Document ID: SEC-2023-0608-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2023-06-12T04:00Z

[Federal Register Volume 88, Number 112 (Monday, June 12, 2023)]
[Notices]
[Pages 38110-38115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12414]

[[Page 38110]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97653; File No. SR-NYSEARCA-2023-37]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the COtwo Advisors 
Physical European Carbon Allowance Trust Under NYSE Arca Rule 8.201-E 
(Commodity-Based Trust Shares)

June 6, 2023.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on May 23, 2023, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the COtwo 
Advisors Physical European Carbon Allowance Trust under NYSE Arca Rule 
8.201-E (Commodity-Based Trust Shares). The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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 
COtwo Advisors Physical European Carbon Allowance Trust (the 
``Trust''), under NYSE Arca Rule 8.201-E, which governs the listing and 
trading of Commodity-Based Trust Shares.\4\ 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.
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    \4\ 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 Trust was formed as a Delaware statutory trust on January 12, 
2023.\5\ The Trust has no fixed termination date. The Trust will not be 
registered as an investment company under the Investment Company Act of 
1940, as amended,\6\ and is not required to register under such act. 
The Trust is not a commodity pool for purposes of the Commodity 
Exchange Act, as amended.\7\
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    \5\ On May 12, 2023, the Trust filed with the Commission a 
registration statement on Form S-1 (File No. 333-271910) (the 
``Registration Statement'') under the Securities Act of 1933 (15 
U.S.C. 77a) (the ``Securities Act''). The description of the 
operation of the Trust herein is based, in part, on the Registration 
Statement. The Registration Statement in not yet effective and the 
Shares will not trade on the Exchange until such time that the 
Registration Statement is effective.
    \6\ 15 U.S.C. 80a-1.
    \7\ 17 U.S.C. 1.
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    The sponsor of the Trust is COtwo Advisors LLC, a Delaware limited 
liability company (``Sponsor''). State Street Bank and Trust Company 
serves as the Trust's administrator (the ``Administrator'') to perform 
various administrative, accounting and recordkeeping functions on 
behalf of the Trust. Wilmington Trust serves as trustee of the Trust 
(the ``Trustee''). State Street Bank and Trust Company serves as the 
Trust's transfer agent (the ``Transfer Agent'') and as custodian of the 
Trust's cash, if any (``Cash Custodian'').\8\
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    \8\ The Cash Custodian is responsible for holding the Trust's 
cash as well as receiving and dispensing cash on behalf of the Trust 
in connection with the payment of Trust expenses.
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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.
Operation of the Trust \9\
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    \9\ The description of the operation of the Trust, the Shares, 
and the carbon credit industry contained herein are based, in part, 
on the Registration Statement. See note 5, supra.
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    The investment objective of the Trust will be for the Shares to 
reflect the performance of the price of EU Carbon Emission Allowances 
for stationary installations (``EUAs''), less the Trust's expenses. The 
Trust intends to achieve its objective by investing all of its assets 
in EUAs on a non-discretionary basis (i.e., without regard to whether 
the value of EUAs is rising or falling over any particular period). 
Shares of the Trust will represent units of fractional undivided 
beneficial interest in and ownership of the Trust. The Trust's only 
ordinary recurring expense will be the Sponsor's annual fee. The Trust 
will not hold any assets other than EUAs or, possibly, cash. The Trust 
may hold a very limited amount of cash to pay Trust expenses. The Trust 
may also cause the Sponsor to receive EUAs from the Trust in such a 
quantity as may be necessary to pay the Sponsor's annual fee.
    The Trust will not invest in futures, options, or swap contracts on 
any futures exchange or in the over-the-counter market. The Trust 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 Trust's Cash Custodian may hold cash 
proceeds from EUA sales to pay Trust expenses. All EUAs will be held in 
the Union Registry (defined below).
    The Trust is not a proxy for investing in physical carbon credits. 
Rather, the Shares are intended to provide a cost-effective means of 
obtaining investment exposure to the price of EUAs through the 
securities markets that is similar to an investment in futures 
contracts or other derivatives.
EUAs and the EUA Industry
Description of EU Emissions Trading Scheme
    According to the Registration Statement, the European Union 
Emissions Trading System (``EU ETS'') is a ``cap and trade'' system 
that caps the total volume of greenhouse gas (``GHG'') emissions from 
installations and aircraft operators responsible for around 40% of 
European Union (``EU'') GHG emissions.\10\ The EU ETS is the largest 
cap and trade system in the world and covers more than 11,000 power 
stations and industrial plants in 31 countries, and flights between 
airports of participating countries. The EU ETS is administered by the 
EU

[[Page 38111]]

Commission, which issues a predefined amount of EUAs through auctions 
or free allocation. An EUA represents the right to emit one metric ton 
of carbon dioxide equivalent into the atmosphere by operators of 
stationary installations (``Covered Entities''). By the end of April 
each year, all Covered Entities are required to surrender EUAs equal to 
the total volume of actual emissions from their installation for the 
last calendar year. EU ETS operators can buy or sell EUAs to achieve EU 
ETS compliance.
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    \10\ There are two types of EU emissions allowance: (i) general 
allowances for stationary installations, or EUA; and (ii) allowances 
for the aviation sector (``EUAA''). The Trust will hold EUAs only.
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    In 2012, EU ETS operations were centralized into a single EU 
registry operated by the EU Commission (the ``Union Registry''), which 
covers all countries participating in the EU ETS. The Union Registry is 
an online database that holds accounts for all entities covered by the 
EU ETS as well as for participants (such as the Trust) not covered 
under the EU ETS. An account must be opened in the Union Registry in 
order to transact in EUAs and the Union Registry is at all times 
responsible for holding the EUAs. All EUAs are held in the Union 
Registry.
Major Holders and Allowance Use Cases
    According to the Registration Statement, while there is limited 
publicly available data on individuals or individual organizations' 
holdings in physical carbon allowances, carbon allowances are primarily 
held for three different use cases:
    (a) Complying with the EU ETS: Companies that need to surrender 
allowances under the EU ETS hold allowances to surrender them annually. 
These positions are typically built over time and ultimately 
surrendered at time of compliance. Therefore, the largest emitters in 
the EU ETS hold a significant amount of allowances, which include 
entities such as large utilities with a substantial share of fossil 
fuel fired power plants, cement companies, steel producers, chemical 
producers, oil and gas majors and airlines.
    (b) Providing financial services for hedging purposes or 
speculation, such as clearing houses for the European Energy Exchange 
or the Intercontinental Exchange, or banks holding allowances for their 
clients.
    (c) Trading on and speculating around price moves, using physical 
emission allowances. This can take many forms, including ``yield 
trades'', which includes holding a physical allowance and selling an 
EUA future at a premium to gain the yield in the forward curve; or 
outright positions for short term or long term speculation.
    In addition to holding physical allowances, there is a liquid 
secondary futures and options market that is primarily used for hedging 
future emissions or speculating.
Trading Location
    According to the Registration Statement, the EU ETS is linked to 
small emissions trading systems in Europe (Norway, Switzerland, Iceland 
and Liechtenstein), but not to any other major cap and trade markets. 
Therefore, allowances handed out in the EU ETS are not transferable to 
any registry outside of the EU ETS and cannot be used for compliance in 
any other cap and trade market.
    There are a number of other trading systems globally, and like the 
EU ETS, no allowances of any of these systems can be used in any other 
system:
    (a) Western Climate Initiative (WCI): The State of California and 
the Canadian province Quebec created a linked cap and trade market, 
that covers >80% of emissions.
    (b) Regional Greenhouse Gas Initiative (RGGI): a group of US east 
coast states created a linked market that covers power generators only.
    (c) The China National ETS: Technically not a cap and trade scheme 
(as the amount of allowances is not fixed but calculated according to 
historic production of units).
    (d) South Korea ETS: A comprehensive market covering the majority 
of Korean emissions.
Pricing of Allowances and Trading Volume
    According to the Registration Statement, there are two primary 
avenues for trading EUAs: a primary market and a secondary market. The 
primary market involves participation in a regularly scheduled auction. 
The secondary market involves transactions between buyers and sellers 
on regulated markets via trading in spot, options, and futures 
contracts. There are also over-the-counter transactions, but they 
comprise a negligible percentage of transactions.
    The EUA markets are generally liquid. EUA auctions are held on a 
near-daily basis throughout the year, other than between mid-December 
to mid-January, when auctions are paused. Prices achieved in these 
auctions are published on various publicly-accessible websites, 
including the European Commission's primary website.
    The secondary market trading takes place predominantly on the 
European Energy Exchange AG (``EEX'') and ICE Endex. As of January 
2023, the secondary market had average daily trading volume of [euro]2 
billion, with the majority of the liquidity in the futures market. 
Prices for secondary market transactions are published on various 
publicly-accessible websites, including those of EEX and ICE Endex. 
Both EEX and ICE Endex are affiliates of Exchange groups that are 
members of the Intermarket Surveillance Group (``ISG'').
    Most liquidity in the secondary market is achieved by trading 
futures contracts. These contracts have expiration going out as far as 
2030. The most liquid contract is the single day futures contract on 
EUAs (the ``Daily EUA Future''), which settles each day at the close of 
trading. Generally, Daily EUA Futures trade from approximately 2:00 
a.m. Eastern Time (``E.T.'') to approximately 12:00 p.m. E.T. The 
settlement price is fixed each business day and is published by the 
exchange at approximately 12:15 E.T. Final cash settlement occurs the 
first business day following the expiry day.
    In 2021, the secondary spot market for EUAs (including the Daily 
EUA Future) averaged around 2.4 million EUAs daily and the primary 
auctions accounted for almost 2.5 million EUAs being auctioned several 
times per week. The current value (spot price) for a EUA is greatly 
influenced by a number of factors, including regulatory changes, world 
events and general level of economic activity.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust 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, which amount may be 
revised from time-to-time. The Trust 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 Transfer Agent (the ``Participant 
Agreement'').
    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 Trust or the distribution by 
the Trust of the amount of EUAs represented by the Creation Units being 
created or redeemed. The amount of EUAs required to be delivered to the 
Trust in connection with any creation, or paid out upon redemption, is 
based on the

[[Page 38112]]

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 11:00 a.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.
    An Authorized Participant who places a purchase order is 
responsible for crediting the Trust's Union Registry account with the 
required EUA deposit by 2:00 p.m. New York time on the second business 
day following the order date. Upon receipt of the EUA deposit amount in 
the Trust's Union Registry account, the Union Registry will notify the 
Sponsor that the EUAs have been deposited. Upon receipt of confirmation 
from the Union Registry that the EUA deposit amount has been received, 
the Administrator will direct DTC to credit the number of Shares 
created to the Authorized Participant's DTC account.
    According to the Registration Statement, the redemption 
distribution due from the Trust will be delivered once the 
Administrator notifies the Sponsor that the Authorized Participant has 
delivered the Shares to be redeemed to the Trust's DTC account. The 
redemption distribution will be delivered to the Authorized Participant 
on the second business day following the order date. Once the 
Administrator notifies the Sponsor that the Shares have been received 
in the Trust's DTC account, the Sponsor instructs the Union Registry to 
transfer the redemption EUA amount from the Trust's Union Registry 
account to the Authorized Participant's Union Registry account.
    The Sponsor is the only entity that may initiate a withdrawal of 
EUAs from the Trust's Union Registry account, and the only accounts 
that may receive EUAs from the Trust's Union Registry account are 
Authorized Participants' or the Sponsor's Union Registry accounts.
Net Asset Value (``NAV'')
    The Trust's NAV is calculated by taking the current market value of 
its total assets, less any liabilities of the Trust, and dividing that 
total by the total number of outstanding Shares.
    The Administrator will calculate the NAV of the Trust once each 
Exchange trading day. The NAV for a normal trading day will be released 
after the end of the Core Trading Session, which is typically 4 p.m. 
New York time. The NAV for the Trust's Shares will be disseminated 
daily to all market participants at the same time. The Administrator 
will use the settlement price for the Daily EUA Futures established by 
ICE Endex to calculate the NAV. The Administrator also converts the 
value of Euro denominated assets into US Dollar equivalent using 
published foreign currency exchange prices by an independent pricing 
vendor. Third parties supplying quotations or market data may include, 
without limitation, dealers in the relevant markets, end-users of the 
relevant product, information vendors, brokers and other sources of 
market information.
Indicative Fund Value (``IFV'')
    In order to provide updated information relating to the Trust for 
use by investors and market professionals, an updated IFV will be made 
available through on-line information services throughout the Exchange 
Core Trading Session (normally 9:30 a.m. to 4:00 p.m. E.T.) on each 
trading day. The IFV will be calculated by using the prior day's 
closing NAV per Share of the Trust as a base and updating that value 
throughout the trading day to reflect changes in the most recently 
reported mid-point of the bid-ask spread of the Daily EUA Future. The 
IFV disseminated during NYSE Arca Core Trading Session hours should not 
be viewed as an actual real time update of the NAV, because the NAV 
will be calculated only once at the end of each trading day based upon 
the relevant end of day values of the Trust's investments. Although the 
IFV will be disseminated throughout the Core Trading Session, the 
customary trading hours for EUAs are 2 a.m. to 12 p.m. Eastern Time. 
During the gap in time at the end of each trading day during which the 
Shares are traded on the Exchange, but real-time trading prices for 
EUAs are not available, the IFV will be calculated based on the end of 
day price of EUAs immediately preceding the trading session.
    The IFV will be disseminated on a per Share basis every 15 seconds 
during regular NYSE Arca Core Trading Session.
Availability of Information
    The NAV for the Trust's Shares will be disseminated daily to all 
market participants at the same time. The intraday, closing prices, and 
settlement prices for EUAs will be readily available from the 
applicable futures exchange websites, automated quotation systems, 
published or other public sources, or major market data vendors. The 
IFV 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).
    Complete real-time data for EUAs and Daily EUA Futures is available 
by subscription through on-line information services. Quotation and 
last-sale information regarding the Shares will be disseminated through 
the facilities of the Consolidated Tape Association. The IFV will be 
available through on-line information services. The trading prices for 
EUAs and Daily EUA Futures will be disseminated by on-line subscription 
services or by one or more major market data vendors during the NYSE 
Arca Core Trading Session of 9:30 a.m. to 4:00 p.m. E.T. Additionally, 
the NAV may be influenced by non-concurrent trading hours between the 
Exchange and the EUA markets. While the Trust's Shares trade on the 
Exchange from 9:30 a.m. to 4:00 p.m. E.T., the trading hours for EUA 
markets do not coincide during all of this time. EEX provides on its 
website, on a daily basis, transaction volumes and transaction prices 
for the EUA spot market. ICE Endex provides on its website, on a daily 
basis, transaction volumes, transaction prices, daily settlement prices 
and historical settlement prices for Daily EUA Futures that were traded 
outside of block trades by EUA futures brokers. In addition, 
transaction volumes, transaction prices, daily settlement prices and 
historical settlement prices for Daily EUA Futures traded in block 
trades by futures brokers are available on a daily basis through a 
subscription service to ICE Endex. However, ICE Endex provides the 
daily settlement price change of the Daily EUA Future on its website.
    In addition, the Trust's website (www.cotwoadvisors.com) will 
contain the following information, on a per Share basis, for the Trust: 
(a) the prior business day's end of day closing NAV; (b) the Official 
Closing Price \11\ or the midpoint of the national best bid and the 
national best offer (``NBBO'') as of the time the NAV is calculated 
(``Bid-Ask Price''); (c) calculation of the premium or discount of the 
Official Closing Price against the NAV expressed as a percentage of 
such NAV; (d) the prospectus; and (e) other applicable quantitative 
information. The Trust will also provide website disclosure of its

[[Page 38113]]

EUA holdings before 9:30 a.m. E.T. on each trading day.
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    \11\ 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.
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    The Trust's website will be publicly available prior to the public 
offering of Shares and accessible at no charge. The website disclosure 
of the Trust's daily holdings will occur at the same time as the 
disclosure by the Trust of the daily holdings to Authorized 
Participants so that all market participants are provided daily 
holdings information at the same time. Therefore, the same holdings 
information will be provided on the public website as well as in 
electronic files provided to Authorized Participants. Accordingly, each 
investor will have access to the current daily holdings of the Trust 
through the Trust's website. 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.
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 
(Early, Core, and Late Trading Sessions). The Exchange has appropriate 
rules to facilitate transactions in the Shares during all trading 
sessions. As provided in NYSE Arca Rule 7.6-E, 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.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.201-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.201-E(g), which sets forth certain 
restrictions on Equity Trading Permit (``ETP'') Holders acting as 
registered Market Makers in Commodity-Based Trust Shares to facilitate 
surveillance. The Exchange represents that, for initial and continued 
listing, the Trust will be in compliance with Rule 10A-3 \12\ under the 
Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares 
will be outstanding at the commencement of trading on the Exchange.
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    \12\ With respect to the application of Rule 10A-3 (17 CFR 
240.10A-3) under the Act, the Trust relies on the exemption 
contained in Rule 10A-3(c)(7).
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    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.
Trading Halts
    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 carbon 
credit 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.\13\
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    \13\ See NYSE Arca Rule 7.12-E.
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    The Exchange may halt trading during the day in which an 
interruption occurs to the dissemination of the IFV, as described 
above. If the interruption to the dissemination of the IFV 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. In addition, if the Exchange becomes aware that the NAV 
with respect to the Shares is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV is available to all market participants.
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.\14\ 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.
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    \14\ 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.
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    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.\15\
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    \15\ For a list of the current members of ISG, see 
www.isgportal.org.
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    Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able 
to obtain information regarding trading in the Shares in connection 
with ETP Holders' proprietary or customer trades which they effect 
through ETP Holders 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 
on the Exchange.
    The Trust 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

[[Page 38114]]

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-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 IFV 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 EUAs during the Core and Late Trading Sessions; 
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 Trust. The Exchange 
notes that investors purchasing Shares directly from the Trust will 
receive a prospectus. ETP Holders purchasing Shares from the Trust for 
resale to investors will deliver a prospectus to such investors.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses as will be described in the 
Registration Statement. The Information Bulletin will also reference 
the fact that while last sale information regarding EUAs would be 
subject to regulation by EEX and ICE Endex, the Commission and the CFTC 
do not have jurisdiction over the trading of EUAs as a commodity. The 
Information Bulletin will also discuss any relief, if granted, by the 
Commission or the staff from any rules under the Act.
    The Information Bulletin will also disclose the trading hours of 
the Shares and that the NAV for the Shares will be calculated after 
4:00 p.m. E.T. each trading day. The Information Bulletin will disclose 
that information about the Shares will be publicly available on the 
Trust's website.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \16\ 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.
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    \16\ 15 U.S.C. 78f(b)(5).
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    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 information on EUAs available on 
public websites and through professional and subscription services. In 
addition, the Trust's website will provide pricing information for EUAs 
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 Trust will be 
published on each day that the NYSE Arca is open for regular trading 
and will be posted on the Trust's website. The IFV relating to the 
Shares will be widely disseminated by one or more major market data 
vendors at least once every 15 seconds as required by NYSE Arca Rule 
8.201-E(e)(2)(v). The Trust's website will also provide its prospectus 
and other relevant quantitative information regarding the Shares. 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.

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 
carbon credits.

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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

[[Page 38115]]

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-2023-37 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-2023-37. 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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-NYSEARCA-2023-37, and should be 
submitted on or before July 3, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12414 Filed 6-9-23; 8:45 am]
BILLING CODE 8011-01-P