Document ID: SEC-2013-2105-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-12-11T05:00Z

[Federal Register Volume 78, Number 238 (Wednesday, December 11, 2013)]
[Notices]
[Pages 75423-75432]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29492]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70994; File No. SR-NYSEArca-2013-132]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of Merk Hard Currency 
ETF Under NYSE Arca Equities Rule 8.600

December 5, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 22, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 the following under NYSE 
Arca Equities Rule 8.600 (``Managed Fund Shares''): Merk Hard Currency 
ETF. The text of the proposed rule change is available on the 
Exchange's Web site 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.

[[Page 75424]]

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of Merk 
Hard Currency ETF (the ``Fund'') under NYSE Arca Equities Rule 8.600, 
which governs the listing and trading of Managed Fund Shares \4\ on the 
Exchange.\5\ The Shares will be offered by Forum ETF Trust (the 
``Trust''), a statutory trust organized under the laws of the State of 
Delaware and registered with the Commission as an open-end management 
investment company.\6\ Forum Investment Advisors, LLC (``Investment 
Manager'') is the investment manager of the Fund. Merk Investments, LLC 
(``Investment Adviser'') is the investment adviser of the Fund.\7\ 
Foreside Fund Services LLC (``Distributor'') is the Fund's principal 
underwriter and distributer of the Fund's Shares. Atlantic Fund 
Administration, LLC (``Administrator''), an affiliate of the Investment 
Manager, serves as the administrator for the Fund. The Bank of New York 
Mellon Corporation serves as custodian and transfer agent for the Fund.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Securities and Exchange Commission (the ``Commission'') 
has previously approved listing and trading on the Exchange of a 
number of actively managed funds under Rule 8.600. See, e.g., 
Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 
27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving Exchange 
listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 58564 (September 17, 2008), 73 FR 55194 
(September 24, 2008) (SR-NYSEArca-2008-86) (order approving Exchange 
listing and trading of WisdomTree Dreyfus Emerging Markets Fund).
    \6\ The Trust is registered under the 1940 Act. On April 12, 
2013, the Trust filed with the Commission an amended Form N-1A under 
the Securities Act of 1933 (15 U.S.C. 77a) (``1933 Act''), and under 
the 1940 Act relating to the Fund (File Nos. 333-180250 and 811-
22679) (``Registration Statement''). The description of the 
operation of the Trust and the Fund herein is based in part on the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 30549 (June 4, 2013) 
(File No. 812-13915-01) (``Exemptive Order'').
    \7\ The Investment Adviser will be responsible for the day-to-
day portfolio management of the Fund and, as such, will make all 
investment decisions for the Fund and is responsible for 
implementing the Fund's investment strategy. The Investment Manager 
will develop the overall investment program for the Fund (which 
includes working with the Investment Adviser to define principal 
investment strategies) and will be responsible for overseeing and 
reporting to the Board of the Trust regarding the Investment 
Adviser.
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. In addition, Commentary 
.06 further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the open-end fund's portfolio.\8\ Commentary .06 to Rule 
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Investment Manager nor the Investment Adviser is a broker-
dealer or is affiliated with a broker-dealer. In the event (a) the 
Investment Manager or the Investment Adviser becomes, or becomes newly 
affiliated with, a broker-dealer, or (b) any new investment adviser is 
or becomes affiliated with a broker-dealer, it will implement a fire 
wall with respect to its relevant personnel or such broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Investment Manager and Investment Adviser 
and their related personnel are subject to the provisions of Rule 
204A-1 under the Advisers Act relating to codes of ethics. This Rule 
requires investment advisers to adopt a code of ethics that reflects 
the fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Description of the Fund
    According to the Registration Statement, the Fund's investment 
objective is to seek to profit from a rise in hard currencies relative 
to the U.S. dollar. The Fund will not be an index fund. The Fund will 
be actively managed and does not seek to replicate the performance of a 
specified index.
    According to the Registration Statement, under normal market 
conditions,\9\ the Fund will invest at least 80% of the value of its 
net assets (plus borrowings for investment purposes) in a basket of 
hard currency denominated investments composed of high quality, short-
term \10\ debt instruments, including sovereign debt, physical gold and 
gold-related securities.\11\
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    \9\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of adverse market, economic, political 
or other conditions including extreme volatility or trading halts in 
the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \10\ According to the Fund, it will define ``short-term'' based 
upon an instrument's remaining maturity period, not the initial 
maturity period. For example, a twenty year bond with three months 
remaining until maturity will be considered to be a short-term debt 
instrument.
    \11\ According to the Registration Statement, ``gold-related 
securities'' are exchange-traded products (``ETPs'') that invest 
directly in gold bullion. ETPs that hold gold, physically or 
indirectly, are not regulated under the 1940 Act and are not 
afforded the protections afforded thereunder.
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    According to the Registration Statement, the term ``hard 
currencies'' is used to describe currencies of countries pursuing what 
the Investment Adviser believes to be ``sound'' monetary policy and 
gold.\12\ Sound monetary policy is

[[Page 75425]]

defined by the Investment Adviser as a monetary policy providing an 
environment fostering long-term price stability. The Investment Adviser 
considers gold to be the only currency with intrinsic value and, as 
such, qualifies as a hard currency.
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    \12\ Provided that the Investment Adviser deems the following 
currencies to be backed by sound monetary policy, ``hard 
currencies'' include, without limitation: Argentine Peso (ARS), 
Australian Dollar (AUD), Brazilian Real (BRL), British Pound (GBP), 
Canadian Dollar (CAD), Chilean Peso (CLP), Chinese Renminbi (CNY), 
Colombian Peso (COP), Czech Koruna (CZK), Danish Krone (DKK), Euro 
(EUR), Hong Kong Dollar (HKD), Hungarian Forint (HUF), Iceland Krona 
(ISK), Indian Rupee (INR), Indonesian Rupiah (IDR), Israeli Shekel 
(ILS), Japanese Yen (JPY), Malaysian Ringgit (MYR), Mexican Peso 
(MXN), New Zealand Dollar (NZD), Norwegian Krone (NOK), Pakistani 
Rupee (PKR), Peruvian New Sol (PEN), Philippine Peso (PHP), Polish 
Zloty (PLN), Russian Ruble (RUB), Singapore Dollar (SGD), South 
African Rand (ZAR), South Korean Won (KRW), Swedish Krona (SEK), 
Swiss Franc (CHF), Taiwanese Dollar (TWD), Thai Baht (THB), Thai 
Baht Onshore (THO), Turkish Lira (TRY), U.S. Dollar (USD), and 
successor currencies of the aforementioned currencies, if any.
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    According to the Registration Statement, the term ``high quality'' 
refers to debt instruments rated in the top three ratings by a U.S. 
nationally recognized ratings service, or that the Investment Adviser 
considers comparable in quality to debt instruments rated in the top 
three ratings.\13\
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    \13\ In determining which instruments are comparable in quality 
to instruments rated in the top three ratings, the Investment 
Adviser will evaluate the relative creditworthiness of issuers and 
the relative credit quality of debt issues. Consideration may be 
given to an issuer's financial strength, capacity for timely payment 
and ability to withstand adverse financial developments as well as 
any ratings assigned to other instruments issued by that issuer.
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    According to the Registration Statement, the Investment Adviser 
will determine currency allocations based on an analysis of monetary 
policies pursued by central banks and economic environments. The 
Investment Adviser will search for currencies that, in the Investment 
Adviser's opinion, are backed by sound monetary policy or gold. Once 
this determination has been made, money market or other debt 
instruments will be selected to create a liquid portfolio of short 
duration and high credit quality.
    According to the Registration Statement, the Fund will specifically 
seek the currency risk of select countries pursuing what the Investment 
Adviser believes are sound monetary policies. As long-term price 
stability is unlikely to be achieved by most currencies, if any, the 
Investment Adviser will focus on a country's monetary policy that 
fosters such stability. The Investment Adviser will invest in a basket 
of hard currency denominated investments that may include physical gold 
and gold-related securities to reduce the Fund's exposure to the risks 
of any one currency. The Investment Adviser may adapt the currency 
allocations as its analysis of monetary policies and economic 
environments evolves.
    According to the Registration Statement, the Investment Adviser may 
sacrifice yield in return for high credit quality of debt securities. 
The Investment Adviser may limit or exclude currencies if, in the 
Investment Adviser's opinion, the potential for appreciation is not 
backed by sound monetary policy.
    According to the Registration Statement, if the Investment Adviser 
deems a currency crisis likely, it is possible that the Fund will 
restrict its investments to a few currencies that meet the Investment 
Adviser's investment criteria for sound monetary policies and 
practices.
Investments
    As noted above, according to the Registration Statement, under 
normal market conditions,\14\ the Fund will invest at least 80% of the 
value of its net assets (plus borrowings for investment purposes) in 
``hard currency'' denominated investments. The Fund normally will 
invest in a basket of hard currency denominated investments composed of 
high quality, short-term debt instruments,\15\ including sovereign 
debt, physical gold and gold-related securities.
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    \14\ See note 9, supra.
    \15\ See note 10, supra.
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    According to the Registration Statement, to try to reduce interest 
rate and credit risk to its portfolio, the Fund will seek to maintain a 
weighted average portfolio maturity of less than eighteen months, 
although the Fund may maintain a weighted average portfolio maturity of 
greater than eighteen months at any given time. In addition, the Fund 
will only buy money market or other short-term debt instruments that 
are rated in the top three ratings by U.S. nationally recognized 
ratings services or that the Investment Adviser considers comparable in 
quality to instruments rated in the top three ratings.\16\
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    \16\ See note 13, supra.
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    According to the Registration Statement, the high quality, short 
term debt instruments in which the Fund will primarily invest include: 
U.S. dollar and non-U.S. dollar denominated money market instruments 
and similar securities; debt obligations issued by the U.S. and foreign 
national, provincial, state or municipal governments or their political 
subdivisions or agencies, central banks, sovereign entities, 
supranational organizations or special purpose entities organized or 
backed by any of the foregoing entities (``Special Purpose Entities''); 
debt instruments issued by U.S. and foreign corporations \17\; and debt 
obligations issued by entities that the Investment Adviser considers to 
be comparable to entities in the categories enumerated above.
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    \17\ The Fund will typically invest only in debt instruments 
that the Investment Adviser deems to be sufficiently liquid at time 
of investment. Generally a debt instruments must have $100 million 
(or an equivalent value if denominated in a currency other than U.S. 
dollars) or more par amount outstanding and significant par value 
traded to be considered sufficiently liquid at the time of 
investment. The Fund may invest up to 25% of its total assets in 
debt instruments having a lower par amount outstanding to the extent 
the Investment Advisor determines such an investment to be 
appropriate. In any such determination, the Investment Advisor will 
evaluate the relative creditworthiness of issuers and the relative 
credit quality of debt issues. Consideration may be given to an 
issuer's financial strength, capacity for timely payment and ability 
to withstand adverse financial developments.
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    According to the Registration Statement, money market instruments 
in which the Fund may invest include short-term government securities, 
floating and variable rate notes, CDs, time deposits, bankers' 
acceptances, commercial paper and other short-term liquid instruments.
    According to the Registration Statement, securities issued by the 
U.S. Government in which the Fund may invest include short-term U.S. 
Treasury obligations and short-term debt obligations. The Fund may also 
purchase certificates not issued by the U.S. Department of the 
Treasury, which evidence ownership of future interest, principal or 
interest and principal payments on obligations issued by the U.S. 
Department of the Treasury. The Fund may invest in obligations issued 
or guaranteed by U.S. Government agencies.\18\ The Fund may also invest 
in separated or divided U.S. Government Securities.\19\ Foreign 
government securities may include direct obligations, as well as 
obligations guaranteed by the foreign government and obligations issued 
by Special Purpose Entities.
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    \18\ Obligations issued or guaranteed by U.S. Government 
agencies include: (1) Obligations issued or guaranteed by U.S. 
Government agencies and instrumentalities that are backed by the 
full faith and credit of the U.S. Government and (2) securities that 
are guaranteed by agencies or instrumentalities of the U.S. 
Government but are not backed by the full faith and credit of the 
U.S.
    \19\ These instruments represent a single interest, or 
principal, payment on a U.S. Government Security that has been 
separated from all the other interest payments as well as the 
security itself. While the components of such instruments are drawn 
from U.S. Government Securities, separated or divided securities may 
be formed by non-governmental institutions.
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    According to the Registration Statement, the Fund may invest in 
U.S. and foreign corporate debt obligations. Corporate debt obligations 
include

[[Page 75426]]

corporate bonds, debentures, notes, commercial paper and other similar 
corporate debt instruments. In addition, the Fund also may invest in 
corporate debt securities registered and sold in the U.S. by foreign 
issuers (sometimes called Yankee bonds) and those sold outside the U.S. 
by foreign or U.S. issuers (sometimes called Eurobonds).
    According to the Registration Statement, the Fund may invest in 
investment grade debt securities and non-investment grade debt 
securities. Investment grade means rated in the top four long-term 
rating categories, or unrated and determined by the Investment Adviser 
to be of comparable quality. The Fund may invest up to 5% of its total 
assets in non-investment grade debt securities, including defaulted 
securities, however the Fund does not expect to invest up to 5% in 
defaulted securities.
    According to the Registration Statement, the Fund may invest in 
physical gold and gold-related securities. To the extent that the Fund 
invests in gold, it may do so by investing directly in physical gold or 
indirectly by investing through U.S.-listed ETPs \20\ that invest in 
gold bullion.
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    \20\ Such ETPs may include the following securities: Trust 
Issued Receipts (as described in NYSE Arca Equities Rule 8.200) and 
Commodity-Based Trust Shares (as described in NYSE Arca Equities 
Rule 8.201). The Fund may invest in ETPs which are not registered 
under the 1940 Act. The Fund may invest in ETPs sponsored by the 
Investment Adviser or its affiliates.
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Other Investments
    According to the Registration Statement, in addition to the 
principal investments in hard currency denominated investments 
described above, the Fund may make certain other investments.
    According to the Registration Statement, in addition to the U.S. 
listed ETPs that the Fund may use as an indirect investment in gold, 
the Fund may invest in other ETPs, including Exchange Traded Funds 
(``ETFs'') \21\ and Exchange Traded Notes (``ETNs'').\22\
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    \21\ For purposes of this proposed rule change, ETFs are 
securities that are registered pursuant to the 1940 Act such as 
those listed and traded on the Exchange pursuant to NYSE Arca 
Equities Rules 5.2(j)(3), 8.100 and 8.600.
    \22\ For purposes of this proposed rule change, ETNs are 
securities that are registered pursuant to the 1933 Act such as 
those listed and traded on the Exchange pursuant to NYSE Arca 
Equities Rule 5.2(j)(6).
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    According to the Registration Statement, the Fund may enter into 
repurchase agreements. If the Fund enters into a repurchase agreement, 
it will maintain possession of the purchased securities and any 
underlying collateral. The Fund may also enter into reverse repurchase 
agreements. A counterparty to a reverse repurchase agreement must be a 
primary dealer that reports to the Federal Reserve Bank of New York or 
one of the largest 100 commercial banks in the United States.
    According to the Registration Statement, the Fund may invest in 
exchange-listed common and preferred stock, and warrants; however, 
according to the Fund, it will not generally invest in such 
investments. The Fund will not invest in any non-U.S. equity 
securities.
    According to the Registration Statement, the Fund may invest in 
sponsored American Depositary Receipts (``ADRs''), European Depositary 
Receipts (``EDRs''), Global Depositary Receipts (``GDRs''), New York 
Registered Shares (``NYRs'') or American Depositary Shares 
(``ADSs'').\23\ The Fund may invest in sponsored, exchange traded 
depositary receipts in order to obtain exposure to foreign securities 
markets.\24\
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    \23\ ADRs typically are issued by a U.S. bank or trust company, 
evidence ownership of underlying securities issued by a foreign 
company, and are designed for use in U.S. securities markets. EDRs 
are issued by European financial institutions and typically trade in 
Europe and GDRs are issued by European financial institutions and 
typically trade in both Europe and the United States. NYRs, also 
known as Guilder Shares since most of the issuing companies are 
Dutch, are U.S. dollar-denominated certificates issued by foreign 
companies specifically for the U.S. market. ADSs are shares issued 
under a deposit agreement that represents an underlying security in 
the issuer's home country. (An ADS is the actual share trading, 
while an ADR represents a bundle of ADSs.)
    \24\ The depositary receipts and NYRs in which the Fund may 
invest will be limited to securities listed on markets that are 
members of the Intermarket Surveillance Group (``ISG''), which 
includes all U.S. national securities exchanges and certain foreign 
exchanges, or are parties to a comprehensive surveillance sharing 
agreement with the Exchange. The Fund will not invest in any 
depositary receipts or NYRs that the Investment Adviser deems to be 
illiquid or for which pricing information is not readily available.
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    According to the Registration Statement, the Fund may invest in 
convertible securities. Convertible securities include debt securities, 
preferred stock or other securities that may be converted into or 
exchanged for a given amount of common stock of the same or a different 
issuer during a specified period and at a specified price in the 
future.
    According to the Registration Statement, the Fund may invest in 
variable amount master demand notes. All variable amount master demand 
notes acquired by the Fund will be payable within a prescribed notice 
period not to exceed seven days.
    According to the Registration Statement, the Fund may hold cash in 
bank deposits in foreign currencies. The Fund may conduct foreign 
currency exchange transactions either on a spot (cash) basis at the 
spot rate prevailing in the foreign exchange market or by entering into 
a forward foreign currency contract. The Fund may enter into forward 
contracts in order to ``lock in'' the exchange rate between the 
currency it will deliver and the currency it will receive for the 
duration of the contract.
    According to the Registration Statement, for the purpose of 
hedging, efficient portfolio management, generating income and/or 
enhancement of returns, the Fund may, from time to time, enter into 
forward currency contracts,\25\ including currency forwards and cross 
currency forwards. The Fund may enter into forward currency contracts 
to hedge against risks arising from securities the Fund owns or 
anticipates purchasing, or the U.S. dollar value of interest and 
dividends paid on those securities.\26\ The Fund may invest in a 
combination of forward currency contracts and U.S. dollar-denominated 
instruments in an attempt to obtain an investment result that is 
substantially the same as a direct investment in a foreign currency-
denominated instrument. For hedging purposes, the Fund may invest in 
forward currency contracts to hedge either specific transactions 
(transaction hedging) or portfolio positions (position hedging).\27\
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    \25\ A forward currency contract is an obligation to purchase or 
sell a specific currency at a future date, which may be any fixed 
number of days from the date of the contract agreed upon by the 
parties, at a price set at the time of the contract.
    \26\ To the extent the Fund retains various U.S. fixed-income 
instruments to settle derivative contracts, the Investment Adviser 
expects such instruments to generate income for the Fund. The value 
of such investments (to the extent used to cover the Fund's net 
exposure under the forward foreign currency contracts and similar 
instruments) and forward contracts and other instruments that 
provide investment exposure to currencies will be counted for 
purposes of the Fund's 80% policy.
    \27\ The Investment Adviser seeks to mitigate counterparty risk 
associated with forward currency contracts by employing multiple 
brokers to execute trades and by monitoring the creditworthiness of 
counterparties through analysis of credit ratings available through 
U.S. nationally recognized ratings services.
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    According to the Registration Statement, in order to respond to 
adverse market, economic, political or other conditions, the Fund may 
assume a temporary defensive position that is inconsistent with its 
principal investment strategies and invest, without limitation, in cash 
or cash equivalents (including commercial paper, certificates of 
deposit, banker's acceptances and time deposits) which may be U.S. 
dollar denominated.

[[Page 75427]]

Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Investment 
Adviser consistent with Commission guidance,\28\ and master demand 
notes.\29\ The Fund will monitor its portfolio liquidity on an ongoing 
basis to determine whether, in light of current circumstances, an 
adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid securities. 
Illiquid assets include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets as determined in accordance with Commission staff 
guidance.
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    \28\ In reaching liquidity decisions, the Investment Adviser may 
consider the following factors: the frequency of trades and quotes 
for the security; the number of dealers wishing to purchase or sell 
the security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers, and the mechanics of transfer).
    \29\ See Investment Company Act Release No. 18612 (March 12, 
1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form 
N-1A) (stating that Guide 4 ``permit[s] a fund to invest up to 15% 
of its assets in illiquid securities''). The Commission has stated 
that long-standing Commission guidelines have required open-end 
funds to hold no more than 15% of their net assets in illiquid 
securities and other illiquid assets. See Investment Company Act 
Release No. 8901 (March 11, 2008), 73 FR 14618 (March 18, 2008), 
footnote 34. See also, Investment Company Act Release No. 5847 
(October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement 
Regarding ``Restricted Securities''). A fund's portfolio security is 
illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the ETF. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the 1933 Act).
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    According to the Registration Statement, the Fund may not purchase 
a security if, as a result, more than 25% of its total assets would be 
invested in securities of issuers conducting their principal business 
activities in the same industry.\30\ For purposes of this limitation, 
there is no limit on investments in U.S. Government Securities and 
repurchase agreements covering U.S. Government Securities. With respect 
to foreign government securities, the Fund treats each foreign 
government or sovereign as its own industry.
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    \30\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    Although the Fund intends to invest in a variety of securities and 
instruments, the fund will be considered ``non-diversified' for the 
purposes of the 1940 Act, which means that it may invest more of its 
assets in the securities of a smaller number of issuers than if it were 
a diversified fund.\31\
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    \31\ The diversification standard is set forth in Section 
5(b)(2) of the 1940 Act, (15 U.S.C. 80a-5(b)(2)).
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    According to the Registration Statement, the Fund will use 
leveraged investment techniques only when the Investment Adviser 
believes that the leveraging and the returns available to the Fund from 
investing the cash will provide investors with a potentially higher 
return. Such leveraged investment techniques include borrowing, 
repurchase agreements, reverse repurchase agreements and securities 
lending. The Fund will not invest in leveraged or inverse leveraged 
ETPs. Such investments will not be used to enhance the leverage of the 
Fund as a whole and will otherwise be consistent with the Fund's 
investment objective.
    The Fund will not directly invest in options contracts, futures 
contracts or swap agreements.
    According to the Registration Statement, the Fund intends, for each 
taxable year, to qualify for treatment as a ``regulated investment 
company'' under Subchapter M of the Internal Revenue Code of 1986, as 
amended.\32\
---------------------------------------------------------------------------

    \32\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    The Fund will not invest in any non-U.S. equity securities, except 
for exposure to those that may underlie a depositary receipt or 
NYR.\33\
---------------------------------------------------------------------------

    \33\ See note 26, supra [sic].
---------------------------------------------------------------------------

Net Asset Value
    The Fund will calculate its net asset value (``NAV'') as of the 
close of trading on the Exchange (normally 4:00 p.m., Eastern Time) on 
each weekday except on days when the Exchange is closed. The NAV will 
be determined by taking the market value of the total assets of the 
Fund, subtracting the liabilities of the Fund, and then dividing the 
result (net assets) by the number of outstanding shares of the Fund. 
Because the Fund will invest in instruments that trade on foreign 
markets on days when the Exchange is closed, the value of the Fund's 
investments may change on days on which shareholders will not be able 
to purchase Fund shares.
    The Fund will value securities for which market quotations are 
readily available at current market value, except for money-market 
instruments with a maturity of sixty days or less, which may be valued 
at amortized cost. Securities for which market quotations are readily 
available will be valued using the last reported sales price provided 
by independent pricing services as of the close of trading on the 
Exchange. In the absence of sales, such securities will be valued at 
the mean of the last bid and asked price. Non-exchange traded 
securities for which quotations are readily available will be valued at 
the mean between the current bid and asked price. Debt securities may 
be valued at prices supplied by the Fund's pricing agents based on 
broker or dealer supplied valuations or matrix pricing, a method of 
valuing securities by reference to the value of other securities with 
similar characteristics such as rating, interest rate and maturity. 
Forward currency contracts will be valued at the mean of bid and ask 
prices for the time period interpolated from rates reported by an 
independent pricing service for proximate time periods. Investments in 
open-end registered investment companies will be valued at their NAV. 
Investments in other ETPs will be valued using market price.
    Market quotations may not be readily available or may be unreliable 
if, among other things, (1) the exchange on which the security is 
principally traded closes early, (2) trading in a security was halted 
during the day and did not resume prior to the time the Fund calculates 
its NAV or (3) events occur after the close of the securities markets 
on which the securities primarily trade but before the time the Fund 
calculates its NAV.
    If market prices are not readily available or the Fund reasonably 
believes that they are unreliable, such as in the case of a security 
value that has been materially affected by events occurring after the 
relevant market closes, the Fund will be required to value the 
securities at fair value as determined in good faith using procedures 
approved by the Board of Trustees of the Trust (``Board'') and in 
accordance with the 1940 Act The Board has delegated day-to-day 
responsibility for fair value determinations to a Valuation Committee, 
members of which are appointed by the Board. Fair valuation may be 
based on subjective factors and, as a result, the fair value price of a 
security may differ from that security's market price and may not be 
the price at which the security may be sold. Fair

[[Page 75428]]

valuation could result in a different NAV than a NAV determined by 
using market quotes.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund will offer and 
issue shares in aggregations of Shares (``Creation Units'') on a 
continuous basis, at the net asset value per share (``NAV'') \34\ next 
determined after receipt of an order in proper form on any business 
day. A Creation Unit is currently an aggregation of 50,000 Shares. 
Creation Units may only be purchased or redeemed by certain large 
institutional investors who have entered into agreements with the 
Fund's Distributor (``Authorized Participants'').
---------------------------------------------------------------------------

    \34\ The Fund will calculate its NAV as of the close of trading 
on the Exchange (normally 4:00 p.m., Eastern time (``E.T.'')) on 
each weekday except days when the Exchange is closed. The NAV will 
be determined by taking the market value of the total assets of the 
Fund, subtracting the liabilities of the Fund, and then dividing the 
result (net assets) by the number of outstanding Shares of the Fund. 
For more information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
---------------------------------------------------------------------------

    The consideration for a Creation Unit of the Fund is the ``Fund 
Deposit.'' The Fund Deposit will consist of a specified all-cash 
payment (``All-Cash Payment'') or a basket of securities to be 
deposited to purchase a Creation Unit (the ``In-Kind Creation Basket'') 
and a specified cash payment (the ``Cash Component'') as determined by 
the Investment Adviser to be in the best interest of the Fund. Any 
positions in the Fund's portfolio that cannot be transferred in kind 
will be represented by cash in the Cash Component and not in the In-
Kind Creation Basket. The Fund expects that Fund Deposits will 
typically consist of All-Cash Payments. The Cash Component will 
typically include a ``Balancing Amount'' reflecting the difference, if 
any, between the NAV of a Creation Unit and the market value of the 
securities in the In-Kind Creation Basket.
    Fund Shares may be redeemed only in Creation Units at their NAV 
next determined after receipt of a redemption request in proper form on 
a business day. The redemption proceeds for a Creation Unit will 
consist of a basket of securities to be received upon redemption of a 
Creation Unit (the ``In-Kind Redemption Basket'') and a specified cash 
payment (the ``Cash Redemption Amount'') or an All-Cash Payment, in all 
instances equal to the value of a Creation Unit. The Fund expects that 
Fund redemptions will typically consist of In-Kind Redemption Baskets 
and a Cash Redemption Amount. The Cash Redemption Amount will typically 
include a Balancing Amount reflecting the difference, if any, between 
the NAV of a Creation Unit and the market value of the securities in 
the In-Kind Redemption Basket.
    The Investment Manager or the Investment Adviser, through the 
National Securities Clearing Corporation (``NSCC''), will make 
available on each business day,\35\ immediately prior to the opening of 
business on the Exchange (currently 9:30 a.m., E.T.), (a) the All-Cash 
Payment for the Fund for that day (based on information about the 
Fund's portfolio at the end of the previous business day) (subject to 
amendment or correction); (b) in the event the Fund requires an In-Kind 
Creation Basket and Cash Component, a list of names and the required 
quantity of each security in the In-Kind Creation Basket to be included 
in the current Fund Deposit for the Fund (based on information about 
the Fund's portfolio at the end of the previous business day) (subject 
to amendment or correction) and the estimated Cash Component, effective 
through and including the previous business day, per Creation Unit; and 
(c) if different from the In-Kind Creation Basket and All-Cash Payment, 
the composition of the In-Kind Redemption Basket and/or an amount of 
cash that will be applicable to redemption requests (subject to 
possible amendment or correction). According to the Investment Adviser, 
this information may be subject to amendment or correction as the 
values of the instruments in the Fund's portfolio change, or the 
instruments in the Fund's portfolio change. Creations and redemptions 
will be at the next determined NAV.
---------------------------------------------------------------------------

    \35\ Orders from Authorized Participants to create or redeem 
Creation Units will only be accepted on a business day.
---------------------------------------------------------------------------

    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement. All terms relating 
to the Fund that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
Availability of Information
    The Fund's Web site (www.merkfunds.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include additional quantitative information updated on a daily 
basis, including, for the Fund: (1) The prior business day's reported 
NAV, mid-point of the bid/ask spread at the time of calculation of such 
NAV (the ``Bid/Ask Price''),\36\ and a calculation of the premium and 
discount of the Bid/Ask Price against the NAV; and (2) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid/Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters. On each business day, 
before commencement of trading in Shares in the Core Trading Session 
\37\ on the Exchange, the Fund will disclose on its Web site the 
identities and quantities of the portfolio of securities and other 
assets (the ``Disclosed Portfolio'') \38\ held by the Fund that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\39\ The Web site and information will be publicly 
available at no charge.
---------------------------------------------------------------------------

    \36\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and/or its service 
providers.
    \37\ The Core Trading Session is 9:30 a.m. to 4:00 p.m. E.T.
    \38\ The Exchange notes that NYSE Arca Equities Rule 
8.600(d)(2)(B)(ii) provides that the Reporting Authority that 
provides the Disclosed Portfolio must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination 
of material non-public information regarding the actual components 
of the portfolio.
    \39\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Notwithstanding the 
foregoing, portfolio trades that are executed prior to the opening 
of the Exchange on any business day may be booked and reflected in 
NAV on such business day. Accordingly, the Fund will be able to 
disclose at the beginning of the business day the portfolio that 
will form the basis for the NAV calculation at the end of the 
business day.
---------------------------------------------------------------------------

    On a daily basis, the Fund will disclose for each portfolio 
security and other financial instrument of the Fund the following 
information: Ticker symbol (if applicable), name or description of 
security and financial instrument, number of shares or dollar value of 
securities and financial instruments held in the portfolio, and 
percentage weighting of securities and financial instruments in the 
portfolio. The Web site information will be publicly available at no 
charge.
    In addition, for the Fund, an estimated value, defined in NYSE Arca 
Equities Rule 8.600 as the ``Portfolio Indicative Value,'' that 
reflects an estimated intraday value of the Fund's portfolio, will be 
disseminated. The Portfolio Indicative Value will be based upon the 
current value for the components of the Disclosed Portfolio.

[[Page 75429]]

In addition, the Portfolio Indicative Value, as defined in NYSE Arca 
Equities Rule 8.600(c)(3), will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session.\40\ The dissemination of the Portfolio Indicative 
Value, together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and to provide a close estimate of that value throughout the 
trading day.
---------------------------------------------------------------------------

    \40\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values published on CTA or other data feeds.
---------------------------------------------------------------------------

    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. 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.
    Quotation and last sale information for the Shares and underlying 
U.S. exchange-traded equities, including, without limitation, ETPs 
(including ETFs and ETNs), common and preferred stock and warrants, 
depositary receipts, and NYRs, will be available via the Consolidated 
Tape Association (``CTA'') high-speed line. Quotation information from 
brokers and dealers or pricing services will be available for fixed 
income securities, other money market instruments, and repurchase and 
reverse repurchase agreements held by the Fund. Price information for 
the Fund's portfolio securities and other instruments is generally 
readily available through major market data vendors, automated 
quotation systems, published or other public sources and/or, for listed 
securities, the securities exchange on which they are listed and 
traded. Investors may obtain on a 24-hour basis gold pricing 
information based on the spot price for an ounce of gold 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 gold, 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. 
ICAP plc provides an electronic trading platform called EBS for the 
trading of spot gold, as well as a feed of live streaming prices to 
Reuters and Moneyline Telerate subscribers. There are a variety of 
other public Web sites providing information on gold, ranging from 
those specializing in precious metals to sites maintained by major 
newspapers, such as The Wall Street Journal. In addition, the daily 
London noon Fix is publicly available at no charge at 
www.thebulliondesk.com.
Initial and Continued Listing
    The Shares will be subject to NYSE Arca Equities Rule 8.600, which 
sets forth the initial and continued listing criteria applicable to 
Managed Fund Shares. The Exchange represents that, for initial and/or 
continued listing, the Fund must be in compliance with Rule 10A-3 \41\ 
under the Exchange Act, as provided by NYSE Arca Equities Rule 5.3. A 
minimum of 100,000 Shares will be outstanding at the commencement of 
trading on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share for the Fund will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
---------------------------------------------------------------------------

    \41\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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 of the Fund. Shares of the Fund will be halted if 
the ``circuit breaker'' parameters in NYSE Arca Equities Rule 7.12 are 
reached. Trading 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 trading is not 
occurring in the securities and/or the financial instruments comprising 
the Disclosed Portfolio of the Fund; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares will be subject 
to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.
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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, 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 Equities Rule 7.6, Commentary .03, 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.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading 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.\42\ 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 applicable federal securities laws.
---------------------------------------------------------------------------

    \42\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    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.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and underlying equity securities 
(including, without limitation, ETPs (including ETFs and ETNs), common 
and preferred stock and warrants, depositary receipts, NYRs and any 
other exchange-traded products) with other markets and other entities 
that are members of the Intermarket Surveillance Group (``ISG''), and 
FINRA, on behalf of the Exchange, may obtain trading information 
regarding trading in the Shares and underlying equity securities 
(including, without

[[Page 75430]]

limitation, ETPs (including ETFs and ETNs), common and preferred stock 
and warrants, depositary receipts, NYRs and any other exchange-traded 
products) from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and 
underlying equity securities (including, without limitation, ETPs 
(including ETFs and ETNs), common and preferred stock and warrants, 
depositary receipts, NYRs and any other exchange-traded products) from 
markets that are members of ISG or with which the Exchange has in place 
a comprehensive surveillance sharing agreement.\43\ The ETPs (including 
ETFs and ETNs), common and preferred stock and warrants, depositary 
receipts and NYRs in which the Fund may invest all will be listed and 
traded on an exchange which is a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by 
the Fund reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').
---------------------------------------------------------------------------

    \43\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the Disclosed Portfolio for the Fund may trade on exchanges that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) the requirement that 
Equity Trading Permit Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information. In 
addition, the Bulletin will reference that the Fund is subject to 
various fees and expenses described in the Registration Statement. The 
Bulletin will discuss any exemptive, no-action, and interpretive relief 
granted by the Commission from any rules under the Exchange Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \44\ 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.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 Equities Rule 
8.600. 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. FINRA, on behalf of the Exchange, 
will communicate as needed regarding trading in the Shares and 
underlying equity securities (including, without limitation, ETPs 
(including ETFs and ETNs), common and preferred stock and warrants, 
depositary receipts, NYRs and any other exchange-traded products) with 
other markets and other entities that are members of ISG, and FINRA, on 
behalf of the Exchange, may obtain trading information regarding 
trading in the Shares and underlying equity securities (including, 
without limitation, ETPs (including ETFs and ETNs), common and 
preferred stock and warrants, depositary receipts, NYRs and any other 
exchange-traded products) from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and underlying equity securities (including, without limitation, 
ETPs (including ETFs and ETNs), common and preferred stock and 
warrants, depositary receipts, NYRs and any other exchange-traded 
products) from markets that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
FINRA, on behalf of the Exchange, is able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to TRACE. The ETPs (including ETFs and ETNs), common and 
preferred stock and warrants, depositary receipts and NYRs in which the 
Fund may invest all will be listed and traded on an exchange which is a 
member of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. According to the Registration 
Statement, the Fund normally will invest in a basket of hard currency 
denominated investments composed of high quality, short-term debt 
instruments, including sovereign debt, and in gold and gold-related 
securities. The Fund will typically maintain a weighted average 
portfolio maturity of less than eighteen months and only buy money 
market or other short-term debt instruments that are rated in the top 
three ratings by U.S. nationally recognized ratings services or that 
the Investment Adviser considers comparable in quality to instruments 
rated in the top three ratings. The Fund will typically invest only in 
debt instruments that the Investment Adviser deems to be sufficiently 
liquid at time of investment. Generally a debt instrument must have 
$100 million (or an equivalent value if denominated in a currency other 
than U.S. dollars) or more par amount outstanding and significant par 
value traded to be sufficiently liquid at the time of investment. The 
Fund may invest up to 25% of its total assets in debt instruments 
having a lower par amount outstanding to the extent the Investment 
Advisor determines such an investment to be appropriate. Leveraged 
investment techniques will not be used to enhance the leverage of the 
Fund as a whole and will otherwise be consistent with the Fund's 
investment objective. The Fund will not invest in leveraged or inverse 
leveraged ETPs. The Fund will not hold in the aggregate illiquid 
assets, including Rule 144A Securities deemed illiquid by the 
Investment Adviser consistent with Commission guidance, and master 
demand notes, in excess of 15% of its net assets.\45\ The Fund will not 
invest in any non-U.S. equity securities. The Fund will not directly 
invest in options contracts, futures contracts or swap agreements.
---------------------------------------------------------------------------

    \45\ See note 28, supra.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that neither the

[[Page 75431]]

Investment Adviser nor the Investment Manager is or is affiliated with 
a broker-dealer. In the event (a) the Investment Manager or Investment 
Adviser becomes, or becomes newly affiliated with, a broker-dealer, or 
(b) any new investment adviser becomes affiliated with a broker-dealer, 
it will implement a fire wall with respect to its relevant personnel or 
such broker-dealer affiliate regarding access to information concerning 
the composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio. The Exchange will 
obtain a representation from the issuer of the Shares that the NAV per 
Share will be calculated daily and that the NAV and the Disclosed 
Portfolio will be made available to all market participants at the same 
time. In addition, a large amount of information is publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. Price information for the debt instruments, gold-related 
securities, and other instruments, including securities of other 
investment companies, common and preferred stock, warrants, depositary 
receipts and NYRs held by the Fund will be available through major 
market data vendors and/or the securities exchange on which they are 
listed and traded. Moreover, the Portfolio Indicative Value, as defined 
in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated by 
one or more major market data vendors at least every 15 seconds during 
the Core Trading Session. On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, the Fund 
will disclose on its Web site the Disclosed Portfolio that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day. 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, and 
quotation and last sale information will be available via the CTA high-
speed line. The Web site for the Fund will include a form of the 
prospectus for the Fund and additional data relating to NAV and other 
applicable quantitative information. Moreover, prior to the 
commencement of trading, the Exchange will inform its Equity Trading 
Permit Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable, and trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    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 actively-managed 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. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares. 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 gold price and gold market information available 
on public Web sites and through professional and subscription services. 
Investors may obtain on a 24-hour basis gold pricing information based 
on the spot price for an ounce of gold from various financial 
information service providers. In addition, the London AM Fix and 
London PM Fix are publicly available at no charge at 
www.thebulliondesk.com. The Trust's daily (or as determined by the 
Investment Manager in accordance with the amended and restated trust 
agreement) NAV is posted on the Trust's Web site as soon as 
practicable.

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 purpose of the Exchange Act. The Exchange notes 
that the proposed rule change will facilitate the listing and trading 
of an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

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 after 
publication (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:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-132 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2013-132. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements

[[Page 75432]]

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 Web site 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. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2013-132 and should 
be submitted on or before January 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29492 Filed 12-10-13; 8:45 am]
BILLING CODE 8011-01-P