Document ID: SEC-2013-1489-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-08-20T04:00Z

[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Notices]
[Pages 51239-51240]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20196]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70195; File No. SR-NYSEArca-2013-61]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To List and Trade Units of the First Trust Gold 
Trust Pursuant to NYSE Arca Equities Rule 8.201

August 14, 2013.

I. Introduction

    On June 11, 2013, 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 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade units (``Units'') of the First Trust Gold 
Trust (``Trust'') pursuant to NYSE Arca Equities Rule 8.201. The 
proposed rule change was published for comment in the Federal Register 
on July 1, 2013.\3\ The Commission received no comments on the 
proposal. 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\ See Securities Exchange Act Release No. 69847 (June 25, 
2013), 78 FR 39399 (July 1, 2013) (``Notice''). Terms not defined 
herein are defined in the Notice.
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Units under NYSE Arca 
Equities Rule 8.201,\4\ which governs the listing and trading pursuant 
to unlisted trading privileges of Commodity-Based Trust Shares.\5\ The 
Exchange has represented that the Units satisfy the requirements of 
NYSE Arca Equities Rule 8.201 and thereby qualify for listing on the 
Exchange.\6\ The Exchange deems the Units to be equity securities and 
therefore subject to the Exchange's rules governing the trading of 
equity securities.\7\
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    \4\ The Trust expects that Units also will be listed and traded 
on the Toronto Stock Exchange (``TSX''). See id. at 39400.
    \5\ 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. See id. at 39399.
    \6\ See id. at 39400.
    \7\ See id. at 39405.
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    FT Portfolios Canada Co. will be the trustee and manager of the 
Trust (``Manager''),\8\ and The Bank of Nova Scotia Trust Company will 
be the custodian of the Trust's assets (``Trust Custodian''). Equity 
Financial Trust Company will process redemption orders and transfers 
for the Trust (``Transfer Agent''). CIBC Mellon Trust Company 
(``Valuation Agent'') will calculate the value of the net assets of the 
Trust on a daily basis and reconcile all purchases and redemptions of 
Units to determine the net asset value per Unit (``NAV'').
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    \8\ The Manager is a company subsisting under the laws of Nova 
Scotia. The Manager is responsible for the day-to-day activities and 
administration of the Trust. The Manager manages, or causes to be 
managed, the Trust pursuant to the declaration of trust. See id.
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    According to the Registration Statement,\9\ the Trust was created 
to invest and hold substantially all of its assets in physical gold 
bullion.\10\ The Exchange states that the Trust seeks to provide a 
secure, convenient, and exchange-traded investment alternative for 
investors interested in holding physical gold bullion.\11\ Each 
outstanding Unit will represent an equal, fractional, undivided 
ownership interest in the Trust. Units will be redeemable monthly, 
directly from the Trust, for physical gold bullion or cash, as 
described in the Notice and Registration Statement.
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    \9\ See the draft registration statement for the Trust on Form 
F-1, filed with the Commission on March 19, 2013 (File No. 377-
00130) (the ``Registration Statement''). According to the 
Registration Statement, the Trust is neither an investment company 
registered under the Investment Company Act of 1940 nor a commodity 
pool for purposes of the Commodity Exchange Act.
    \10\ According to the Registration Statement, at least 90% of 
the net assets of the Trust will be invested in allocated kilogram 
bars of physical gold bullion with a fineness of 0.995 or higher 
that are manufactured by refiners recognized by the London Bullion 
Market Association for the production of good delivery bars 
(``Kilogram Bars''). The Trust is subject to various investment and 
operating restrictions (``Restrictions'') and will not invest in 
gold certificates or other financial instruments that represent gold 
or that may be exchanged for gold. The Trust will not speculate with 
regard to short-term changes in gold prices. See Notice, supra note 
3, at 39400.
    \11\ See id.
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    Additional information regarding the Trust, including NAV 
calculation, operation of the Trust, restrictions, risks, expenses, and 
redemptions of Units, can be found in the Notice and/or Registration 
Statement.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade Units is consistent with the Exchange Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\12\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\13\ which requires, among other things, that the Exchange's rules 
be designed to prevent fraudulent and manipulative acts and practices, 
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.
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    \12\ 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).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Units on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Exchange Act, which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Last sale, quotation 
information, trading volume, closing prices and NAV for the Units from 
the previous day will be available via the Consolidated Tape.\14\ The 
Trust's Web site will provide an intraday indicative value (``IIV'') 
per share for the Units, which will be calculated by a third party 
financial provider and disseminated by one or more major market data 
vendors at least every 15 seconds during the Exchange's Core Trading 
Session.\15\ The Web site also will include, on a per Unit basis, for 
the Trust, (1) 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; (2) 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; and (3) the Trust's prospectus, as well as 
the two most recent reports to stockholders.\16\ The Trust's Web site

[[Page 51240]]

also will provide the last sale price of the Units as traded in the 
U.S. market.\17\ Furthermore, the Commission further 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 Units 
appropriately and to prevent trading when a reasonable degree of 
transparency cannot be assured. The Trust's Web site will post the 
daily NAV, a breakdown of the holdings of the Trust.\18\ The Commission 
notes that the Exchange will obtain a representation from the issuer of 
the Units that the NAV will be calculated on each business day and will 
be made available to all market participants at the same time.\19\ 
Moreover, investors may obtain gold pricing information from a variety 
of service providers and newspapers. For example, financial information 
service providers offer, on a 24-hour basis, gold pricing information 
based on the spot price of an ounce of gold from various financial 
information providers.\20\ Real-time data for gold futures and options 
prices traded on the COMEX, an affiliate of the Chicago Mercantile 
Exchange, Inc., are also available by subscription.\21\
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    \14\ See Notice, supra note 3, 78 FR at 39404.
    \15\ See id. The Exchange states that IIV on a per Unit basis 
disseminated during the Core Trading Session should not be viewed as 
a real-time update of the NAV, which will be calculated once a day. 
See id.
    \16\ See id.
    \17\ See id.
    \18\ The Exchange will provide a link to the Trust on its Web 
site. See id.
    \19\ See id. 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.
    \20\ See id.
    \21\ The data is available by subscription from Reuters and 
Bloomberg. The New York Mercantile Exchange also provides delayed 
futures and options information on current and past trading session 
and market news free of charge on its Web site. EBS Market provides 
an electronic trading platform to institutions for the trading of 
spot gold, as well as a feed of live streaming prices to Reuters and 
Moneyline Telerate subscribers. See id.
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    The Exchange will consider suspending trading in the Units 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.\22\ 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.\23\ The Exchange will halt trading in the Units if the 
Manager, on behalf of 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.\24\
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    \22\ See NYSE Arca Equities Rules 8.200(e)(2)(iv) and (v). More 
generally, NYSE Arca may halt trading in the Units on the Exchange 
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; (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present; or (3) in the event that the TSX 
halts trading in the Units. See id. at 39405. 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.
    \23\ See Notice, supra note3, at 39405.
    \24\ See id.
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    In support of this proposal, the Exchange has made representations, 
including that:
    (1) The Exchange has appropriate rules to facilitate transactions 
in the Units during all trading sessions.\25\
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    \25\ See id.
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    (2) The trading surveillance procedures administered by the 
Financial Industry Regulatory Authority on behalf of the Exchange are 
adequate to properly monitor Exchange trading of the Units in all 
trading sessions and to deter and detect violations of Exchange rules 
and applicable federal securities laws.\26\
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    \26\ See id.
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    (3) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders (``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.\27\
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    \27\ See id.
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    (4) A minimum of 100,000 Units will be outstanding at the 
commencement of trading on the Exchange.\28\
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    \28\ See id.
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    This order is based on the Exchange's representations.
    For the forgoing reasons, the Commission believes the Exchange's 
proposal to list and trade the Units is consistent with the Exchange 
Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\29\ that the proposed rule change (SR-NYSEArca-2013-61) 
be, and it hereby is, approved.
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    \29\ 15 U.S.C. 78s(b)(2).
    \30\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20196 Filed 8-19-13; 8:45 am]
BILLING CODE 8011-01-P