Document ID: SEC-2010-1250-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-08-17T04:00Z

[Federal Register: August 17, 2010 (Volume 75, Number 158)]
[Notices]               
[Page 50789-50791]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17au10-87]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62692; File No. SR-NYSEArca-2010-56]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change To List and Trade Shares of the ETFS 
Precious Metals Basket Trust

August 11, 2010.

I. Introduction

    On June 15, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the ETFS Precious Metals Basket 
Trust (``Trust'') pursuant to NYSE Arca Equities Rule 8.201. The 
proposed rule change was published for comment in the Federal Register 
on July 8, 2010.\3\ The Commission received no comments on the 
proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62402 (June 29, 
2010), 75 FR 39292 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to list and trade Shares pursuant to NYSE 
Arca Equities Rule 8.201, which governs the listing and trading of 
Commodity-Based Trust Shares. ETFS Services USA LLC is the sponsor of 
the Trust (``Sponsor''), The Bank of New York Mellon is the trustee of 
the Trust (``Trustee''), and JPMorgan Chase Bank, N.A. is the custodian 
of the Trust (``Custodian'').
    The Shares represent units of fractional undivided beneficial 
interest in and ownership of the Trust. The investment objective of the 
Trust is for the Shares to reflect the performance of the price of 
physical gold, silver, platinum, and palladium in the proportions held 
by the Trust, less the expenses of the Trust's operations.\4\
---------------------------------------------------------------------------

    \4\ See the registration statement for the Trust on Form S-1, 
filed with the Commission on April 29, 2010 (No. 333-164769) 
(``Registration Statement'').
---------------------------------------------------------------------------

    The Exchange deems the Shares to be equity securities, which 
subjects trading in the Shares to the Exchange's existing rules 
governing the trading of equity securities, and has represented that 
trading in the Shares on the Exchange will occur in accordance with 
NYSE Arca Equities Rule 7.34(a). The Exchange has also represented that 
it has appropriate rules to facilitate transactions in the Shares 
during all trading sessions.
    Additional information regarding the Trust, the Shares, the Trust's 
investment objectives, strategies, policies, and restrictions, fees and 
expenses, creation and redemption of Shares, the Bullion markets, 
availability of information, trading rules and halts, and surveillance 
procedures, among other things, can be found in the Notice and in the 
Registration Statement.\5\
---------------------------------------------------------------------------

    \5\ See supra notes 3 and 4.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful consideration, the Commission finds that the proposed 
rule change to list and trade the Shares of the Fund is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\6\ In particular, the 
Commission finds that the proposed rule change is consistent with the 
requirements of Section 6(b)(5) of the Act,\7\ 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, foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\8\ which sets forth Congress's 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. Quotation and last-
sale information for the Shares will be disseminated through the 
facilities of the Consolidated Tape Association. In addition, the 
Trust's Web site will provide an intraday indicative value (``IIV'') 
per Share,\9\ updated at least every 15 seconds, as calculated by the 
Exchange or a third

[[Page 50790]]

party financial data provider, during the Exchange's Core Trading 
Session (9:30 a.m. to 4 p.m. E.T.). The Trust's Web site also will 
provide the following information: (1) The net asset value (``NAV'') of 
the Trust, on a per Share basis, as calculated each business day by the 
Sponsor and the mid-point of the bid-ask price \10\ at the close of 
trading in relation to such NAV (``Bid/Ask Price''), and a calculation 
of the premium or discount of such price against such NAV; and (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 
Creation Basket Deposit; (4) the Trust's prospectus, and the two most 
recent reports to stockholders; and (5) the last sale price of the 
Shares as traded in the US market. Further, the Exchange will make 
available over the Consolidated Tape trading volume, closing prices and 
NAV for the Shares from the previous day. There is a considerable 
amount of Bullion market information available on public Web sites and 
through professional and subscription services. For example, investors 
may obtain on a 24-hour basis Bullion pricing information based on the 
spot price for an ounce of Bullion from various financial information 
service providers, such as Reuters and Bloomberg. Reuters and Bloomberg 
provide at no charge on their Web sites delayed information regarding 
the spot price of Bullion and last sale prices of Bullion futures, as 
well as information about news and developments in the Bullion market. 
Reuters and Bloomberg also offer a professional service to subscribers 
for a fee that provides information on Bullion prices directly from 
market participants. Meanwhile, other public Web sites provide 
information on Bullion, ranging from those specializing in precious 
metals to sites maintained by major newspapers, such as The Wall Street 
Journal. In addition, the London AM Fix and London PM Fix are publicly 
available at no charge at or http://www.thebulliondesk.com.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \9\ The IIV is calculated by multiplying the indicative spot 
price of Bullion by the quantity of Bullion backing each Share as of 
the last calculation date.
    \10\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange states that it will obtain a representation from 
the Trust that the NAV will be calculated daily and made available to 
all market participants at the same time.\11\ Following the initial 12-
month period following commencement of trading, the Exchange will 
consider the suspending trading in Shares or removing Shares from 
listing if, among other things: (1) The value of the Bullion is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, Trust, custodian or the 
Exchange; (2) the Exchange stops providing a hyperlink on its Web site 
to any such unaffiliated commodity value; or (3) the IIV is no longer 
made available on at least a 15-second delayed basis.\12\ 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. With respect to 
trading halts, the Exchange may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the Shares. 
These may include: (1) The extent to which conditions in the underlying 
Bullion markets 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.\13\
---------------------------------------------------------------------------

    \11\ See e-mail from Timothy J. Malinowski, Senior Director, 
NYSE Euronext, to Christopher W. Chow, Special Counsel, and Daniel 
T. Gien, Staff Attorney, Commission, dated July 29, 2010.
    \12\ See NYSE Arca Equities Rules 8.201(e)(2)(iv), (v).
    \13\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

    Further, NYSE Arca Equities Rule 8.201 sets forth certain 
restrictions on ETP Holders acting as registered Market Makers in the 
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule 
8.201(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 applicable underlying Bullion, related futures or 
options on futures, or any other related derivatives. Commentary .04 of 
NYSE Arca Equities Rule 6.3 requires an ETP Holder acting as a 
registered Market Maker in Commodity-Based Trust 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.
    In support of this proposal, the Exchange has made representations, 
including the following:
    (1) The Shares will be subject to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.201.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.\14\ In addition, the Exchange may obtain trading 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges who are members of the ISG.\15\
---------------------------------------------------------------------------

    \14\ Pursuant to NYSE Arca Equities Rule 8.201(g), the Exchange 
is able to obtain information regarding trading in the Bullion, 
Bullion futures contracts, options on Bullion futures, or any other 
Bullion derivative, by ETP Holders acting as registered Market 
Makers.
    \15\ The Exchange notes that the New York Mercantile Exchange, 
of which the COMEX is a division, is an ISG member; however, the 
Tokyo Commodity Exchange, Inc. (``TOCOM'') is not an ISG member and 
the Exchange does not have in place a comprehensive surveillance 
sharing agreement with such market.
---------------------------------------------------------------------------

    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (1) 
The procedures for purchases and redemptions of Shares in Baskets 
(including noting that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) how information regarding the 
IIV is disseminated; (4) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; (5) the 
possibility that trading spreads and the resulting premium or discount 
on the Shares may widen as a result of reduced liquidity of Bullion 
trading during the Core and Late Trading Sessions after the close of 
the major world Bullion markets; and (6) trading information.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act

[[Page 50791]]

and the rules and regulations thereunder applicable to a national 
securities exchange.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSEArca-2010-56) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20256 Filed 8-16-10; 8:45 am]
BILLING CODE 8010-01-P