Document ID: SEC-2018-1507-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-09-27T04:00Z

[Federal Register Volume 83, Number 188 (Thursday, September 27, 2018)]
[Notices]
[Pages 48877-48880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20998]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84257; File No. SR-NYSEArca-2018-55]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Approving on an Accelerated Basis a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of the GraniteShares Gold MiniBAR Trust Pursuant to NYSE Arca 
Rule 8.201-E

September 21, 2018

I. Introduction

    On July 19, 2018, 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 GraniteShares Gold MiniBAR 
Trust (``Trust'') under NYSE Arca Equities Rule 8.201-E. The proposed 
rule change was published for comment in the Federal Register on August 
8, 2018.\3\ On September 14, 2018, the Exchange filed Amendment No. 1 
to the proposed rule change.\4\ The Commission has not received any 
comments on the proposed rule change. The Commission is publishing this 
notice to solicit comments on Amendment No. 1 from interested persons, 
and is approving the proposed rule change, as modified by Amendment No. 
1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83765 (Aug. 2, 
2018), 83 FR 39138 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Asserted that gold 
futures contribute to and provide evidence of the liquidity of the 
overall market for gold; and (2) stated that the Chicago Mercantile 
Exchange Group (``CME Group'') and ICE Futures US (``ICE'') are 
members of the Intermarket Surveillance Group (``ISG''). Amendment 
No. 1 is available at: https://www.sec.gov/comments/sr-NYSEArca-2018-55/srnysearca201855-4348511-173281.pdf.
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II. The Description of the Proposed Rule Change, as Modified by 
Amendment No. 1 \5\
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    \5\ A more detailed description of the Trust and the Shares, the 
creation and redemption of Shares, the NAV, the availability of 
information, among other things, is included in the Registration 
Statement, infra note 6, and the Notice, supra note 3.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.201-E,\6\ which governs the listing and trading of 
Commodity-Based Trust Shares on the Exchange.\7\ The Shares will 
represent units of fractional undivided beneficial interest in and 
ownership of the Trust. The investment objective of the Trust will be 
for the Shares to reflect the performance of the price of gold, less 
the expenses and liabilities of the Trust.
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    \6\ The Trust has filed a registration statement on Form S-1 
under the Securities Act of 1933 (15 U.S.C. 77a), dated July 2, 2018 
(File No. 333-226034) (``Registration Statement'').
    \7\ 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).
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    The sponsor of the Trust is GraniteShares LLC (``Sponsor''). The 
``Trustee'' is The Bank of New York Mellon and the ``Custodian'' is 
ICBC Standard Bank Plc.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposed rule change, as modified by Amendment No. 1, to list and trade 
the Shares is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\8\ In 
particular, the Commission finds that the proposal, as modified by 
Amendment No. 1, is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\9\ 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. According 
to the Exchange, 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.\10\
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    \8\ 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).
    \9\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \10\ 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, 83 FR at 
39140.

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[[Page 48878]]

    Additionally, the Commission finds that the proposed rule change, 
as modified by Amendment No. 1, is consistent with Section 6(b)(5) of 
the Exchange Act,\11\ 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. 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 exchange in the 
U.S. is COMEX, a subsidiary of New York Mercantile Exchange, Inc., and 
a subsidiary of the CME Group; (2) ICE also lists gold futures;\12\ and 
(3) the CME Group and ICE are members of the ISG,\13\ 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'').\14\ The gold futures market is of significant 
size and liquidity.\15\
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See Notice, supra note 3, 83 FR at 39139.
    \13\ See Amendment No. 1, supra note 4.
    \14\ See Securities Exchange Act Release No. 82593 (January 26, 
2018), 83 FR 4718, 4719 (February 1, 2018) (approving the listing 
and trading of shares of the Perth Mint Physical Gold ETF).
    \15\ The Commission 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), 78 FR 51239 (August 20, 
2013) (SR-NYSEArca-2013-61). See also Securities Exchange Act 
Release No. 83723 (July 26, 2018), 83 FR 37579, 37594 (August 1, 
2018) (SR-BatsBZX-2016-30) (disapproving the listing and trading of 
shares of the Winklevoss Bitcoin Trust).
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    The Commission believes that the proposed rule change, as modified 
by Amendment No. 1, 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(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.\16\ 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.\17\ 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.\18\ 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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    \16\ See Notice, supra note 3, 83 FR at 39142.
    \17\ See id.
    \18\ See id. at 39140-41.
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    The Commission also believes that the proposal, as modified by 
Amendment No. 1, 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.\19\ The Exchange will halt trading 
in the Shares if the NAV of the Trust is not calculated or disseminated 
daily.\20\ 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.\21\
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    \19\ See id. at 39141.
    \20\ See id.
    \21\ 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.\22\
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    \22\ 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.\23\
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    \23\ See id. at 39142.
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    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\24\
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    \24\ See id. at 39141.
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    (3) The Exchange deems the Shares to be equity securities.\25\
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    \25\ 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.\26\
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    \26\ See id. at 39141-42.
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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 the Financial Industry Regulatory 
Authority (``FINRA'') on behalf of the Exchange, which are designed to 
detect violations of Exchange rules and applicable federal securities 
laws, and that these

[[Page 48879]]

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.\27\
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    \27\ See id. at 39141. 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 39141, n.28.
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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 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.\28\
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    \28\ See id. at 39141.
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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.\29\
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    \29\ See id. at 39142.
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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 on the 
Exchange.\30\
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    \30\ 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-E(m).\31\
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    \31\ See Notice, supra note 3, at 39142.
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    This approval order is based on all of the Exchange's 
representations--including those set forth above, in the Notice, and in 
Amendment No. 1--and the Exchange's description of the Trust.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with 
Sections 6(b)(5) and 11A(a)(1)(C)(iii) of the Act \32\ and the rules 
and regulations thereunder applicable to a national securities 
exchange.
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    \32\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78k-1(a)(1)(C)(iii), 
respectively.
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IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1 to the proposed rule change. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2018-55 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-2018-55. 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 this filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-55 and should be submitted 
on or before October 18, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the 30th day after the 
date of publication of notice of Amendment No. 1 in the Federal 
Register. Amendment No. 1 supplements the proposal by providing 
additional information regarding regulation of the gold futures market. 
This information assisted the Commission in evaluating the Shares' 
susceptibility to manipulation. Accordingly, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Exchange Act,\33\ to approve 
the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.
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    \33\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\34\ that the proposed rule change (SR-NYSEArca-2018-55), 
as modified by Amendment No. 1 be, and it hereby is, approved.
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    \34\ 15 U.S.C. 78s(b)(2).

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[[Page 48880]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20998 Filed 9-26-18; 8:45 am]
 BILLING CODE 8011-01-P