Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Units of the Sprott Physical Platinum and Palladium Trust Pursuant to NYSE Arca Equities Rule 8.201, 75239-75241 [2012-30503]
Download as PDF
<![CDATA[
Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68430; File No. SR–
NYSEArca–2012–111]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To List and Trade
Units of the Sprott Physical Platinum
and Palladium Trust Pursuant to NYSE
Arca Equities Rule 8.201
December 13, 2012.
I. Introduction
On October 9, 2012, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 units (‘‘Units’’)
of the Sprott Physical Platinum and
Palladium Trust (‘‘Trust’’) pursuant to
NYSE Arca Equities Rule 8.201. On
October 24, 2012, the Exchange
submitted Amendment No. 1 to the
proposed rule change. The proposed
rule change was published for comment
in the Federal Register on October 30,
2012.3 The Commission received no
comment letters regarding the proposed
rule change. This order approves the
proposed rule change.
II. Description of the Proposal
The Exchange proposes to list and
trade the Units 4 under NYSE Arca
Equities Rule 8.201. NYSE Arca
represents that the Units satisfy the
requirements of NYSE Arca Equities
Rule 8.201 and thereby qualify for
listing and trading on the Exchange.5
Sprott Asset Management LP is the
sponsor and manager of the Trust
(‘‘Sponsor’’ or ‘‘Manager’’).6 RBC
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 68101
(October 24, 2012), 77 FR 65732 (‘‘Notice’’)
(noticing the filing of the proposed rule change as
modified by Amendment No. 1).
4 Each Unit will represent an equal, fractional,
undivided interest in the net assets of the Trust
attributable to the particular class of Units. See
Notice, supra note 3, 77 FR at 65735.
5 With respect to application of Rule 10A–3 under
the Act, the Trust relies on the exemption contained
in Rule 10A–3(c)(7). See Notice, supra note 3, 77
FR at 65733 n.17.
6 The Manager is a limited partnership existing
under the laws of Ontario, Canada, and acts as
manager of the Trust pursuant to the trust
agreement and the management agreement. The
Manager has adopted a policy pursuant to which no
entity or account that is (a) managed or (b) for
whom investment decisions are made, directly or
indirectly, by a person that is involved in the
decision-making process of, or has nonpublic
information about, follow-on offerings of the Trust
sroberts on DSK5SPTVN1PROD with
2 17
VerDate Mar<15>2010
16:35 Dec 18, 2012
Jkt 229001
Investor Services (‘‘RBC’’) is the trustee
and valuation agent of the Trust
(‘‘Valuation Agent’’), as well as the
custodian of the Trust’s assets other
than physical platinum and palladium
bullion.7 The Royal Canadian Mint is
the custodian for the physical platinum
and palladium bullion owned by the
Trust (‘‘Platinum and Palladium
Custodian’’).
The Trust will issue the Units in an
initial public offering.8 The Trust may
not issue additional Units following the
completion of the initial public offering
except under certain conditions. NYSE
Arca will require that a minimum of
1,000,000 Units be outstanding at the
start of trading.
The Trust’s investment objective is to
invest and hold substantially all of its
assets in physical platinum and
palladium bullion. Except with respect
to cash held by the Trust to pay
expenses and anticipated cash
redemptions,9 the Trust expects to own
only physical platinum and palladium
bullion that is certified as conforming to
the Good Delivery Standard (‘‘Good
Delivery’’) of the London Platinum and
Palladium Market. The Trust will
purchase approximately equal dollar
amounts of physical platinum and
palladium. The Manager expects to
invest and hold approximately 97% of
the total net assets of the Trust in
(‘‘Decision Maker’’) is permitted to invest in the
Trust, and no Decision Maker is permitted to invest
in the Trust for the Decision Maker’s account or
benefit, directly or indirectly. See Notice, supra
note 3, 77 FR at 65732 n.11. Additional details
regarding the Trust are set forth the registration
statement for the Trust, most recently amended on
September 4, 2012 (No. 333–179017) (‘‘Registration
Statement’’).
7 RBC is affiliated with a broker-dealer. RBC has
represented to the Exchange that it has put in place
and will maintain the appropriate information
barriers and controls between itself and the brokerdealer affiliate so that the broker-dealer affiliate will
not have access to information concerning the
composition and/or changes to the Trust’s holdings
that are not available on the Trust’s Web site. See
Notice, supra note 3, 77 FR at 65732 n.12.
8 To purchase physical platinum and palladium
bullion, the Manager will create an order internally
and send it for pre-trade compliance review. Once
the order has been approved, the order will be
placed by one of the Manager’s traders. Orders
generally will be placed by phone and through
electronic dealing systems. Lists of the plates and
ingots available to fill the buy order will be sent to
the Manager by a bullion broker with whom the
Manager has an established relationship. While the
Manager will work with a bullion broker with
whom the Manager has an established relationship,
the Manager has represented that it will make all
purchases of physical platinum and palladium
bullion on an arms-length basis and will not make
purchases from affiliated entities. See Notice, supra
note 3, 77 FR at 65735.
9 The Trust can hold no more than ten percent of
the assets in cash or other specified investments.
See Notice, supra note 3, 77 FR at 65734–35 n.21.
PO 00000
Frm 00135
Fmt 4703
Sfmt 4703
75239
physical platinum and palladium
bullion.
The Units will be redeemable
monthly for physical platinum and
palladium bullion or for cash at the
option of the Unitholder, subject to
certain conditions. Redemption requests
for physical platinum and palladium
bullion must be for a minimum of
25,000 Units. A redemption request for
physical platinum and palladium
bullion must be received by the Trust’s
transfer agent no later than 4:00 p.m.
E.T. on the 15th day of the month in
which such redemption notice will be
processed, or if such day is not a
Business Day,10 then on the
immediately following day that is a
Business Day.11 Generally, the Units
redeemed for physical platinum and
palladium bullion will have a
redemption value equal to the aggregate
value of the net asset value (‘‘NAV’’) per
Unit of the redeemed Units on the last
day on which the Exchange is open for
trading in the month during which the
redemption request is processed, less
applicable expenses (‘‘Redemption
Amount’’). The Manager will allocate
the Redemption Amount to physical
platinum and palladium bullion in
direct proportion to the value of
physical platinum and palladium
bullion held by the Trust at the time of
redemption (‘‘Bullion Redemption
Amount’’).12
The Units redeemed for cash will
receive a redemption price equal to 95%
of the lesser of: (i) the volume-weighted
average trading price of the Units traded
on NYSE Arca or, if trading has been
suspended on NYSE Arca, the volumeweighted average trading price of the
Units traded on the TSX, for the last five
days on which the respective exchange
is open for trading during the month in
which the redemption request is
processed; or (ii) the NAV per Unit of
the redeemed Units on the last day of
such month on which NYSE Arca is
open for trading.
Additional information can be found
in the Notice and in the Registration
Statement regarding: the Trust; the
Units; the Trust’s investment objectives,
10 A ‘‘Business Day’’ is a day on which the
Exchange or the Toronto Stock Exchange (‘‘TSX’’)
is open for trading. The Exchange states that the
Units will trade on both the Exchange and the TSX.
See Notice, supra note 3, 77 FR at 65735.
11 Any bullion redemption notice received after
such time will be processed in the next month.
12 Any Bullion Redemption Amount in excess of
the value of the Good Delivery plates or ingots, as
the case may be, of the particular metal to be
delivered to the redeeming Unitholder will be paid
in cash, as such excess amount will not be
combined with any excess amounts in respect of the
other metal for the purpose of delivering additional
physical platinum and palladium bullion. See
Notice, supra note 3, 77 FR at 65736.
E:\FR\FM\19DEN1.SGM
19DEN1
75240
Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
strategies, policies, and restrictions; fees
and expenses; creation and redemption
of Units; the physical platinum and
palladium markets; availability of
information; trading rules and halts; and
surveillance procedures.13
sroberts on DSK5SPTVN1PROD with
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act 14 and the rules and
regulations thereunder applicable to a
national securities exchange.15 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,16 which
requires, among other things, that the
rules of a national securities exchange
be designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and 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.
In addition, the Commission finds
that the proposal to list and trade Units
on NYSE Arca is consistent with
Section 11(a)(1)(C)(iii) of the Act,17
which sets forth Congress’s finding that
it is in the public interest and
appropriate for the protection of
investors 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 Units will be available via the
Consolidated Tape Association. The
Trust’s Web site will provide an
intraday indicative value (‘‘IIV’’) per
unit for the Units, as calculated by a
third-party financial data provider
during NYSE Arca’s Core Trading
Session (9:30 a.m. to 4:00 p.m. E.T.).18
13 See Notice and the Registration Statement,
supra notes 3 and 6, respectively.
14 15 U.S.C. 78f.
15 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).
16 15 U.S.C. 78f(b)(5).
17 15 U.S.C. 78k–1(a)(1)(C)(iii).
18 The IIV will be calculated by: (1) Multiplying
the total number of ounces of physical platinum
bullion held by the Trust as of the close of business
on the previous day with the mid-price of spot
platinum per ounce (‘‘Platinum IIV’’); (2)
multiplying the total number of ounces of physical
palladium bullion held by the Trust as of the close
of business on the previous day with the mid-price
of spot palladium per ounce (‘‘Palladium IIV’’); (3)
adding the Platinum IIV to the Palladium IIV and
the fair market value of the assets of the Trust that
are not physical platinum or palladium bullion as
VerDate Mar<15>2010
16:35 Dec 18, 2012
Jkt 229001
In addition, the Trust’s Web site will
contain the following information, on a
per-Unit basis, for the Trust: (a) the
midpoint of the bid-ask price at the
close of trading in relation to the NAV
as of the time the NAV is calculated
(‘‘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
Trust’s Web site will also provide the
Trust’s prospectus, the two most recent
reports to Unitholders, the last sale
price of the Units as traded in the U.S.
market, and a breakdown, calculated on
a daily basis, of the holdings of the
Trust by metal type. In addition, NYSE
Arca will make available over the
Consolidated Tape quotation
information, trading volume, closing
prices, and NAV per Unit from the
previous day.
The Commission believes that the
proposal to list and trade the Units is
reasonably designed to promote fair
disclosure of information that may be
necessary to price the Units
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. As
discussed above, the Trust will publish
on its Web site: a breakdown of the
holdings of the Trust by metal type; the
NAV of the Trust; the IIV per Unit; the
Trust’s prospectus; and the last sale
price of the Units as traded in the U.S.
market. The Commission notes that the
Exchange will obtain a representation
from the Trust prior to the
commencement of trading of the Units
that the NAV per Unit will be calculated
daily and made available to all market
participants at the same time.
Under NYSE Arca Equities Rule
7.34(a)(5), if the Exchange becomes
aware that the NAV is not being
disseminated to all market participants
at the same time, it must halt trading on
the NYSE Marketplace until such time
as the NAV is available to all market
participants. Additionally, if the IIV 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 close of business on the previous day (such
sum, ‘‘IIV Assets’’); (4) subtracting the fair market
value of the Trust’s total liabilities (excluding all
liabilities represented by the outstanding Units, if
any) as of the close of business on the previous day
from the IIV Assets; and (5) dividing the result by
the number of Units outstanding as of the close of
business on the previous day.
PO 00000
Frm 00136
Fmt 4703
Sfmt 4703
of the trading day following the
interruption. Further, the Exchange will
consider suspension of trading pursuant
to NYSE Arca Rule 8.201(e)(2) if, after
the initial 12-month period following
commencement of trading: (1) the value
of platinum or palladium is no longer
calculated or available on at least a 15second delayed basis from a source
unaffiliated with the Sponsor, Trust, or
Platinum and Palladium Custodian, or
the Exchange stops providing a
hyperlink on its Web site to any such
unaffiliated commodity value; or (2) if
the IIV is no longer made available on
at least a 15-second delayed basis.19
NYSE Arca will halt trading in the Units
on the Exchange in the event the Trust
directs the Trust’s Valuation Agent to
suspend the calculation of the value of
the net assets of the Trust and the
NAV.20 NYSE Arca Equities Rule
8.201(e)(2) also provides that NYSE
Arca may seek to delist the Units in the
event the value of the underlying
commodity or the IIV is no longer
calculated or available as required.
In support of this proposal, NYSE
Arca has made representations,
including:
(1) The Units will be subject to the
initial and continued listing criteria
under NYSE Arca Equities Rule 8.201.
(2) NYSE Arca’s surveillance
procedures are adequate to properly
monitor Exchange trading of the Units
in all trading sessions and to deter and
detect violations of NYSE Arca rules
and applicable federal securities laws.21
19 More generally, NYSE Arca may halt trading on
the Exchange in the Units because of market
conditions or for reasons that, in the Exchange’s
view, make trading in the Units inadvisable,
including: (1) the extent to which conditions in the
underlying platinum or palladium market have
caused disruptions and/or lack of trading; (2)
whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly
market are present; or (3) if trading in the Units is
halted on TSX. See Notice, supra note 3, 77 FR at
65738. Additionally, trading in the Units will be
subject to trading halts caused by extraordinary
market volatility pursuant to NYSE Arca’s ‘‘circuit
breaker’’ rule. See NYSE Arca Equities Rule 7.12.
20 See Notice, supra note 3, 77 FR at 65739.
21 To support this, NYSE Arca states that,
pursuant to NYSE Arca Equities Rule 8.201(g), it is
able to obtain information regarding trading in the
Units; physical platinum and palladium; platinum
or palladium futures contracts; options on platinum
or palladium futures; or any other platinum or
palladium derivative from ETP Holders acting as
registered Market Makers, in connection with their
proprietary or customer trades. More generally,
NYSE Arca states that it has regulatory jurisdiction
over its ETP Holders and their associated persons,
which includes any person or entity controlling an
ETP Holder. With respect to a subsidiary or affiliate
of an ETP Holder that does business only in
commodities or futures contracts, the Exchange
states that it could obtain information regarding the
activities of such subsidiary or affiliate through
surveillance sharing agreements with regulatory
organizations of which such subsidiary or affiliate
E:\FR\FM\19DEN1.SGM
19DEN1
Federal Register / Vol. 77, No. 244 / Wednesday, December 19, 2012 / Notices
(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 Units.
Specifically, the Information Bulletin
will discuss the following: (a) The
procedures for purchases and
redemptions of Units; (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
Units; (c) the requirement that ETP
Holders deliver a prospectus to
investors purchasing newly issued Units
prior to or concurrently with the
confirmation of a transaction; (d) the
possibility that trading spreads and the
resulting premium or discount on the
Units may widen as a result of reduced
liquidity of platinum and palladium
trading during the Core and Late
Trading Sessions after the close of the
major world platinum and palladium
markets; and (e) trading information.
This approval order is based on the
Exchange’s representations.
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 22 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule change (SR–NYSEArca–
2012–111), as modified by Amendment
No. 1, is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–30503 Filed 12–18–12; 8:45 am]
sroberts on DSK5SPTVN1PROD with
BILLING CODE 8011–01–P
is a member. Further, NYSE Arca states that it may
obtain trading information via the Intermarket
Surveillance Group (‘‘ISG’’) from other exchanges
that are members of the ISG, including the
Commodity Exchange, Inc. (‘‘COMEX’’). The
Exchange also states that The Investment Industry
Regulatory Organization of Canada and the New
York Mercantile Exchange, of which COMEX is a
division, are ISG members. The Investment Industry
Regulatory Organization of Canada oversees
Canadian broker-dealers and trading activity on the
TSX. See Securities Exchange Act Release No.
63043 (October 5, 2010), 75 FR 62615, 62619 n.26
(October 12, 2010).
22 15 U.S.C. 78f(b)(5).
23 15 U.S.C. 78s(b)(2).
24 17 CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:35 Dec 18, 2012
Jkt 229001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68424; File No. SR–ISE–
2012–95]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Extend the Penny Pilot
Program
December 13, 2012.
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 December
7, 2012, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission (the ‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The ISE proposes to amend its rules
relating to a pilot program to quote and
to trade certain options in pennies
(‘‘Penny Pilot Program’’). The text of the
proposed rule change is as follows, with
deletions in [brackets] and additions are
italicized:
Rule 710. Minimum Trading
Increments
*
*
*
*
*
Supplementary Material to Rule 710
.01 Notwithstanding any other
provision of this Rule 710, the Exchange
will operate a pilot program, scheduled
to expire on [December 31, 2012] June
30, 2013, to permit options classes to be
quoted and traded in increments as low
as $.01. The Exchange will specify
which options trade in such pilot, and
in what increments, in Regulatory
Information Circulars filed with the
Commission pursuant to Rule 19b–4
under the Exchange Act and distributed
to Members.
The Exchange may replace any penny
pilot issues that have been delisted with
the next most actively traded multiply
listed options classes that are not yet
included in the penny pilot, based on
trading activity in the previous six
months. The replacement issues may be
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
Frm 00137
Fmt 4703
added to the penny pilot on the second
trading day following [July 1, 2012]
January 1, 2013.
.02 No Change.
*
*
*
*
*
The text of the proposed rule change
is available on the Exchange’s Web site
at www.ise.com, at the Exchange’s
principal office 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 these statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Under the Penny Pilot Program, the
minimum price variation for all
participating options classes, except for
the Nasdaq-100 Index Tracking Stock
(‘‘QQQQ’’), the SPDR S&P 500 Exchange
Traded Fund (‘‘SPY’’) and the iShares
Russell 2000 Index Fund (‘‘IWM’’), is
$0.01 for all quotations in options series
that are quoted at less than $3 per
contract and $0.05 for all quotations in
options series that are quoted at $3 per
contract or greater. QQQQ, SPY and
IWM are quoted in $0.01 increments for
all options series. The Penny Pilot
Program is currently scheduled to
expire on December 31, 2012.4 The
Exchange proposes to extend the time
period of the Penny Pilot Program
through June 30, 2013, and to provide
revised dates for adding replacement
issues to the Penny Pilot program. The
Exchange proposes that any Penny Pilot
Program issues that have been delisted
may be replaced on the second trading
day following January 1, 2013. The
replacement issues will be selected
based on trading activity for the six
month period beginning June 1, 2012,
and ending November 30, 2012. This
filing does not propose any substantive
changes to the Penny Pilot Program: all
classes currently participating will
4 See Exchange Act Release No. 67323 (June 29,
2012), 77 FR 40121 (July 6, 2012) (SR–ISE–2012–
57).
2 15
PO 00000
75241
Sfmt 4703
E:\FR\FM\19DEN1.SGM
19DEN1
]]>Agencies
[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75239-75241]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30503]
[[Page 75239]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68430; File No. SR-NYSEArca-2012-111]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade
Units of the Sprott Physical Platinum and Palladium Trust Pursuant to
NYSE Arca Equities Rule 8.201
December 13, 2012.
I. Introduction
On October 9, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
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 units (``Units'') of the Sprott Physical Platinum and
Palladium Trust (``Trust'') pursuant to NYSE Arca Equities Rule 8.201.
On October 24, 2012, the Exchange submitted Amendment No. 1 to the
proposed rule change. The proposed rule change was published for
comment in the Federal Register on October 30, 2012.\3\ The Commission
received no comment letters regarding the proposed rule change. This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 68101 (October 24,
2012), 77 FR 65732 (``Notice'') (noticing the filing of the proposed
rule change as modified by Amendment No. 1).
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to list and trade the Units \4\ under NYSE
Arca Equities Rule 8.201. NYSE Arca represents that the Units satisfy
the requirements of NYSE Arca Equities Rule 8.201 and thereby qualify
for listing and trading on the Exchange.\5\
---------------------------------------------------------------------------
\4\ Each Unit will represent an equal, fractional, undivided
interest in the net assets of the Trust attributable to the
particular class of Units. See Notice, supra note 3, 77 FR at 65735.
\5\ With respect to application of Rule 10A-3 under the Act, the
Trust relies on the exemption contained in Rule 10A-3(c)(7). See
Notice, supra note 3, 77 FR at 65733 n.17.
---------------------------------------------------------------------------
Sprott Asset Management LP is the sponsor and manager of the Trust
(``Sponsor'' or ``Manager'').\6\ RBC Investor Services (``RBC'') is the
trustee and valuation agent of the Trust (``Valuation Agent''), as well
as the custodian of the Trust's assets other than physical platinum and
palladium bullion.\7\ The Royal Canadian Mint is the custodian for the
physical platinum and palladium bullion owned by the Trust (``Platinum
and Palladium Custodian'').
---------------------------------------------------------------------------
\6\ The Manager is a limited partnership existing under the laws
of Ontario, Canada, and acts as manager of the Trust pursuant to the
trust agreement and the management agreement. The Manager has
adopted a policy pursuant to which no entity or account that is (a)
managed or (b) for whom investment decisions are made, directly or
indirectly, by a person that is involved in the decision-making
process of, or has nonpublic information about, follow-on offerings
of the Trust (``Decision Maker'') is permitted to invest in the
Trust, and no Decision Maker is permitted to invest in the Trust for
the Decision Maker's account or benefit, directly or indirectly. See
Notice, supra note 3, 77 FR at 65732 n.11. Additional details
regarding the Trust are set forth the registration statement for the
Trust, most recently amended on September 4, 2012 (No. 333-179017)
(``Registration Statement'').
\7\ RBC is affiliated with a broker-dealer. RBC has represented
to the Exchange that it has put in place and will maintain the
appropriate information barriers and controls between itself and the
broker-dealer affiliate so that the broker-dealer affiliate will not
have access to information concerning the composition and/or changes
to the Trust's holdings that are not available on the Trust's Web
site. See Notice, supra note 3, 77 FR at 65732 n.12.
---------------------------------------------------------------------------
The Trust will issue the Units in an initial public offering.\8\
The Trust may not issue additional Units following the completion of
the initial public offering except under certain conditions. NYSE Arca
will require that a minimum of 1,000,000 Units be outstanding at the
start of trading.
---------------------------------------------------------------------------
\8\ To purchase physical platinum and palladium bullion, the
Manager will create an order internally and send it for pre-trade
compliance review. Once the order has been approved, the order will
be placed by one of the Manager's traders. Orders generally will be
placed by phone and through electronic dealing systems. Lists of the
plates and ingots available to fill the buy order will be sent to
the Manager by a bullion broker with whom the Manager has an
established relationship. While the Manager will work with a bullion
broker with whom the Manager has an established relationship, the
Manager has represented that it will make all purchases of physical
platinum and palladium bullion on an arms-length basis and will not
make purchases from affiliated entities. See Notice, supra note 3,
77 FR at 65735.
---------------------------------------------------------------------------
The Trust's investment objective is to invest and hold
substantially all of its assets in physical platinum and palladium
bullion. Except with respect to cash held by the Trust to pay expenses
and anticipated cash redemptions,\9\ the Trust expects to own only
physical platinum and palladium bullion that is certified as conforming
to the Good Delivery Standard (``Good Delivery'') of the London
Platinum and Palladium Market. The Trust will purchase approximately
equal dollar amounts of physical platinum and palladium. The Manager
expects to invest and hold approximately 97% of the total net assets of
the Trust in physical platinum and palladium bullion.
---------------------------------------------------------------------------
\9\ The Trust can hold no more than ten percent of the assets in
cash or other specified investments. See Notice, supra note 3, 77 FR
at 65734-35 n.21.
---------------------------------------------------------------------------
The Units will be redeemable monthly for physical platinum and
palladium bullion or for cash at the option of the Unitholder, subject
to certain conditions. Redemption requests for physical platinum and
palladium bullion must be for a minimum of 25,000 Units. A redemption
request for physical platinum and palladium bullion must be received by
the Trust's transfer agent no later than 4:00 p.m. E.T. on the 15th day
of the month in which such redemption notice will be processed, or if
such day is not a Business Day,\10\ then on the immediately following
day that is a Business Day.\11\ Generally, the Units redeemed for
physical platinum and palladium bullion will have a redemption value
equal to the aggregate value of the net asset value (``NAV'') per Unit
of the redeemed Units on the last day on which the Exchange is open for
trading in the month during which the redemption request is processed,
less applicable expenses (``Redemption Amount''). The Manager will
allocate the Redemption Amount to physical platinum and palladium
bullion in direct proportion to the value of physical platinum and
palladium bullion held by the Trust at the time of redemption
(``Bullion Redemption Amount'').\12\
---------------------------------------------------------------------------
\10\ A ``Business Day'' is a day on which the Exchange or the
Toronto Stock Exchange (``TSX'') is open for trading. The Exchange
states that the Units will trade on both the Exchange and the TSX.
See Notice, supra note 3, 77 FR at 65735.
\11\ Any bullion redemption notice received after such time will
be processed in the next month.
\12\ Any Bullion Redemption Amount in excess of the value of the
Good Delivery plates or ingots, as the case may be, of the
particular metal to be delivered to the redeeming Unitholder will be
paid in cash, as such excess amount will not be combined with any
excess amounts in respect of the other metal for the purpose of
delivering additional physical platinum and palladium bullion. See
Notice, supra note 3, 77 FR at 65736.
---------------------------------------------------------------------------
The Units redeemed for cash will receive a redemption price equal
to 95% of the lesser of: (i) the volume-weighted average trading price
of the Units traded on NYSE Arca or, if trading has been suspended on
NYSE Arca, the volume-weighted average trading price of the Units
traded on the TSX, for the last five days on which the respective
exchange is open for trading during the month in which the redemption
request is processed; or (ii) the NAV per Unit of the redeemed Units on
the last day of such month on which NYSE Arca is open for trading.
Additional information can be found in the Notice and in the
Registration Statement regarding: the Trust; the Units; the Trust's
investment objectives,
[[Page 75240]]
strategies, policies, and restrictions; fees and expenses; creation and
redemption of Units; the physical platinum and palladium markets;
availability of information; trading rules and halts; and surveillance
procedures.\13\
---------------------------------------------------------------------------
\13\ See Notice and the Registration Statement, supra notes 3
and 6, respectively.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \14\
and the rules and regulations thereunder applicable to a national
securities exchange.\15\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\16\
which requires, among other things, that the rules of a national
securities exchange be designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f.
\15\ 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).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In addition, the Commission finds that the proposal to list and
trade Units on NYSE Arca is consistent with Section 11(a)(1)(C)(iii) of
the Act,\17\ which sets forth Congress's finding that it is in the
public interest and appropriate for the protection of investors 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 Units will be
available via the Consolidated Tape Association. The Trust's Web site
will provide an intraday indicative value (``IIV'') per unit for the
Units, as calculated by a third-party financial data provider during
NYSE Arca's Core Trading Session (9:30 a.m. to 4:00 p.m. E.T.).\18\ In
addition, the Trust's Web site will contain the following information,
on a per-Unit basis, for the Trust: (a) the midpoint of the bid-ask
price at the close of trading in relation to the NAV as of the time the
NAV is calculated (``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 Trust's Web site will
also provide the Trust's prospectus, the two most recent reports to
Unitholders, the last sale price of the Units as traded in the U.S.
market, and a breakdown, calculated on a daily basis, of the holdings
of the Trust by metal type. In addition, NYSE Arca will make available
over the Consolidated Tape quotation information, trading volume,
closing prices, and NAV per Unit from the previous day.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\18\ The IIV will be calculated by: (1) Multiplying the total
number of ounces of physical platinum bullion held by the Trust as
of the close of business on the previous day with the mid-price of
spot platinum per ounce (``Platinum IIV''); (2) multiplying the
total number of ounces of physical palladium bullion held by the
Trust as of the close of business on the previous day with the mid-
price of spot palladium per ounce (``Palladium IIV''); (3) adding
the Platinum IIV to the Palladium IIV and the fair market value of
the assets of the Trust that are not physical platinum or palladium
bullion as of the close of business on the previous day (such sum,
``IIV Assets''); (4) subtracting the fair market value of the
Trust's total liabilities (excluding all liabilities represented by
the outstanding Units, if any) as of the close of business on the
previous day from the IIV Assets; and (5) dividing the result by the
number of Units outstanding as of the close of business on the
previous day.
---------------------------------------------------------------------------
The Commission believes that the proposal to list and trade the
Units is reasonably designed to promote fair disclosure of information
that may be necessary to price the Units appropriately and to prevent
trading when a reasonable degree of transparency cannot be assured. As
discussed above, the Trust will publish on its Web site: a breakdown of
the holdings of the Trust by metal type; the NAV of the Trust; the IIV
per Unit; the Trust's prospectus; and the last sale price of the Units
as traded in the U.S. market. The Commission notes that the Exchange
will obtain a representation from the Trust prior to the commencement
of trading of the Units that the NAV per Unit will be calculated daily
and made available to all market participants at the same time.
Under NYSE Arca Equities Rule 7.34(a)(5), if the Exchange becomes
aware that the NAV is not being disseminated to all market participants
at the same time, it must halt trading on the NYSE Marketplace until
such time as the NAV is available to all market participants.
Additionally, if the IIV 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. Further, the Exchange will
consider suspension of trading pursuant to NYSE Arca Rule 8.201(e)(2)
if, after the initial 12-month period following commencement of
trading: (1) the value of platinum or palladium is no longer calculated
or available on at least a 15-second delayed basis from a source
unaffiliated with the Sponsor, Trust, or Platinum and Palladium
Custodian, or the Exchange stops providing a hyperlink on its Web site
to any such unaffiliated commodity value; or (2) if the IIV is no
longer made available on at least a 15-second delayed basis.\19\ NYSE
Arca will halt trading in the Units on the Exchange in the event the
Trust directs the Trust's Valuation Agent to suspend the calculation of
the value of the net assets of the Trust and the NAV.\20\ NYSE Arca
Equities Rule 8.201(e)(2) also provides that NYSE Arca may seek to
delist the Units in the event the value of the underlying commodity or
the IIV is no longer calculated or available as required.
---------------------------------------------------------------------------
\19\ More generally, NYSE Arca may halt trading on the Exchange
in the Units because of market conditions or for reasons that, in
the Exchange's view, make trading in the Units inadvisable,
including: (1) the extent to which conditions in the underlying
platinum or palladium market have caused disruptions and/or lack of
trading; (2) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present; or (3) if trading in the Units is halted on TSX. See
Notice, supra note 3, 77 FR at 65738. Additionally, trading in the
Units will be subject to trading halts caused by extraordinary
market volatility pursuant to NYSE Arca's ``circuit breaker'' rule.
See NYSE Arca Equities Rule 7.12.
\20\ See Notice, supra note 3, 77 FR at 65739.
---------------------------------------------------------------------------
In support of this proposal, NYSE Arca has made representations,
including:
(1) The Units will be subject to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.201.
(2) NYSE Arca's surveillance procedures are adequate to properly
monitor Exchange trading of the Units in all trading sessions and to
deter and detect violations of NYSE Arca rules and applicable federal
securities laws.\21\
---------------------------------------------------------------------------
\21\ To support this, NYSE Arca states that, pursuant to NYSE
Arca Equities Rule 8.201(g), it is able to obtain information
regarding trading in the Units; physical platinum and palladium;
platinum or palladium futures contracts; options on platinum or
palladium futures; or any other platinum or palladium derivative
from ETP Holders acting as registered Market Makers, in connection
with their proprietary or customer trades. More generally, NYSE Arca
states that it has regulatory jurisdiction over its ETP Holders and
their associated persons, which includes any person or entity
controlling an ETP Holder. With respect to a subsidiary or affiliate
of an ETP Holder that does business only in commodities or futures
contracts, the Exchange states that it 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. Further, NYSE Arca
states that it may obtain trading information via the Intermarket
Surveillance Group (``ISG'') from other exchanges that are members
of the ISG, including the Commodity Exchange, Inc. (``COMEX''). The
Exchange also states that The Investment Industry Regulatory
Organization of Canada and the New York Mercantile Exchange, of
which COMEX is a division, are ISG members. The Investment Industry
Regulatory Organization of Canada oversees Canadian broker-dealers
and trading activity on the TSX. See Securities Exchange Act Release
No. 63043 (October 5, 2010), 75 FR 62615, 62619 n.26 (October 12,
2010).
---------------------------------------------------------------------------
[[Page 75241]]
(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 Units.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Units; (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 Units; (c) the requirement that ETP Holders deliver a
prospectus to investors purchasing newly issued Units prior to or
concurrently with the confirmation of a transaction; (d) the
possibility that trading spreads and the resulting premium or discount
on the Units may widen as a result of reduced liquidity of platinum and
palladium trading during the Core and Late Trading Sessions after the
close of the major world platinum and palladium markets; and (e)
---------------------------------------------------------------------------
trading information.
This approval order is based on the Exchange's representations.
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 \22\ and the rules and regulations thereunder
applicable to a national securities exchange.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\23\ that the proposed rule change (SR-NYSEArca-2012-111), as
modified by Amendment No. 1, is approved.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30503 Filed 12-18-12; 8:45 am]
BILLING CODE 8011-01-P
