Document ID: SEC-2018-0204-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE, Arca, Inc.
Posted Date: 2018-02-01T05:00Z

[Federal Register Volume 83, Number 22 (Thursday, February 1, 2018)]
[Notices]
[Pages 4718-4720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01953]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82593; File No. SR-NYSEArca-2017-140]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To List and Trade Shares of the Perth Mint 
Physical Gold ETF Trust Pursuant to NYSE Arca Rule 8.201-E

January 26, 2018.

I. Introduction

    On December 11, 2017, 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 (``Shares'') of the Perth 
Mint Physical Gold ETF Trust (``Trust'') under NYSE Arca Equities Rule 
8.201-E. The proposed rule change was published for comment in the 
Federal Register on December 28, 2017.\3\ The Commission has not 
received any comments on 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\ See Securities Exchange Act Release No. 82372 (Dec. 21, 
2017), 82 FR 61601 (``Notice'').
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II. The Description of the Proposed Rule Change \4\
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    \4\ A more detailed description of the Trust and the Shares, as 
well as investment risks, Share creation procedures for authorized 
participants, Share redemption procedures for authorized 
participants and certain beneficial owners, NAV calculation, 
availability of information and fees, among other things, is 
included in the Registration Statement, infra note 5.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.201-E,\5\ which governs the listing and trading of 
Commodity-Based Trust Shares on the Exchange.\6\ The Shares will 
represent units of fractional undivided beneficial interest in and 
ownership of the Trust. The Trust's primary objective will be to 
provide investors with an opportunity to invest in gold through the 
Shares, have the gold securely stored by Gold Corporation and, if 
requested by an investor, deliver Physical Gold \7\ to such investor in 
exchange for its Shares.\8\
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    \5\ On August 30, 2017, the Trust submitted to the Commission 
its draft registration statement on Form S-1 (``Registration 
Statement'') under the Securities Act of 1933 (15 U.S.C. 77a).
    \6\ A ``Commodity-Based Trust Share'' is a security (a) that is 
issued by a trust that holds a specified commodity deposited with 
the trust; (b) that is issued by such trust in a specified aggregate 
minimum number in return for a deposit of a quantity of the 
underlying commodity; and (c) that, when aggregated in the same 
specified minimum number, may be redeemed at a holder's request by 
such trust which will deliver to the redeeming holder the quantity 
of the underlying commodity. See NYSE Arca Equities Rule 
8.201(c)(1).
    \7\ ``Physical Gold'' is defined as London Bars and all gold 
products without numismatic value and having a gold purity of at 
least 99.5% (including coins, cast bars and minted bars).
    \8\ According to the Registration Statement, the Trust does not 
trade in gold futures contracts on COMEX or on any other futures 
exchange. Because the Trust does not trade in gold futures contracts 
on any futures exchange, the Trust is not regulated by the CFTC 
under the Commodity Exchange Act as a ``commodity pool,'' and is not 
operated by a CFTC-regulated commodity pool operator. Investors in 
the Trust do not receive the regulatory protections afforded to 
investors in regulated commodity pools, nor may COMEX or any futures 
exchange enforce its rules with respect to the Trust's activities. 
In addition, investors in the Trust do not benefit from the 
protections afforded to investors in gold futures contracts on 
regulated futures exchanges.
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    The sponsors of the Trust will be Gold Corporation (``Custodial 
Sponsor'') and Exchange Traded Concepts, LLC (``ETC'' or the 
``Administrative Sponsor'' and, together with the Custodial Sponsor, 
the ``Sponsors'') \9\ and Gold Corporation will also serve as custodian 
of the Trust's gold bullion (in such capacity, ``Custodian'').\10\
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    \9\ Gold Corporation, doing business as the Perth Mint, is a 
Western Australian Government owned statutory body corporate 
established by the Gold Corporation Act 1987 (Western Australia). 
ETC is an Oklahoma limited liability company majority owned by 
Cottonwood ETF Holdings LLC. ETC is a registered investment adviser 
and provides investment advisory services to domestic and 
international equity and fixed income ETFs.
    \10\ As Custodian of the Trust's gold bullion, Gold Corporation 
will be responsible for the safekeeping of the Trust's gold and 
supplying inventory information to the Trustee and the Sponsors. The 
Custodian will also be responsible for facilitating the transfer of 
gold in and out of the Trust and facilitating the shipment of 
Physical Gold to Delivery any beneficial owner (who is not an 
authorized participant) who wishes to surrender Shares in exchange 
for Physical Gold.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposed rule change to list and trade the Shares is consistent with 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\11\ In particular, the Commission finds 
that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\12\ 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. The last-sale price for 
the Shares will be disseminated over the Consolidated Tape. 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.\13\
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    \11\ 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).
    \12\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \13\ The Exchange states that 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. See Notice, supra note 3, 82 FR at 
61605.
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    Additionally, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Exchange Act,\14\ 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

[[Page 4719]]

perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
The Commission notes that the Exchange has surveillance-sharing 
agreements with significant, regulated markets for trading futures on 
gold. Specifically, according to the Exchange: (1) The most significant 
gold futures exchanges in the U.S. is COMEX, a subsidiary of New York 
Mercantile Exchange, Inc., and a subsidiary of the Chicago Mercantile 
Exchange Group (``CME Group''); (2) ICE Futures US (``ICE'') also lists 
gold futures; \15\ and (3) the CME Group and ICE are members of the 
ISG,\16\ which will allow NYSE Arca to obtain surveillance information 
from COMEX and ICE. Both COMEX and ICE are regulated by the U.S. 
Commodity Futures Trading Commission (``CFTC'').\17\ The gold futures 
market is of significant size and liquidity.\18\
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    \14\ 15 U.S.C. 78f(b)(5).
    \15\ See Notice, supra note 3, 82 FR at 61603.
    \16\ See id.
    \17\ See https://www.theice.com/futures-us/regulation (``ICE 
Futures U.S. is a Designated Contract Market pursuant to the 
Commodity Exchange Act and regulated by the CFTC.''); Securities 
Exchange Act Release No. 68440 (December 14, 2012), 78 FR 75468, 
75469 (December 20, 2012) (SR-NYSEArca-2012-28) (COMEX is regulated 
by the CFTC).
    \18\ The Commission further notes that it has approved the 
listing and trading of other Commodity-Based Trust Shares overlying 
gold. See, e.g., Securities Exchange Act Release No. 81918 (October 
23, 2017), 82 FR 49884 (October 27, 2017) (SR-NYSEArca-2017-98); 
Securities Exchange Act Release No. 71378 (January 23, 2014), 79 FR 
71378 (January 29, 2014) (SR-NYSEArca-2013-137); and Securities 
Exchange Act Release No. 70195 (August 14, 2013, 2013), 78 FR 51239 
(August 20, 2013) (SR-NYSEArca-2013-61).
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    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. NYSE Arca Equities Rule 
8.201(e)(2)(v) requires that an intraday indicative value (``IIV,'' 
which is referred to in the rule as the ``Indicative Trust Value'') be 
calculated and disseminated at least every 15 seconds. The IIV will be 
calculated based on the amount of gold held by the Trust and a price of 
gold derived from updated bids and offers indicative of the spot price 
of gold. The Exchange states that the IIV relating to the Shares will 
be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.\19\ The NAV of 
the Trust will be published by the Sponsor on each day that the NYSE 
Arca is open for regular trading and will be posted on the Trust's 
website.\20\ The Trust also will publish the following information on 
their website: (1) The mid-point of the bid-ask price as of the close 
of trading (``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; (3) the Trust's prospectus, as 
well as the two most recent reports to stockholders; and (4) the last-
sale price of the Shares as traded in the U.S. market.\21\ 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.
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    \19\ See Notice, supra note 3, 82 FR at 61607.
    \20\ See id.
    \21\ See id. at 61606.
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    The Commission also believes that the proposal is reasonably 
designed to prevent trading when a reasonable degree of transparency 
cannot be assured. 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.\22\ The Exchange will halt trading in the Shares if the 
NAV of the Trust is not calculated or disseminated daily.\23\ The 
Exchange may halt trading during the day in which an interruption 
occurs to the dissemination of the IIV; 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.\24\
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    \22\ See id.
    \23\ See id.
    \24\ See id.
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    Additionally, the Commission notes that market makers in the Shares 
will be subject to the requirements of NYSE Arca Equities Rule 8.201-
E(g), which are designed to allow the Exchange to ensure that they do 
not use their positions to violate the requirements of Exchange rules 
or applicable federal securities laws.\25\
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    \25\ Commentary .04 of NYSE Arca Equities Rule 6.3 requires that 
an ETP Holder acting as a registered market maker in the Shares, and 
its affiliates, 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.
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    In support of this proposal, the Exchange has made the following 
additional representations:
    (1) The Shares will be listed and traded on the Exchange pursuant 
to the initial and continued listing criteria in NYSE Arca Equities 
Rule 8.201-E.\26\
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    \26\ See id.
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    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\27\
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    \27\ See id.
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    (3) The Exchange deems the Shares to be equity securities.\28\
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    \28\ See id. The Commission notes that, as a result, trading of 
the Shares will be subject to the Exchange's existing rules 
governing the trading of equity securities.
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    (4) The Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.\29\
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    \29\ See id. at 61607.
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    (5) 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, and 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.\30\
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    \30\ See id. at 61606. 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. See id. at 61606, n.39.
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    (6) 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

[[Page 4720]]

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.\31\
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    \31\ See id. at 61606.
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    (7) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (1) 
The procedures for purchases and redemptions of Shares in Baskets 
(including noting that Shares are not individually redeemable); (2) 
NYSE Arca 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 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 (6) trading information.\32\
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    \32\ See id. at 61607.
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    (8) All statements and representations made in this filing 
regarding (a) the description of the portfolio, (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 Trust on 
the Exchange.\33\
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    \33\ See id. See also NYSE Arca Rule 8.201-E(e)(2)(vii).
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    (9) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5(m).\34\
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    \34\ See Notice, supra note 3, at 61607.
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    This approval order is based on all of the Exchange's 
representations--including those set forth above and in the Notice--and 
the Exchange's description of the Trust.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Sections 6(b)(5) and 11A(a)(1)(C)(iii) 
of the Act \35\ and the rules and regulations thereunder applicable to 
a national securities exchange.
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    \35\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78k-1(a)(1)(C)(iii), 
respectively.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\36\ that the proposed rule change (SR-NYSEArca-2017-140), 
be, and it hereby is, approved.
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    \36\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
Robert W. Errett,
Deputy Secretary.
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    \37\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-01953 Filed 1-31-18; 8:45 am]
 BILLING CODE 8011-01-P