Document ID: SEC-2017-1758-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-10-27T04:00Z

[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Notices]
[Pages 49884-49886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23371]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81918; File No. SR-NYSEArca-2017-98]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List 
and Trade Shares of The Gold Trust Under NYSE Arca Rule 8.201-E

October 23, 2017.

I. Introduction

    On August 30, 2017, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares of The Gold Trust under NYSE Arca Rule 8.201-E. 
The proposed rule change was published for comment in the Federal 
Register on September 15, 2017.\3\ On September 28, 2017, the Exchange 
filed Amendment No. 1 to the proposed rule change.\4\ The Commission 
has not received any comments on the proposed rule change. This order 
approves the proposed rule change, as modified by Amendment No. 1.
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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. 81568 (Sep. 11, 
2017), 82 FR 43417.
    \4\ Amendment No. 1 to the proposed rule change replaces and 
supersedes the original filing in its entirety. In Amendment No. 1, 
the Exchange: (1) Provided additional information regarding the 
futures exchanges that trade in gold futures contracts and which of 
those exchanges are members of the Intermarket Surveillance Group 
(``ISG''); (2) stated that the net asset value (``NAV'') of the 
Trust will be published by the Sponsor (as defined herein) by 5:30 
p.m., Eastern time on each day that the NYSE Arca is open for 
regular trading and will be posted on the Trust's Web site; (3) 
clarified that the intraday indicative value (``IIV'') per Share for 
the Shares will be widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session (as defined in the Exchange's rules; and (4) stated 
that the Web site for the Trust will provide the two most recent 
reports to stockholders. Amendment No. 1 also made non-substantive, 
technical amendments. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2017-98/nysearca201798-2614707-161129.pdf. Amendment No. 1 is not subject to notice and comment 
because it is a technical amendment that does not materially alter 
the substance of the proposed rule change or raise any novel 
regulatory issues.
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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, as 
well as investment risks, creation and redemption procedures, NAV 
calculation, availability of information and fees, among other 
things, is included in the Registration Statement, infra note 7, and 
in Amendment No. 1, supra note 4.
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    The Exchange proposes to list and trade shares (``Shares'') of The 
Gold Trust (``Trust''), a series of the World Currency Gold Trust 
(``WCGT''),\6\ under NYSE Arca Rule 8.201-E.\7\ NYSE Arca Rule 8.201-E 
governs the listing and trading, or trading pursuant to unlisted 
trading privileges, of Commodity-Based Trust Shares on the Exchange.\8\
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    \6\ According to the Exchange, WCGT is a Delaware statutory 
trust consisting of multiple series, each of which issues common 
units of beneficial interest, which represent units of fractional 
undivided beneficial interest in and ownership of such series. The 
term of WCGT and each series will be perpetual (unless terminated 
earlier in certain circumstances).
    \7\ On August 29, 2017, WCGT submitted to the Commission its 
draft registration statement on Form S-1 with respect to the Trust 
(``Registration Statement'') under the Securities Act of 1933 
(``1933 Act'').
    \8\ 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 Rule 8.201-E(c)(1).
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    The investment objective of the Trust is for the Shares to reflect 
the performance of the price of gold bullion, less the expenses of the 
Trust's operations. The Trust will not trade in gold futures, options, 
or swap contracts on any futures exchange or over the counter. The 
Trust will not hold or trade in commodity futures contracts, commodity 
interests, or any other instruments regulated by the Commodity Exchange 
Act. The Trust will take delivery of physical gold that complies with 
the London Bullion Market Association (``LBMA'') gold delivery rules. 
According to the Exchange, the Shares, which are Commodity Based Trust 
Shares, will represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust.
    The sponsor of the Trust is WGC USA Asset Management Company, LLC 
(``Sponsor''). The sole trustee of WCGT is Delaware Trust Company. BNY 
Mellon Asset Servicing, a division of The Bank of New York Mellon 
(``BNYM''), will be the Trust's administrator and transfer agent. BNYM 
will serve as the custodian of the Trust's cash, if any. A bank will 
serve as the custodian of the Trust's gold.

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.\9\ 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,\10\ 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 Web sites 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.\11\
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    \9\ 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).
    \10\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \11\ The Exchange states that Reuters and Bloomberg, for 
example, provide at no charge on their Web sites 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 Web sites 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 Amendment No. 1, supra note 4.

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[[Page 49885]]

    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,\12\ 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 is 
COMEX, a subsidiary of New York Mercantile Exchange, Inc., and a 
subsidiary of the Chicago Mercantile Exchange Group (``CME Group''), 
and ICE Futures US (``ICE'') also lists gold futures; \13\ and (2) the 
CME Group and ICE are members of the ISG,\14\ 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'').\15\
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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ See Amendment No. 1, supra note 4.
    \14\ See id.
    \15\ See https://www.theice.com/futures-us/regulation (``ICE 
Futures U.S. is a Designated Contract Market pursuant to the 
Commodity Exchange Act and regulated by the CFTC.''); http://www.cmegroup.com/market-regulation/rulebook.html (COMEX is regulated 
by the CFTC).
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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 Rule 8.201-E(e)(2)(v) requires that an 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 Web 
site.\17\ The Trust also will publish the following information on its 
Web site: (1) The mid-point of the bid-ask price at the close of 
trading (``Bid/Ask Price''), and a calculation of the premium or 
discount of such price against the 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 Amendment No. 1, supra note 4.
    \17\ See id.
    \18\ See id.
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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 NYSE Arca Rule 7.12-E.
    \20\ See Amendment No. 1, supra note 4.
    \21\ See id.
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    Additionally, the Commission notes that market makers in the Shares 
would be subject to the requirements of NYSE Arca Rule 8.201-E(g), 
which 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 Rule 6.3-E requires that an 
Equity Trading Permit Holder (``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. See Amendment No. 
1, supra note 4.
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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 Rule 8.201-
E.\23\
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    \23\ See id.
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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.
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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 has a general policy prohibiting the distribution 
of material, non-public information by its employees.\26\
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    \26\ See id.
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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 these procedures are adequate to properly monitor Exchange 
trading of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.\27\
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    \27\ See id. 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.

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[[Page 49886]]

    (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.
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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 creation 
units (including noting that Shares are not individually redeemable); 
(2) NYSE Arca Rule 9.2-E(a), which imposes a duty of due diligence on 
its ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (3) how information regarding the 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.
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    (8) All statements and representations made in this filing 
regarding (a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
of the Trust on the Exchange.\30\
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    \30\ See id.
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    (9) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Trust to comply with the continued 
listing requirements and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5(m).\31\
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    \31\ See id.
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    This approval order is based on all of the Exchange's 
representations--including those set forth above 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 Section 
6(b)(5) 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).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\33\ that the proposed rule change (SR-NYSEArca-2017-98), 
as modified by Amendment No. 1 be, and it hereby is, approved.
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    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23371 Filed 10-26-17; 8:45 am]
 BILLING CODE 8011-01-P