averaging, cash-settlement, location
swaps, fixed for floating swaps, options and other derivative
transactions.
---------------------------------------------------------------------------
The Administrator will calculate the NAV on each day the Exchange
is open for regular trading, at the earlier LBMA Gold Price PM for the
day or 12:00 p.m. New York time. If no LBMA Gold Price (AM or PM) is
made on a particular evaluation day or if the LBMA Gold Price PM has
not been announced by 12:00 p.m. New York time on a particular
evaluation day, the next most recent LBMA Gold Price AM or PM will be
used in the determination of the NAV, unless the Sponsor determines
that such price is inappropriate to use as the basis for such
determination.
Once the value of the gold has been determined, the Administrator
will subtract all estimated accrued expenses and other liabilities of
the Fund from the total value of the gold and any cash of the Fund. The
resulting figure is the NAV. The Administrator will determine the NAV
per Share by dividing the NAV of the Fund by the number of Shares
outstanding as of the close of trading on the Exchange.
With respect to the theoretical possibility that a pricing premium
or discount or official deviation in the LBMA gold spot price arises
between post-2012 gold and pre-2012 gold, the Fund's valuation of its
gold holdings would reflect the appropriate spot price or fair value of
such holdings with a view to mitigating the risk of shareholder
dilution. For example, the Fund generally values its gold holdings on
the basis of the LBMA Gold Price PM, as described above. To the extent
that it is determined that the LBMA
[[Page 24361]]
Gold Price PM no longer reflects an accurate measure of the value of
the Fund's gold holdings, or to the extent that the LBMA begins
providing two different prices--one for pre-2012 gold and one for post-
2012 gold--the Fund would adjust its valuation accordingly. Further,
the Fund only holds gold and cash, and transacts in-kind. Each
outstanding Share represents a fractional, undivided interest in the
gold bullion held by the Fund. The in-kind creation and redemption
transactions in creation unit aggregations are based on a specified
quantity/number of ounces of gold bullion, which proportionately
reflects the amount of gold bullion represented by the Shares
outstanding at the time of creation/redemption.\38\ The Fund also has
other levers in the event of theoretical pricing deviations or
increased costs with respect to its post-2012 gold holdings, including
imposing additional creation and redemption transaction fees on
Authorized Participants transacting in the Fund's Shares as appropriate
in the Sponsor's discretion. Accordingly, the Fund reserves the right
to take appropriate steps to seek to ensure that the Fund and its
shareholders are not adversely impacted in such a scenario.
---------------------------------------------------------------------------
\38\ See supra note 35.
---------------------------------------------------------------------------
Availability of Information Regarding Gold
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a commodity such as gold over the
Consolidated Tape. However, there will be disseminated over the
Consolidated Tape the last sale price for the Shares, as is the case
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of
information about gold and gold markets available on public websites
and through professional and subscription services.
Investors may obtain gold pricing information on a 24-hour basis
based on the spot price for an ounce of gold from various financial
information service providers, such as Reuters and Bloomberg.
Reuters and Bloomberg, for example, provide at no charge on their
websites delayed information regarding the spot price of gold and last
sale prices of gold futures, as well as information about news and
developments in the gold market. Reuters and Bloomberg also offer a
professional service to subscribers for a fee that provides information
on gold prices directly from market participants. Complete real-time
data for gold futures and options prices traded on the COMEX are
available by subscription from Reuters and Bloomberg. There are a
variety of other public websites providing information on gold, ranging
from those specializing in precious metals to sites maintained by major
newspapers. In addition, the LBMA Gold Price is publicly available at
no charge at www.lbma.org.uk.
Availability of Information
The intraday indicative value (``IIV'') per Share for the Shares
will be disseminated by one or more major market data vendors on at
least a 15 second delayed basis as required by NYSE Arca Rule 8.201-
E(e)(2)(v). The IIV will be calculated based on the amount of gold and
cash (if any) held by the Fund and a price of gold derived from updated
bids and offers indicative of the spot price of gold, adjusted to
reflect estimated price changes based on real time proxy pricing
updates.\39\
---------------------------------------------------------------------------
\39\ The IIV on a per Share basis disseminated during the
Exchange's Core Trading Session, as defined in NYSE Arca Rule 7.34-
E, should not be viewed as a real-time update of the NAV, which is
calculated once a day.
---------------------------------------------------------------------------
The Fund's website (https://www.franklintempleton.com/investments/options/exchange-traded-funds/products/31714/SINGLCLASS/franklin-responsibly-sourced-gold-etf/FGLD) will contain the following
information, on a per Share basis: (a) The Official Closing Price \40\
and a calculation of the premium or discount of such Official Closing
Price against the Fund's NAV, as of the prior business day, expressed
as a percentage of such NAV; (b) a table showing the number of days the
Shares of the Fund traded at a premium or discount during the most
recently completed calendar year and the most recently completed
calendar quarters since that year; (c) a line graph showing the Shares'
premiums or discounts for the most recently completed calendar year and
the most recently completed calendar quarters since that year; (d) data
in chart format displaying the frequency distribution of discounts and
premiums of the Official Closing Price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters;
and (e) the daily holdings of the Fund, before 9:30 a.m. E.T. on each
Exchange trading day. The website for the Fund will also provide its
prospectus. The NAV of the Fund will be published on each day that the
NYSE Arca is open for regular trading and will be posted on the Fund's
website. Finally, the Fund's website will be updated once daily to
provide the last sale price of the Shares as traded in the U.S. market
at the end of regular trading. 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.
---------------------------------------------------------------------------
\40\ 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.
---------------------------------------------------------------------------
Criteria for Initial and Continued Listing
The Fund will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
A minimum of 100,000 Shares will be required to be outstanding at
the start of trading, which is equivalent to 1,317 fine ounces of gold
or approximately $2,500,000 as of February 18, 2022. 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 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(a).
The Exchange has appropriate rules to facilitate transactions in the
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-E
Commentary .03, the minimum price variation (``MPV'') for quoting and
entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00, for which the MPV for order entry is $0.0001.
Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on
ETP Holders acting as registered Market Makers in the Shares to
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder
acting as a registered Market Maker in the Shares is required to
provide the Exchange with information relating to its trading in the
underlying gold, any related futures or options on futures, or any
other related derivatives. Commentary .04 of NYSE Arca Rule 11.3
requires an ETP Holder acting as a registered Market Maker, and its
affiliates, in the Shares to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to
[[Page 24362]]
such products, any components of the related products, any physical
asset or commodity underlying the product, applicable currencies,
underlying indexes, related futures or options on futures, and any
related derivative instruments (including the Shares).
As a general matter, the Exchange has regulatory jurisdiction over
its ETP Holders and their associated persons, which include any person
or entity controlling an ETP Holder. To the extent the Exchange may be
found to lack jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or futures contracts, the
Exchange could obtain information regarding the activities of such
subsidiary or affiliate through surveillance sharing agreements with
regulatory organizations of which such subsidiary or affiliate is a
member.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading on the Exchange in the Shares may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which conditions in the underlying gold
market have caused disruptions and/or lack of trading, or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\41\ The Exchange will halt trading in the Shares if the
NAV of the Fund is not calculated or disseminated daily. The Exchange
may halt trading during the day in which an interruption occurs to the
dissemination of the IIV, as described above. If the interruption to
the dissemination of the IIV persists past the trading day in which it
occurs, the Exchange will halt trading no later than the beginning of
the trading day following the interruption.
---------------------------------------------------------------------------
\41\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------
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.\42\ 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.
---------------------------------------------------------------------------
\42\ 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 or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\43\
---------------------------------------------------------------------------
\43\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------
Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able
to obtain information regarding trading in the Shares and the
underlying gold, gold futures contracts, options on gold futures, or
any other gold derivatives through ETP Holders acting as registered
Market Makers, in connection with such ETP Holders' proprietary or
customer trades through ETP Holders which they effect on any relevant
market.
In addition, the Exchange also has a general policy prohibiting the
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
of the Fund on the Exchange.
The Trust has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The procedures for
purchases and redemptions of Shares in Creation Units (including noting
that Shares are not individually redeemable); (2) NYSE Arca Rule 9.2-
E(a), which imposes a duty of due diligence on its ETP Holders to learn
the essential facts relating to every customer prior to trading the
Shares; (3) how information regarding the IIV is disseminated; (4) the
requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (5) the possibility that trading spreads
and the premium or discount on the Shares may widen as a result of
reduced liquidity of gold trading during the Core and Late Trading
Sessions after the close of the major world gold markets; and (6)
trading information. For example, the Information Bulletin will advise
ETP Holders, prior to the commencement of trading, of the prospectus
delivery requirements applicable to the Fund. The Exchange notes that
investors purchasing Shares directly from the Fund will receive a
prospectus. ETP Holders purchasing Shares from the Fund for resale to
investors will deliver a prospectus to such investors.
In addition, the Information Bulletin will reference that the Fund
is subject to various fees and expenses as will be described in the
Registration Statement. The Information Bulletin will also reference
the fact that there is no regulated source of last sale information
regarding physical gold, that the Commission has no jurisdiction over
the trading of gold as a physical commodity, and that the CFTC has
regulatory jurisdiction over the trading of gold futures contracts and
options on gold futures contracts.
[[Page 24363]]
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 basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \44\ 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.
---------------------------------------------------------------------------
\44\ 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 via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement.
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 gold price and gold market
information available on public websites and through professional and
subscription services. Investors may obtain on a 24-hour basis gold
pricing information based on the spot price for an ounce of gold from
various financial information service providers. Current spot prices
also are generally available with bid/ask spreads from gold bullion
dealers. In addition, the Fund's website will provide pricing
information for gold spot prices 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.
The NAV of the Fund will be published on each day that the NYSE Arca is
open for regular trading and will be posted on the Fund's website. The
IIV relating to the Shares will be widely disseminated by one or more
major market data vendors at least every 15 seconds as required by NYSE
Arca Rule 8.201-E(e)(2)(v). In addition, the LBMA Gold Price is
publicly available at no charge at www.lbma.org.uk. The Fund's website
will also provide its prospectus, as well as the two most recent
reports to stockholders. 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
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, as noted above, investors will have ready
access to information regarding gold pricing.
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
gold.
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. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 1, is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\45\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Act,\46\ which requires, among other
things, that the Exchange's rules be 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 a national market system, and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------
\45\ 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).
\46\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposed rule change is reasonably
designed to promote fair disclosure of information that may be
necessary to price the Shares appropriately. The NAV of the Fund will
be published on each day that the NYSE Arca is open for regular trading
and will be posted on the Fund's website. The IIV relating to the
Shares will be widely disseminated by one or more major market data
vendors at least every 15 seconds as required by NYSE Arca Rule 8.201-
E(e)(2)(v). The IIV will be calculated based on the amount of gold and
cash (if any) held by the Fund and a price of gold derived from updated
bids and offers indicative of the spot price of gold, adjusted to
reflect estimated price changes based on real time proxy pricing
updates. Based on the information provided by the Exchange, the
Commission believes that there is no separate market for post-2012
gold. All gold held by the Fund will be London Good Delivery bars. The
LBMA Gold Price is publicly available at no charge at www.lbma.org.uk.
Additionally, the website for the Fund \47\ will contain the
following information, on a per Share basis: (a) The Official Closing
Price and a calculation of the premium or discount of such Official
Closing Price against the Fund's NAV, as of the prior business day,
expressed as a percentage of such NAV; (b) a table showing the number
of days the Shares of the Fund traded at a premium or discount during
the most recently completed calendar year and the most recently
completed calendar quarters since that year; (c) a line graph showing
the Shares' premiums or discounts for the most recently completed
calendar year and the most recently completed calendar quarters since
that year; (d) data in chart format displaying the frequency
distribution of discounts and premiums of the Official Closing Price
against the NAV, within appropriate ranges, for each of the four
[[Page 24364]]
previous calendar quarters; and (e) the daily holdings of the Fund,
before 9:30 a.m. E.T. on each Exchange trading day. The website for the
Fund will also provide the Fund's prospectus as well as the two most
recent reports to shareholders.
---------------------------------------------------------------------------
\47\ https://www.franklintempleton.com/investments/options/exchange-traded-funds/products/31714/SINGLCLASS/franklin-responsibly-sourced-gold-etf/FGLD.
---------------------------------------------------------------------------
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. The Fund's
website will be updated once daily to provide the last sale price of
the Shares as traded in the U.S. market at the end of regular trading.
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. While the Consolidated Tape Plan does
not provide for dissemination of the spot price of a commodity such as
gold over the Consolidated Tape, the last sale price for the Shares
will be disseminated over the Consolidated Tape. In addition, there is
a considerable amount of information about gold and gold markets
available on public websites and through professional and subscription
services. Investors may obtain gold pricing information on a 24-hour
basis based on the spot price for an ounce of gold from various
financial information service providers.\48\
---------------------------------------------------------------------------
\48\ As the Exchange states, Reuters and Bloomberg, for example,
provide at no charge on their websites delayed information regarding
the spot price of gold and last sale prices of gold futures, as well
as information about news and developments in the gold market.
Reuters and Bloomberg also offer a professional service to
subscribers for a fee that provides information on gold prices
directly from market participants. Complete real-time data for gold
futures and options prices traded on the COMEX are available by
subscription from Reuters and Bloomberg. There are a variety of
other public websites providing information on gold, ranging from
those specializing in precious metals to sites maintained by major
newspapers.
---------------------------------------------------------------------------
The Commission also believes that the proposal is reasonably
designed to prevent trading when a reasonable degree of transparency
cannot be assured. The Exchange represents that it will halt trading in
the Shares if the NAV of the Fund is not calculated or disseminated
daily. If the IIV is not being disseminated as required, the Exchange
may halt trading during the day in which the interruption to the
dissemination of the IIV occurs. If the interruption to the
dissemination of the IIV persists past the trading day in which it
occurs, the Exchange will halt trading no later than the beginning of
the trading day following the interruption. With respect to trading
halts, the Exchange states that it may consider all relevant factors in
exercising its discretion to halt or suspend trading in the Shares.
Trading on the Exchange in the Shares may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) The extent to
which conditions in the underlying gold market have caused disruptions
and/or lack of trading, or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. In addition, trading in Shares will be subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange's ``circuit breaker'' rule.
Additionally, NYSE Arca Rule 8.201-E(g) sets forth certain
restrictions on ETP Holders acting as registered Market Makers in the
Shares to facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an
ETP Holder acting as a registered Market Maker in the Shares is
required to provide the Exchange with information relating to its
trading in the underlying gold, related futures or options on futures,
or any other related derivatives. Commentary .04 of NYSE Arca Rule
11.3-E requires an ETP Holder acting as a registered Market Maker, and
its affiliates, in the Shares to establish, maintain and enforce
written policies and procedures reasonably designed to prevent the
misuse of any material nonpublic information with respect to such
products, any components of the related products, any physical asset or
commodity underlying the product, applicable currencies, underlying
indexes, related futures or options on futures, and any related
derivative instruments (including the Shares).\49\
---------------------------------------------------------------------------
\49\ The Exchange confirms that it has regulatory jurisdiction
over its ETP Holders and their associated persons, which include any
person or entity controlling an ETP Holder. 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.
---------------------------------------------------------------------------
Moreover, the Commission concludes that the proposal is reasonably
designed to mitigate the Shares' susceptibility to manipulation and
misuse of nonpublic information in trading in the Shares, consistent
with Section 6(b)(5) of the Act,\50\ because the Shares will be subject
to the Exchange's and other rules below. Specifically:
---------------------------------------------------------------------------
\50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
(1) The Fund will be subject to the criteria in NYSE Arca Rule
8.201-E(e) for initial and continued listing of the Shares.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions. Trading in the Shares on the
Exchange will occur in accordance with NYSE Arca Rule 7.34-E(a).
(3) The Exchange deems the Shares to be equity securities, thus
rendering trading in the Trust subject to the Exchange's existing rules
governing the trading of equity securities.
(4) Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws.\51\ 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. These surveillances 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.
---------------------------------------------------------------------------
\51\ 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.
---------------------------------------------------------------------------
(5) The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
(6) Pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able to
obtain information regarding trading in the Shares and the underlying
gold, gold futures contracts, options on gold futures, or any other
gold derivatives, through ETP Holders acting as registered Market
Makers, in connection with such ETP Holders' proprietary or
[[Page 24365]]
customer trades through ETP Holders which they effect on any relevant
market.
(7) The Exchange has a general policy prohibiting the distribution
of material, non-public information by its employees.
(8) 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: (a)
The procedures for purchases and redemptions of Shares in Creation
Units (including noting that Shares are not individually redeemable);
(b) 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; (c) how information regarding the IIV is
disseminated; (d) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; (e) the possibility that
trading spreads and the resulting premium or discount on the Shares may
widen as a result of reduced liquidity of gold trading during the Core
and Late Trading Sessions after the close of the major world gold
markets; and (f) trading information. The Exchange states that
investors purchasing Shares directly from the Fund will receive a
prospectus. ETP Holders purchasing Shares from the Fund for resale to
investors will deliver a prospectus to such investors. In addition, the
Information Bulletin will reference that the Fund is subject to various
fees and expenses as will be described in the Registration Statement,
the fact that there is no regulated source of last sale information
regarding physical gold, that the Commission has no jurisdiction over
the trading of gold as a physical commodity, and that the CFTC has
regulatory jurisdiction over the trading of gold futures contracts and
options on gold futures contracts. The Information Bulletin will also
discuss any relief, if granted, by the Commission or the staff from any
rules under the Act.
(9) A minimum of 100,000 Shares will be required to be outstanding
at the start of trading.
In addition, pursuant to Commentary .04 of NYSE Arca Rule 8.201-E,
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 of the Fund on
the Exchange. The issuer must notify the Exchange of any failure by the
Fund to comply with the continued listing requirements. Pursuant to its
obligations under Section 19(g)(1) of the Act, the Exchange will
monitor \52\ 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).
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\52\ The Commission notes that certain proposals for the listing
and trading of exchange-traded products include a representation
that the exchange will ``surveil'' for compliance with the continued
listing requirements. See, e.g., Securities Exchange Act Release No.
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the
Commission's view that ``monitor'' and ``surveil'' both mean ongoing
oversight of compliance with the continued listing requirements.
Therefore, the Commission does not view ``monitor'' as a more or
less stringent obligation than ``surveil'' with respect to the
continued listing requirements.
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Accordingly, for the foregoing reasons, the Commission finds that
the proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Act \53\ and the rules and regulations
thereunder applicable to a national securities exchange.
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\53\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on the Proposed Rule Change, as Modified
by Amendment No. 1
Interested persons are invited to submit written views, data, and
arguments concerning whether the proposed rule change, as modified by
Amendment No. 1, 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 email to [email protected]. Please include
File Number SR-NYSEArca-2021-73 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2021-73. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2021-73 and should be submitted
on or before May 16, 2022.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
1 in the Federal Register. As stated above, among other things,
Amendment No. 1 to the proposed rule change, among other things, went
into greater detail with respect to the operation of the Trust and the
Fund, including the assets held by the Fund, the LBMA Responsible
Sourcing Programme, the Responsible Gold Guidance, creations and
redemptions of the Fund's Shares, determination of net asset value of
the Fund's Shares, and availability of information for the Fund's
Shares. Amendment No. 1 also made additional and revised
representations, including that all gold held by the Fund will be
London Good Delivery bars and the information related to the Shares
that will be provided on the Fund's website. Finally, Amendment No. 1
provided clarifications and technical edits to the proposed rule
change. These changes and additional information in Amendment No. 1
assist the Commission in evaluating the Exchange's proposal and in
determining that it is consistent with the Act. The
[[Page 24366]]
Commission believes that such changes and additional information do not
raise unique or novel regulatory issues under the Act. Accordingly, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\54\ to approve the proposed rule change, as modified by Amendment
No. 1, on an accelerated basis.
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\54\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\55\ that the proposed rule change (SR-NYSEArca-2021-73), as
modified by Amendment No. 1, be, and it hereby is, approved on an
accelerated basis.
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\55\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\56\
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\56\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-08678 Filed 4-22-22; 8:45 am]
BILLING CODE 8011-01-P>