Document ID: SEC-2021-1520-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2021-11-02T04:00Z

[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60516-60522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23810]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93434; File No. SR-NYSEArca-2021-65]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change To List and Trade Shares of the Sprott ESG Gold ETF Under 
NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares)

October 27, 2021.

I. Introduction

    On July 19, 2021, 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'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
Sprott ESG Gold ETF (``Trust'') under NYSE Arca Rule 8.201-E 
(``Commodity-Based Trust Shares''). The proposed rule change was 
published for comment in the Federal Register on July 30, 2021.\3\ On 
September 2, 2021, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
rule change.\5\ The Commission has received no comments on the proposed 
rule change. The Commission is publishing this order to institute 
proceedings pursuant to Section 19(b)(2)(B) of the Act \6\ to determine 
whether to approve or disapprove 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. 92506 (July 26, 
2021), 86 FR 41109.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 92867, 86 FR 50568 
(September 9, 2021). The Commission designated October 28, 2021, as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change \7\
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    \7\ Additional information regarding the Trust and the Shares, 
including investment strategies, creation and redemption procedures, 
and portfolio holdings can be found in the Notice, supra note 3.
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    The Exchange proposes to list and trade Shares of the Trust \8\ 
under NYSE Arca Rule 8.201-E, which governs the listing and trading of 
Commodity-Based Trust Shares \9\ on the Exchange. The Sponsor of the 
Trust is Sprott Asset Management LP, a Canadian limited partnership 
(``Sponsor''). The Bank of New York Mellon serves as the Trust's 
administrator (``Administrator'') and transfer agent (``Transfer 
Agent''). The Delaware Trust Company is the trustee of the Trust 
(``Trustee'').\10\ The Royal Canadian Mint is the custodian of the 
Trust's gold (``Gold Custodian'' or ``Mint'').\11\ The Bank of New York

[[Page 60517]]

Mellon will also serve as the Trust's cash custodian (``Cash 
Custodian'') pursuant to the terms of the agreement between the Trust 
and the Cash Custodian. In its capacity as cash custodian, the Cash 
Custodian will maintain a custodial account that holds cash for the 
benefit of the Trust for the purpose of payment of the Sponsor's fee in 
cash or the other expenses of the Trust.
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    \8\ On February 11, 2021, the Trust submitted to the Commission 
on a confidential basis its draft registration statement on Form S-1 
under the Securities Act of 1933, and on July 1, 2021, the Trust 
submitted to the Commission the most recent amendment to its draft 
registration statement (collectively, the ``Registration 
Statement''). The Registration Statement is not yet effective, and 
the Exchange will not commence trading in Shares until the 
Registration Statement becomes effective.
    \9\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust. The Exchange represents that the Shares will satisfy the 
requirements of NYSE Arca Rule 8.201-E and thereby qualify for 
listing on the Exchange and that the Trust relies on the exemption 
contained in Rule 10A-3(c)(7) regarding the application of Rule 10A-
3 (17 CFR 240.10A-3) under the Act.
    \10\ The Trustee is a fiduciary under the Trust Agreement and 
must satisfy the requirements of Section 3807 of the Delaware 
Statutory Trust Act. However, the fiduciary duties, responsibilities 
and liabilities of the Trustee are limited by, and are only those 
specifically set forth in, the Trust Agreement. The Trust does not 
have a Board of Directors or persons acting in a similar capacity.
    \11\ The Mint operates pursuant to the Royal Canadian Mint Act 
(Canada) and is a Canadian Crown corporation. Crown corporations are 
corporations wholly-owned by the Government of Canada. The Mint is, 
for all its purposes, an agent of Her Majesty in right of Canada 
and, as such, its obligations generally constitute unconditional 
obligations of the Government of Canada. The Gold Custodian is 
responsible for safekeeping the gold owned by the Trust pursuant to 
gold storage and custody agreements. The Gold Custodian will hold 
gold for the account of the Trust on an allocated basis (the ``Trust 
Allocated Account''), except where gold is temporarily held in an 
unallocated account (the ``Trust Unallocated Account''). The Sponsor 
may cause the Trust to engage unaffiliated gold brokers to transfer 
unallocated gold between the Trust's custody accounts maintained for 
the benefit of the Trust by the Gold Custodian in Ottawa, Canada and 
London, United Kingdom where it can be delivered to a redeeming 
Authorized Participant (as defined below) if additional unallocated 
gold is needed by the Trust to satisfy the redeeming Authorized 
Participant's redemption request. The Gold Custodian is responsible 
for allocating specific bars of gold to the Trust Allocated Account. 
The Gold Custodian will provide the Trust with regular reports 
detailing the gold transfers in and out of the Trust Unallocated 
Account with the Gold Custodian and identifying the gold bars held 
in the Trust Allocated Account.
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Operation of the Trust

    The investment objective of the Trust will be for the Shares to 
reflect the performance of the price of gold, less the Trust's expenses 
and liabilities. The Trust will issue Shares which represent units of 
fractional undivided beneficial interest in and ownership of the Trust.
    The Trust's assets are expected to consist primarily of fully 
allocated unencumbered physical gold bullion held by the Mint on behalf 
of the Trust that meets certain environmental, social and governance 
(``ESG'') standards and criteria established by the Sponsor (``ESG 
Approved Gold''), and will also include unallocated unencumbered 
physical gold bullion held by the Mint on behalf of the Trust and cash.
    The Trust does not intend to hold a certain amount of gold in 
unallocated form to satisfy redemption requests or to pay expenses, but 
the Trust expects to hold some amount of unallocated gold at any given 
point in time. The Trust's holdings of unallocated gold may be a 
significant percentage of the Trust's assets if, for example, the Trust 
has received more requests for creations than redemptions or the 
Trust's unallocated gold holdings are not sufficient to meet certain 
minimum size requirements to convert unallocated gold to ESG Approved 
Gold at the Mint. The Trust may need to instruct the Mint to convert 
ESG Approved Gold into unallocated gold if insufficient unallocated 
gold is available to be sold to pay expenses or to meet redemption 
requests. The Mint will exchange ESG Approved Gold for an equal amount 
of unallocated gold upon the receipt of proper instructions from the 
Sponsor.
    The ESG standards and criteria used by the Sponsor (the ``ESG 
Criteria'') are designed to provide investors with an enhanced level of 
ESG scrutiny along with disclosure of the provenance of the metal 
sourced, and include an evaluation of mining companies and mines.\12\ 
Mining companies and mines that meet the ESG Criteria (``ESG Approved 
Mining Companies'' and ``ESG Approved Mines'', respectively) must also 
comply with the Mint Responsible Sourcing Requirements. An overview of 
the Sponsor's application of the ESG Criteria to mining companies and 
mines that can provide the material for ESG Approved Gold is provided 
below.\13\
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    \12\ The ESG Criteria are anticipated to evolve over time at the 
discretion of the Sponsor. Also, one or more criterion may not be 
relevant with respect to all sources of gold that are eligible for 
investment. Factors that could be considered by the Sponsor in 
modifying the ESG Criteria include changes to current gold mining 
techniques or standards, evolving legal standards, the introduction 
of new standards or evaluation frameworks within the mining industry 
or the elimination of existing standards or frameworks that in the 
view of the Sponsor are relevant to the ESG assessment of a mining 
company or mine site.
    \13\ The ESG Criteria and the Sponsor's application of the ESG 
Criteria are disclosed in the Registration Statement.
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    The application of the ESG Criteria involves multiple levels of 
analysis. While the Sponsor's evaluation of mines and mining companies 
will include the objective factors discussed below, the Sponsor will 
also evaluate company reports and, where possible, interview key 
personnel to assess whether such a mining company or mine meets the ESG 
Criteria, which will require the subjective judgment of the Sponsor. 
The selection of these factors and how they are applied will be based, 
at least to some degree, on the judgment of the Sponsor and may or may 
not be consistent with current or future standards used by others in 
the industry. The ESG Criteria is subject to change by the Sponsor in 
its sole discretion.
    The ESG Criteria are in addition to those used in the London 
Bullion Market Association's (``LBMA'') Responsible Sourcing Program, 
as detailed in the LBMA's Responsible Gold Guidance, and are designed 
to provide investors with an enhanced level of ESG scrutiny along with 
disclosure of the provenance of the metal sourced. The Mint currently 
requires that its refining customers, including mines, meet the 
requirements outlined in the OECD Due Diligence Guidance for 
Responsible Supply Chains of Minerals from Conflict-Affected and High-
Risk Areas, the LBMA Responsible Gold Guidance, the Mint's Responsible 
Metals Program and the Mint's Anti-Money Laundering and Anti-Terrorist 
Financing Program in compliance with the Proceeds of Crime (Money 
Laundering) and Terrorist Financing Act (Canada) (collectively, the 
``Mint Responsible Sourcing Requirements''). Only mines which the Mint 
determines meet and maintain the Mint Responsible Sourcing Requirements 
and with whom the Mint has a contractual refining relationship (each a 
``Mint Approved Mine'', collectively the ``Mint Approved Mines'') will 
be eligible for consideration by the Sponsor as a provider of ESG 
Approved Gold. The Mint will cease refining gold from any Mint Approved 
Mine that no longer meets the Mint Responsible Sourcing Requirements, 
as determined by the Mint from time to time.
    The ESG factors used for the ESG assessment of mines and miners 
generally will encompass the following factors:

 Environmental Factors
    [cir] Energy use and greenhouse gas emissions
    [cir] Tailings and waste management
    [cir] Conservation and water management
    [cir] Mine site remediation
 Social Factors
    [cir] Worker safety and health
    [cir] Community relations
    [cir] Natural resource benefit to local communities
    [cir] Child and forced labor
 Governance Factors
    [cir] Corporate governance
    [cir] Workplace and gender diversity
    [cir] Fair executive compensation
    [cir] Corporate transparency and disclosures

    Mining companies that qualify for the LBMA's Responsible Sourcing 
Program and are Mint Approved Mines will then be subject to two levels 
of ESG screening by the Sponsor: At the overall company level and at 
the individual mine site level.
    First, the Sponsor will evaluate a mining company using ESG factors 
determined by the Sponsor (described above). This evaluation will use a 
number of tools, which include ratings from third-party research 
providers, such as Sustainalytics ESG Risk Ratings, along with sell-
side equity research reports. With respect to corporate governance, the 
Sponsor will evaluate recommendations from proxy voting

[[Page 60518]]

research providers, such as the Glass Lewis Proxy Review. The Sponsor 
will also use compliance with precious metals industry standards as an 
objective factor in its evaluation of mining companies. Each mining 
company with high ESG ratings and favorable recommendations from proxy 
voting research providers that complies with precious metals industry 
standards will be designated as an ESG Approved Mining Company.
    Second, the Sponsor will evaluate individual mine site locations of 
each ESG Approved Mining Company. Each mine location of an ESG Approved 
Mining Company will then be evaluated by the Sponsor as follows: (1) 
The performance of each mine against various indicators in the Mining 
Association of Canada's Towards Sustainable Mining standards; (2) using 
the ESG factors described above; and (3) whether such mine is in a 
heightened risk or conflict area. Each mining location of that ESG 
Approved Mining Company that (a) the Sponsor determines to meet the 
Mining Association of Canada's Towards Sustainable Mining standards and 
the ESG factors, and (b) is not in a heightened risk or conflict area 
will be designated as an ESG Approved Mine. Only ESG Approved Mines 
will be permitted to supply the raw material for ESG Approved Gold to 
the Mint, which will then refine the raw material to create ESG 
Approved Gold for the Trust. This means that the provenance of ESG 
Approved Gold will be known to the Trust.
    Heightened risk or conflict areas include areas where:
     Human rights abuses, forced or child labor, war crimes or 
genocide are prevalent;
     mines are involved in direct or indirect support to non-
state actors that use arms without legal authority;
     mines transport gold or supplies along routes that involve 
payment of illegal taxes or extortions; and
     mines are involved in money laundering or terrorism 
financing.
    The Sponsor will be responsible for any costs associated with 
researching, establishing and maintaining the ESG Criteria, assessing 
mining companies and mines against certain of the ESG Criteria and the 
diligence of the Trust's ESG Approved Gold Holdings. The Sponsor will 
conduct research on each mining company using its in-house investment 
professionals, and may use the services of outside consultants.
    The Trust will not trade in gold futures, options or swap contracts 
on any futures exchange or over the counter (``OTC''). 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's Cash Custodian may hold cash temporarily 
received from the sale of gold. The Trust's assets will only consist of 
ESG Approved Gold, unallocated gold and cash.

Operation of the Gold Market

    The global trade in gold consists of OTC transactions in spot, 
forwards, and options and other derivatives, together with exchange-
traded futures and options. The ESG Criteria and the processes and 
methods for refining and using ESG Approved Gold for the Trust's 
operations have been developed by the Sponsor specifically for the 
Trust, and thus no ESG Approved Gold that meets the ESG Criteria has 
been produced. Therefore, there have been no market transactions in ESG 
Approved Gold. The Trust is not aware of a separate market for ESG 
Approved Gold and does not believe that one will develop. ESG Approved 
Gold will be a subset of allocated gold bullion that is already 
currently refined by the Mint for its customers.
    The OTC gold market includes spot, forward, and option and other 
derivative transactions conducted on a principal-to-principal basis. 
While this is a global, nearly 24-hour per day market, its main centers 
are London, New York, and Zurich.
    According to the Exchange, most OTC market trades are cleared 
through London. The LBMA plays an important role in setting OTC gold 
trading industry standards. A London Good Delivery Bar (as described 
below), which is acceptable for settlement of any OTC transaction, will 
be acceptable for delivery to the Trust in connection with the issuance 
of Creation Units (defined below).
    The most significant gold futures exchange in the U.S. is COMEX, 
operated by Commodities Exchange, Inc., a subsidiary of New York 
Mercantile Exchange, Inc., and a subsidiary of the Chicago Mercantile 
Exchange Group (the ``CME Group''). Other commodity exchanges include 
the Tokyo Commodity Exchange (``TOCOM''), the Multi Commodity Exchange 
Of India (``MCX''), the Shanghai Futures Exchange, ICE Futures US (the 
``ICE''), and the Dubai Gold & Commodities Exchange. The CME Group and 
ICE are members of the Intermarket Surveillance Group (``ISG'').

The London Gold Bullion Market

    According to the Exchange, most trading in physical gold is 
conducted on the OTC market, predominantly in London. LBMA coordinates 
various OTC-market activities, including clearing and vaulting, acts as 
the principal intermediary between physical gold market participants 
and the relevant regulators, promotes good trading practices and 
develops standard market documentation. In addition, the LBMA promotes 
refining standards for the gold market by maintaining the ``London Good 
Delivery List,'' which identifies refiners of gold that have been 
approved by the LBMA. In the OTC market, gold bars that meet the 
specifications for weight, dimensions, fineness (or purity), 
identifying marks (including the assay stamp of an LBMA-acceptable 
refiner) and appearance described in ``The Good Delivery Rules for Gold 
and Silver Bars'' published by the LBMA are referred to as ``London 
Good Delivery Bars.'' A London Good Delivery Bar (typically called a 
``400 ounce bar'') must contain between 350 and 430 fine troy ounces of 
gold (1 troy ounce = 31.1034768 grams), with a minimum fineness (or 
purity) of 995 parts per 1,000 (99.5%), be of good appearance and be 
easy to handle and stack. The fine gold content of a gold bar is 
calculated by multiplying the gross weight of the bar (expressed in 
units of 0.025 troy ounces) by the fineness of the bar. A London Good 
Delivery Bar must also bear the stamp of one of the refiners identified 
on the London Good Delivery List.
    Following the enactment of the Financial Markets Act 2012, the 
Prudential Regulation Authority of the Bank of England is responsible 
for regulating most of the financial firms that are active in the 
bullion market, and the Financial Conduct Authority is responsible for 
consumer and competition issues. Trading in spot, forwards and 
wholesale deposits in the bullion market is subject to the Non-
Investment Products (``NIPS'') Code adopted by market participants.

Creation and Redemption of Shares

    The Trust will create and redeem Shares on a continuous basis in 
one or more blocks of 25,000 Shares (a block of 25,000 Shares is called 
a ``Creation Unit''). As described below, the Trust will issue Shares 
in Creation Units to certain authorized participants (``Authorized 
Participants'') on an ongoing basis.
    Creation Units may be created or redeemed only by Authorized 
Participants. Orders must be placed by 3:59 p.m. Eastern Time 
(``E.T.''). The day on which a Trust receives a valid purchase or 
redemption order is the order date. In connection with creations

[[Page 60519]]

and redemptions of Creation Units, Authorized Participants will be 
required to deliver or receive unallocated gold to or from the Trust, 
as applicable. An Authorized Participant will be required to enter into 
a trading agreement with the Mint for purposes of facilitating 
transfers of unallocated gold between the Trust and the Authorized 
Participant.
    Unallocated gold received from Authorized Participants will be 
converted into ESG Approved Gold by the Mint. The Mint will convert 
unallocated gold into ESG Approved Gold after receipt of a completed 
withdrawal request form from the Sponsor to withdraw an amount of 
unallocated gold from the Trust Unallocated Account and deposit ESG 
Approved Gold into the Trust Allocated Account.
    The Trust will redeem Shares using unallocated gold. To the extent 
that the Trust's existing holdings of unallocated gold are insufficient 
to meet a redemption request, the Trust will be required to request 
that the Mint convert ESG Approved Gold to unallocated gold, which may 
result in delays in the Trust's ability to meet redemption requests 
from Authorized Participants. The Mint will exchange ESG Approved Gold 
for an equal amount of unallocated gold upon the receipt of proper 
instructions from the Sponsor. The Mint will issue a confirmation of a 
completed exchange to the Sponsor by facsimile or by email on the 
business day that the exchange is completed.
    The Mint expects that it will be able to refine and produce ESG 
Approved Gold within approximately five business days following the 
receipt of completed withdrawal request, subject to production 
capacity, availability and minimum size requirements. The business day 
on which the physical withdrawal is to occur will be confirmed to the 
Sponsor in writing by the Mint. A receipt of deposit will be issued to 
the Sponsor by facsimile or by email on the business day the production 
of all ESG Approved Gold underlying a withdrawal request form is 
completed.
    Creation Units are only issued or redeemed on a day that the 
Exchange is open for regular trading in an amount of gold determined by 
the Administrator. Because ESG Approved Gold can be sourced by the Mint 
only from a limited number of suppliers, from time-to-time, on a 
temporary basis until additional ESG Approved Gold can be refined by 
the Mint, the Trust will hold gold in unallocated form. No Shares will 
be issued unless the Mint has allocated to the Trust Unallocated 
Account the corresponding amount of unallocated gold from the 
Authorized Participant's account.
    Each Authorized Participant must be a registered broker-dealer, a 
participant in Depository Trust Corporation (``DTC''), have entered 
into an agreement with the Trustee (the ``Authorized Participant 
Agreement'') and be in a position to deliver or receive to or from the 
Trust, as applicable, an amount of gold that is at least equal to the 
aggregate NAV of the number of Creation Units that are part of a 
purchase order or redemption order, as the case may be.
    According to the Registration Statement, Authorized Participants 
may surrender Creation Units in exchange for the corresponding amount 
of unallocated gold announced by the Transfer Agent. Upon the surrender 
of such Shares and the payment of the Transfer Agent's applicable fee 
and of any expenses, taxes or charges, the Transfer Agent will deliver 
to the order of the redeeming Authorized Participant the amount of 
unallocated gold corresponding to the redeemed Creation Units. Shares 
can only be surrendered for redemption in Creation Units of 25,000 
Shares each.
    Before surrendering Creation Units for redemption, an Authorized 
Participant must deliver to the Trustee a written request indicating 
the number of Creation Units it intends to redeem. The date the Trustee 
receives that order determines the amount of unallocated gold to be 
received in exchange. However, orders received by the Trustee after 
3:59 p.m. Eastern Time (``E.T.'') will be rejected.
    The redemption distribution from the Trust will consist of a credit 
to the redeeming Authorized Participant's unallocated account 
representing the amount of the gold held by the Trust evidenced by the 
Shares being redeemed as of the date of the redemption order.

Net Asset Value

    The NAV of the Trust will be calculated by subtracting the Trust's 
expenses and liabilities on any day from the value of the gold and 
other assets owned by the Trust on that day; the NAV per Share will be 
obtained by dividing the NAV of the Trust on a given day by the number 
of Shares outstanding on that day. On each day on which the Exchange is 
open for regular trading, the Administrator will determine the NAV as 
promptly as practicable after 4:00 p.m. E.T. The Administrator will 
value the Trust's gold on the basis of LBMA Gold Price PM or LBMA Gold 
Price AM. If the Sponsor deems it necessary, the Sponsor and the 
Administrator may agree to use a widely recognized pricing service for 
purposes of ascertaining the price of gold to use when calculating the 
NAV. The NAV per Share will be calculated by taking the current price 
of the Trust's total assets, subtracting any liabilities, and dividing 
by the total number of Shares outstanding.
    Authorized Participants will not receive from the Sponsor, the 
Trust or any affiliates any fee or other compensation in connection 
with the offering of the Shares.

Availability of Information Regarding Gold

    Currently, the Consolidated Tape Plan does not provide for 
dissemination of the spot price of a commodity such as gold over the 
Consolidated Tape. However, there will be disseminated over the 
Consolidated Tape the last sale price for the Shares, as is the case 
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of 
information about gold and gold markets available on public websites 
and through professional and subscription services.
    Investors may obtain gold pricing information on a 24-hour basis 
based on the spot price for an ounce of Gold from various financial 
information service providers, such as Reuters and Bloomberg.
    Reuters and Bloomberg, for example, provide at no charge on their 
websites delayed information regarding the spot price of Gold and last 
sale prices of Gold futures, as well as information about news and 
developments in the gold market. Reuters and Bloomberg also offer a 
professional service to subscribers for a fee that provides information 
on Gold prices directly from market participants. Complete real-time 
data for Gold futures and options prices traded on the COMEX are 
available by subscription from Reuters and Bloomberg. There are a 
variety of other public websites providing information on gold, ranging 
from those specializing in precious metals to sites maintained by major 
newspapers. In addition, the LBMA Gold Price is publicly available at 
no charge at www.lbma.org.uk.

Availability of Information

    The intraday indicative value (``IIV'') per Share for the Shares 
will be disseminated by one or more major market data vendors. The IIV 
will be calculated based on the amount of gold held by the Trust and a 
price of gold

[[Page 60520]]

derived from updated bids and offers indicative of the spot price of 
gold.\14\
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    \14\ The IIV on a per Share basis disseminated during the Core 
Trading Session should not be viewed as a real-time update of the 
NAV, which is calculated once a day.
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    The website for the Trust (https://sprott.com/investment-strategies/physical-bullion-trusts) will contain the following 
information, on a per Share basis, for the Trust: (a) The mid-point of 
the bid-ask price \15\ at the close of trading (``Bid/Ask Price''), and 
a calculation of the premium or discount of such price against such 
NAV; and (b) 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. 
The website for the Trust will also provide the Trust's prospectus. 
Finally, the Trust's website will be updated once daily to provide the 
last sale price of the Shares as traded in the U.S. market at the end 
of regular trading. 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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    \15\ The bid-ask price of the Shares will be determined using 
the highest bid and lowest offer on the Consolidated Tape as of the 
time of calculation of the closing day NAV.
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    The Trust will maintain on its website current lists of the ESG 
Criteria and ESG Approved Mines and ESG Approved Mining Companies from 
which the Trust sources its ESG Approved Gold. The Trust anticipates 
that ESG Approved Mines and ESG Approved Mining Companies may be added 
or removed from such lists over time based on, among other things, 
whether such ESG Approved Mines and ESG Approved Mining Companies meet 
the evolving ESG Criteria and whether they are Mint Approved Mines. The 
Trust will update the information on its website promptly after any 
change to the ESG Criteria, ESG Approved Mines or ESG Approved Mining 
Companies.

Criteria for Initial and Continued Listing

    The Trust will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
    A minimum of two Creation Units or 50,000 Shares will be required 
to be outstanding at the start of trading, which is equivalent to 
10,000 fine ounces of gold or about $18,550,000 as of June 14, 2021. 
The Exchange believes that the anticipated minimum number of Shares 
outstanding at the start of trading is sufficient to provide adequate 
market liquidity.

Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Trust subject to the Exchange's existing rules 
governing the trading of equity securities. Trading in the Shares on 
the Exchange will occur in accordance with NYSE Arca Rule 7.34-E(a). 
The Exchange has appropriate rules to facilitate transactions in the 
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-
E, 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.
    Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on 
ETP Holders acting as registered Market Makers in the Shares to 
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), 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 the 
underlying gold, any related futures or options on futures, or any 
other related derivatives. Commentary .04 of NYSE Arca Rule 6.3-E 
requires an ETP Holder acting as a registered Market Maker, and its 
affiliates, in the Shares to 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 (including the Shares).
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder. To the extent the Exchange may be 
found to lack jurisdiction over a subsidiary or affiliate of an ETP 
Holder that does business only in commodities or futures contracts, the 
Exchange could obtain information regarding the activities of such 
subsidiary or affiliate through surveillance sharing agreements with 
regulatory organizations of which such subsidiary or affiliate is a 
member.
    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.\16\ The Exchange will halt trading in the Shares if the 
NAV of the Trust is not calculated or disseminated daily. The Exchange 
may halt trading during the day in which an interruption occurs to the 
dissemination of the IIV, as described above. 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.
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    \16\ See NYSE Arca Rule 7.12-E.
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Surveillance

    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\17\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
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    \17\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will

[[Page 60521]]

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.\18\
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    \18\ For a list of the current members of ISG, see 
www.isgportal.org.
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    Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able 
to obtain information regarding trading in the Shares and the 
underlying gold through ETP Holders acting as registered Market Makers, 
in connection with such ETP Holders' proprietary or customer trades 
through ETP Holders which they effect on any relevant market.
    In addition, the Exchange also has a general policy prohibiting the 
improper distribution of material, non-public information by its 
employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings or reference assets, or (c) the applicability of Exchange 
listing rules specified in this rule filing shall constitute continued 
listing requirements for listing the Shares of the Trust on the 
Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-65 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \19\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposal. Institution of proceedings does not 
indicate that the Commission has reached any conclusions with respect 
to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\20\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal's consistency with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of a national 
securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \21\
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    \20\ Id.
    \21\ 15 U.S.C. 78f(b)(5).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
[SRO] that proposed the rule change.'' \22\ The description of a 
proposed rule change, its purpose and operation, its effect, and a 
legal analysis of its consistency with applicable requirements must all 
be sufficiently detailed and specific to support an affirmative 
Commission finding,\23\ and any failure of an SRO to provide this 
information may result in the Commission not having a sufficient basis 
to make an affirmative finding that a proposed rule change is 
consistent with the Act and the applicable rules and regulations.\24\
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    \22\ 17 CFR 201.700(b)(3).
    \23\ See id.
    \24\ See id.
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    The Commission is concerned that certain aspects of the proposal 
are not sufficiently described and that the Exchange has not met its 
burden to demonstrate that the proposed rule change is consistent with 
the Act and the rules and regulations issued thereunder. For example, 
with respect to creation and redemption of Shares, the Exchange 
describes a process whereby the Mint will convert unallocated gold into 
ESG Approved Gold or convert ESG Approved Gold into unallocated 
gold.\25\ However, the Exchange does not explain how this conversion 
process will take place or provide sufficient details on how costly it 
will be for the Mint to perform such a conversion on the Fund's behalf 
and the extent to which these costs will be borne by investors in the 
Shares. The Exchange also does not explain why this conversion from 
unallocated gold to ESG Approved Gold is necessary rather than allowing 
Authorized Participants to submit Creation Units of ESG Approved Gold 
that they have sourced from the Mint. In addition, the Exchange states 
that to the extent that the Trust's existing holdings of unallocated 
gold are insufficient to meet a redemption request, the Trust will be 
required to request that the Mint convert ESG Approved Gold to 
unallocated gold, which may result in delays in the Trust's ability to 
meet redemption requests from Authorized Participants. However, the 
Exchange does not sufficiently explain why such a conversion is 
necessary to effect redemptions instead of the Fund redeeming Shares 
using ESG Approved Gold without a delay, or why this delay does not 
raise concerns under the Act.\26\ As such, the Commission has concerns 
about the proposed conversion process and whether the proposal is 
sufficiently designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and to 
protect investors and the public interest, as required by Section 
6(b)(5) of the Act.
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    \25\ See Notice, supra note 3.
    \26\ See Notice, supra note 3.
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    Furthermore, the Commission is concerned that the Exchange does not 
adequately explain how other aspects of the proposal are designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and to protect investors and the 
public interest, as required by Section 6(b)(5) of the Act. For 
example, the Exchange represents that the Administrator will value the 
Trust's gold, including both ESG Approved Gold and unallocated gold 
held by the Trust, based on LBMA Gold Price PM or LBMA Gold Price 
AM.\27\ The Exchange further states that the Trust is not aware of a 
separate market for ESG Approved Gold and does not believe that one 
will develop.\28\ However, given that ESG Approved Gold may constitute, 
by construction, a small portion of the total gold outstanding in the 
market, the Exchange has not sufficiently explained why the Trust can 
expect to trade or value ESG Approved Gold at the same price as 
unallocated gold. In addition, the proposal does not address the 
potential effects that the listing and trading of the Shares may have 
on the development of a separate market for ESG Approved Gold or 
differential pricing terms for

[[Page 60522]]

ESG Approved Gold in existing gold markets. The proposal also does not 
address the effect such a differential may have on the valuation of the 
Shares, potential pricing dislocations between the NAV per Share and 
Share price or between the NAV and the true value of the underlying 
assets, or how such dislocations might affect investors in the Shares, 
nor how those effects would be consistent with the Act.
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    \27\ See id.
    \28\ See id.
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    For these reasons, the Commission believes it is appropriate to 
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \29\ 
to determine whether the proposal should be approved or disapproved.
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    \29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\30\
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    \30\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by November 23, 2021. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
December 7, 2021.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal in addition to any 
other comments they may wish to submit about the proposed rule change. 
In this regard, the Commission seeks commenters' views regarding the 
Exchange's proposal to list and trade the Shares is adequately designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, and to protect investors and 
the public interest, 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 [email protected]. Please include 
File Number SR-NYSEArca-2021-65 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2021-65. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2021-65 and should be submitted 
by November 23, 2021. Rebuttal comments should be submitted by December 
7, 2021.
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    \31\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23810 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P