Document ID: SEC-2009-1829-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating To Listingand Trading Shares of the ETFS Palladium Trust
Posted Date: 2009-12-29T05:00Z

[Federal Register: December 29, 2009 (Volume 74, Number 248)]
[Notices]               
[Page 68895-68896]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de09-141]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61220; File No. SR-NYSEArca-2009-94]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating To Listing and Trading Shares 
of the ETFS Palladium Trust

December 22, 2009.

I. Introduction

    On October 20, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the ETFS 
Palladium Trust (the ``Trust''). The proposed rule change was published 
for comment in the Federal Register on November 17, 2009.\3\ The 
Commission received no comments on the proposal. This order approves 
the proposed rule change.
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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. 60971 (November 9, 
2009), 74 FR 59283 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.201, which governs the listing and trading of 
Commodity-Based Trust Shares. The Exchange represents that the Shares 
satisfy the requirements of NYSE Arca Equities Rule 8.201 and thereby 
qualify for listing on the Exchange.
    The Shares represent units of fractional undivided beneficial 
interest in and ownership of the Trust. The investment objective of the 
Trust is for the Shares to reflect the performance of the price of 
palladium, less the expenses of the Trust's operations.\4\
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    \4\ Amendment No. 2 to the Registration Statement for the ETFS 
Palladium Trust on Form S-1, filed with the Commission on October 
20, 2009 (No. 333-15830) (``Registration Statement'').
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    The Exchange deems the Shares to be equity securities, which 
subjects trading in the Shares to the Exchange's existing rules 
governing the trading of equity securities, and has represented that 
trading in the Shares on the Exchange will occur in accordance with 
NYSE Arca Equities Rule 7.34(a). The Exchange has also represented that 
it has appropriate rules to facilitate transactions in the Shares 
during all trading sessions.
    Additional details regarding the Shares and Trust including, among 
other things, creations and redemptions of the Shares, the organization 
and structure of the Trust, custody of the Trust's holdings, Trust 
expenses, Trust termination events, the international market for 
palladium, the palladium futures market, the dissemination and 
availability of information about the underlying assets, trading halts, 
applicable trading rules, surveillance, and the Information Bulletin 
can be found in the Notice and/or the Registration Statement.\5\
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    \5\ See supra notes 3 and 4.
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III. Discussion and Commission's Findings

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\6\ In particular, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act,\7\ which requires, among other things, that the Exchange's rules 
be designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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.
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    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal to list and 
trade the Shares on the Exchange is consistent with Section 
11A(a)(1)(C)(iii) of the Act,\8\ which sets forth Congress' finding 
that it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers and investors of information with 
respect to quotations for and transactions in securities. Quotation and 
last-sale information for the Shares will be available via the 
Consolidated Tape Association CQ High-Speed Lines. The Trust's Web site 
will provide the following information: (1) An intraday indicative 
value (``IIV'') per share for the Shares, updated at least every 15 
seconds, as calculated by the Exchange or a third party financial data 
provider, during the Exchange's Core Trading Session (9:30 AM to 4:00 
PM, Eastern Standard Time); (2) the net asset value (``NAV'') of the 
Trust as calculated each business day by the Sponsor; (3) the NAV, on a 
per Share basis, as of the close of the prior business day; (4) the 
mid-point of the bid-ask price \9\ at the close of trading in relation 
to such NAV (``Bid/Ask Price''); (5) a calculation of the premium or 
discount of such price against such NAV; (6) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
Bid/Ask Price against the per Share NAV, within appropriate ranges, for 
each of the four previous calendar quarters; (7) the Creation Basket 
Deposit; (8) the Trust's prospectus; (9) the two most recent reports to 
stockholders; and (10) the last sale price of the Shares as traded in 
the U.S. market.\10\ In addition, the Exchange will make available over 
the Consolidated Tape quotation information, trading volume, closing 
prices and NAV for the Shares from the previous day.
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    \8\ 15 U.S.C. 78k-l(a)(1)(C)(iii).
    \9\ The bid-ask price of the Trust is determined using the 
highest bid and lowest offer on the Consolidated Tape as of the time 
of calculation of the closing day NAV.
    \10\ The Exchange will provide on its Web site (http://
www.nyx.com) a link to the Trust's Web site.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured.
    Under NYSE Arca Equities Rule 7.34(a)(5), if the Exchange becomes 
aware that the NAV is not being

[[Page 68896]]

disseminated to all market participants at the same time, it must halt 
trading in on NYSE Arca Marketplace until such time as the NAV is 
available to all market participants. The Commission notes that the 
Exchange will obtain a representation from the Trust that the NAV per 
Share will be calculated daily and that the NAV will be made available 
to all market participants at the same time.\11\ Additionally, if the 
IIV \12\ is not being disseminated as required, the Exchange may halt 
trading during the day in which the disruption occurs; if the 
interruption persists past the day in which it occurred, the Exchange 
will halt trading no later than the beginning of the trading day 
following the interruption.\13\ Further, the Exchange will consider the 
suspension of trading in or removal from listing of the Shares pursuant 
to NYSE Arca Rule 8.201(e)(2) if: (1) The value of palladium is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, Trust, custodian or the 
Exchange or the Exchange stops providing a hyperlink on its Web site to 
any such unaffiliated commodity value; or (2) the IIV is no longer made 
available on at least a 15-second delayed basis. 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 palladium 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.
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    \11\ See e-mail from Michael Cavalier, Chief Counsel, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, and Andrew Madar, 
Special Counsel, Commission, dated December 10, 2009.
    \12\ For the Shares, the Exchange uses IIV and ITV 
interchangeably. See e-mail from Michael Cavalier, Chief Counsel, 
NYSE Euronext, to Christopher W. Chow, Special Counsel, Commission, 
dated December 22, 2009.
    \13\ See id.
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    In addition, NYSE Arca Equities Rule 8.201 sets forth certain 
requirements for ETP Holders acting as registered Market Makers in the 
Shares. Pursuant to NYSE Arca Equities Rule 8.201(h), an ETP Holder 
acting as a registered Market Maker in the Shares is required to 
provide the Exchange with information relating to its trading in 
palladium, related futures or options on futures, or any other related 
derivatives, which the Market Maker may have or over which it may 
exercise investment discretion. NYSE Arca Equities Rule 8.201(i) also 
prohibits an ETP Holder acting as a registered Market Maker in the 
Shares from using any material nonpublic information received from any 
person associated with an ETP Holder or employee of such person 
regarding trading by such person or employee in palladium, related 
futures or options on futures or any other related commodity 
derivatives.
    In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will be subject to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.201.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. Pursuant to NYSE Arca Equities Rule 8.201(h), the 
Exchange is able to obtain information regarding trading in the Shares 
and the underlying palladium, palladium futures contracts, options on 
palladium futures, or any other palladium derivative, through ETP 
Holders acting as registered Market Makers, in connection with such ETP 
Holders' proprietary or customer trades which they effect on any 
relevant market. In addition, the Exchange may obtain trading 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges who are members of the ISG.
    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares in Baskets 
(including noting that Shares are not individually redeemable); (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (c) how information regarding the 
IIV is disseminated; (d) the requirement that ETP Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; (e) the 
possibility that trading spreads and the resulting premium or discount 
on the Shares may widen as a result of reduced liquidity of palladium 
trading during the Core and Late Trading Sessions after the close of 
the major world palladium markets; and (f) trading information.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \14\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \14\ 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 
Act,\15\ that the proposed rule change (SR-NYSEArca-2009-94), be, and 
it hereby is, approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30787 Filed 12-28-09; 8:45 am]

BILLING CODE 8011-01-P