Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List and Trade Shares of the Merk Gold Trust Pursuant to NYSE Arca Equities Rule 8.201, 76367-76375 [2013-29893]

Download as PDF Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71038; File No. SR– NYSEArca–2013–137] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List and Trade Shares of the Merk Gold Trust Pursuant to NYSE Arca Equities Rule 8.201 December 11, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 27, 2013, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change, which filing was amended and replaced in part by Amendment No. 1 thereto on December 11, 2013,4 as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the Merk Gold Trust (the ‘‘Trust’’) pursuant to NYSE Arca Equities Rule 8.201. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change wreier-aviles on DSK5TPTVN1PROD with NOTICES In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 According to the Exchange, Amendment No. 1 seeks to clarify certain statements in the filing with respect to: (i) The Custodian’s information barriers between itself and its broker dealer affiliate; (ii) the use of unallocated gold accounts by other gold trusts; and (iii) the Trustee’s role in valuing the Trust’s physical gold holdings. 2 15 VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the Trust under NYSE Arca Equities Rule 8.201.5 Under NYSE Arca Equities Rule 8.201, the Exchange may propose to list and/ or trade pursuant to unlisted trading privileges (‘‘UTP’’) ‘‘Commodity-Based Trust Shares.’’ 6 The Commission has previously approved listing on the Exchange under NYSE Arca Equities Rule 8.201 shares of the APMEX Physical-1 oz. Gold Redeemable Trust 7, as well as the ETFS Gold Trust 8 and the Sprott Physical Gold Trust.9 In addition, the Commission has approved listing on the Exchange of streetTRACKS Gold Trust and iShares COMEX Gold Trust.10 Prior to their listing on the Exchange, the Commission approved listing of the streetTRACKS Gold Trust on the New York Stock Exchange (‘‘NYSE’’) and listing of iShares COMEX Gold Trust on the American Stock Exchange LLC.11 The sponsor of the Trust is Merk Investments LLC (‘‘Sponsor’’), a Delaware limited liability company.12 5 See the registration statement for the Trust on Form S–1 under the Securities Act of 1933 (15 U.S.C. 77a), filed with the Commission on April 8, 2013 (No. 333–180868) (the ‘‘Registration Statement’’). The descriptions of the Trust, the Shares and the gold market contained herein are based, in part, on the Registration Statement. 6 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. 7 Securities Exchange Act Release No 66930 (May 7, 2012), 77 FR 27817 (May 11, 2012) (SR– NYSEArca–2012–18) (‘‘APMEX Release’’). 8 Securities Exchange Act Release No. 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR– NYSEArca–2009–40). 9 Securities Exchange Act Release No. 61496 (February 4, 2010), 75 FR 6758 (February 10, 2010) (SR–NYSEArca–2009–113). 10 See Securities Exchange Act Release Nos. 56224 (August 8, 2007), 72 FR 45850 (August 15, 2007) (SR–NYSEArca–2007–76) (approving listing on the Exchange of the streetTRACKS Gold Trust); 56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) (SR–NYSEArca–2007–43) (order approving listing on the Exchange of iShares COMEX Gold Trust). 11 See Securities Exchange Act Release Nos. 50603 (October 28, 2004), 69 FR 64614 (November 5, 2004) (SR–NYSE–2004–22) (order approving listing of streetTRACKS Gold Trust on NYSE); 51058 (January 19, 2005), 70 FR 3749 (January 26, 2005) (SR–Amex–2004–38) (order approving listing of iShares COMEX Gold Trust on the American Stock Exchange LLC). 12 The Sponsor generally oversees the performance of the Trustee and the Trust’s PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 76367 The trustee for the Trust is The Bank of New York Mellon (‘‘Trustee’’).13 The custodian is JPMorgan Chase Bank, N.A. (the ‘‘Custodian’’).14 principal service providers, but does not exercise day-to-day oversight of the Trustee or such service providers. The Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustee’s monthly fee and out-ofpocket expenses; the fee of the Custodian (as described below); the marketing support fees and expenses; expenses reimbursable under the custody agreement; the precious metals dealer’s fees and expenses reimbursable under its agreement with the Sponsor; Exchange listing fees; Commission registration fees; printing and mailing costs; maintenance expenses for the Trust’s Web site; audit fees and up to $100,000 per annum in legal expenses. The Sponsor also will pay the costs of the Trust’s organization and the initial sale of the Shares, including applicable Commission registration fees. The Sponsor will undertake other activities for the Trust, as described in the Registration Statement. 13 The Trustee will be responsible for the day-today administration of the Trust. The Trustee’s responsibilities will include: (1) Valuing the Trust’s physical gold and unallocated gold and calculating the net asset value (‘‘NAV’’) per Share of the Trust, (2) supplying inventory information to the Sponsor for the Trust’s Web site; (3) receiving and processing orders from ‘‘Authorized Participants’’ (as described below) for the creation and redemption of ‘‘Baskets’’ (as described below); (4) coordinating the processing of orders from Authorized Participants with the Custodian and The Depository Trust Company (‘‘DTC’’), including coordinating with the Custodian the receipt of unallocated gold transferred to the Trust in connection with each issuance of Baskets; (5) cooperating with the Sponsor, the precious metals dealer and the Custodian in connection with the delivery of ‘‘physical gold’’ (as defined below) to ‘‘Delivery Applicants’’, as described below, in exchange for their Shares; (6) issuing and allocating Shares to the Sponsor in lieu of paying the fee to compensate the Sponsor (‘‘Sponsor Fee’’) in cash; (7) issuing and allocating Shares to the Sponsor to reimburse cash payments owed by the Trust, but undertaken by the Sponsor; (8) selling gold pursuant to the Sponsor’s direction or otherwise as needed to pay any extraordinary Trust expenses that are not assumed by the Sponsor; (9) holding the Trust’s cash and other financial assets, if any; (10) when appropriate, making distributions of cash or other property to investors; and (11) receiving and reviewing reports on the custody of and transactions in physical and unallocated gold from the Custodian and taking such other actions in connection with the custody of physical or unallocated gold as the Sponsor instructs. 14 The Custodian will be responsible for the safekeeping of the Trust’s allocated gold (as described below) and supplying inventory information to the Trustee and the Sponsor. The Custodian also will be responsible for facilitating the transfer of allocated gold and unallocated gold in and out of the Trust and facilitating the shipment of London Bars to Delivery Applicants. The Custodian will deposit into the Trust’s unallocated gold account (‘‘Unallocated Account’’) unallocated gold (as described below) received from an Authorized Participant in exchange for Baskets. The Custodian will promptly convert the deposit to allocated gold to be held in London Bars, as described below, unless the Sponsor instructs the Custodian to convert a portion of the unallocated gold received into physical gold for delivery to a Delivery Applicant. The Custodian has represented that it has policies and procedures in place to enable it to comply with its regulatory obligations E:\FR\FM\17DEN1.SGM Continued 17DEN1 76368 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES The Trust Shares According to the Registration Statement, each Share will represent a fractional undivided beneficial interest in the Trust’s net assets. The Trust’s assets will consist principally of gold bullion held on the Trust’s behalf in financial institutions for safekeeping. The Trust’s gold bullion will consist of (i) London Bars 15 (‘‘London Bars’’) as allocated gold in the Trust Allocated Account 16 and (ii) no more than 430 Fine Ounces 17 of unallocated gold held with the Custodian in the Trust Unallocated Account.18 The Trust may hold other types of physical gold 19 for in relation to appropriate information barriers and controls to safeguard client confidentiality, including, but not limited to, information barriers and controls between itself and its broker dealer affiliate so that its 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. 15 According to the Registration Statement, a London Bar is a gold bar meeting the London Good Delivery Standards and is also known as a London Good Delivery Bar. According to the Registration Statement, the London Good Delivery Standards are the specifications for weight, dimensions, fineness (or purity), identifying marks and appearance of gold bars set forth in ‘‘The Good Delivery Rules for Gold and Silver Bars’’ published by the London Bullion Market Association (‘‘LBMA’’). According to the Registration Statement, a London Bar varies in size between 350 Fine Ounces and 430 Fine Ounces. As used herein, London Bars are one form of ‘‘physical gold’’ held by the Trust. See note 19. 16 According to the Registration Statement, allocated gold is stored in a vault under a custody arrangement, and the individual bars are the property of the owner. London Bars will be held by the Trust as allocated gold in the Trust Allocated Account. 17 Ounce is defined in the Registration Statement to mean one troy ounce, equal to 31.103 grams (1.0971428 ounces avoirdupois). Fine Ounce is defined in the Registration Statement as an Ounce of 100% pure gold. 18 According to the Registration Statement, unallocated gold (sometimes referred to as ‘‘paper gold’’) is a claim on a non-specific pool of gold held by a financial institution. Gold is said to be held in unallocated form when the person in whose name such gold is held is entitled to receive delivery of gold in the amount standing to the credit of that person’s account, but that person has no ownership interest in any particular gold that the custodian for financial assets maintaining the account owns or holds. Unallocated gold facilitates transactions with Authorized Participants and to convert gold into different specifications to meet delivery requests from Delivery Applicants of physical gold. Upon receipt of a deposit of unallocated gold from an Authorized Participant, the Custodian will allocate such deposit to allocated gold consisting of London Bars held in the Trust Allocated Account. Because London Bars vary in size between 350–430 Fine Ounces, the Custodian may not have access to London Bars precisely matching the Fine Ounces of unallocated gold deposited by an Authorized Participant. However, the Custodian will transfer a deposit of unallocated gold into allocated gold in the Trust Allocated Account so that no more than 430 Fine Ounces remain in the Trust Unallocated Account. 19 According to the Registration Statement, the term ‘‘physical gold’’ means the physical gold bullion the Trust may hold, consisting of (i) London VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 short periods, but only, if at all, in connection with the delivery of other types of physical gold to Delivery Applicants (as defined below). Thus, under these limited circumstances, the Trust may also hold (i) gold bars (other than London Bars) or gold coins, in each case without numismatic value and having a minimum fineness (or purity) of 99.5% or (ii) American Gold Eagle gold coins, with a minimum fineness of 91.67% (‘‘American Gold Eagle Coins’’), solely for delivery to an investor who would like to take delivery of physical gold in exchange for its Shares (such investor, a ‘‘Delivery Applicant’’).20 The Trust will not normally hold cash or any other assets, but may hold a very limited amount of cash in connection with the delivery of physical gold to Delivery Applicants as described below. According to the Registration Statement, the Trust is not an investment company registered under the Investment Company Act of 1940, as amended 21 (‘‘1940 Act’’), and is not required to register with the Commission thereunder. The Trust will not hold or trade in commodity futures contracts regulated by the Commodity Exchange Act 22 (‘‘CEA’’), as administered by the Commodity Futures Trading Commission (‘‘CFTC’’). The Trust is not a commodity pool for purposes of the CEA and neither the Sponsor nor the Trustee is subject to regulation as a commodity pool operator Bars, (ii) gold bars (other than London Bars) or gold coins, in each case without numismatic value and having a minimum fineness (or purity) of 99.5% or (iii) American Gold Eagle Coins. Unallocated gold is not considered ‘‘physical gold.’’ 20 According to the Registration Statement, the Trust permits individual investors, known as Delivery Applicants, to deliver Shares to the Trust in an amount less than a Basket, in exchange for physical gold. Upon receipt of a Delivery Application, as defined below, from a Delivery Applicant and an appropriate number of Shares, the Trust will arrange for delivery of physical gold, in accordance with the procedures described herein, to the Delivery Applicant. In order to effect a transfer of physical gold (other than London Bars) to a Delivery Applicant, the Trust will instruct the Custodian to transfer an amount of unallocated gold from the Trust Unallocated Account equal to the Fine Ounce content of the requested physical gold to the unallocated account of a precious metals dealer. Such precious metals dealer will then acquire physical gold in such specifications as the Delivery Applicant may request and arrange for delivery of such physical gold to the Delivery Applicant. Delivery of London Bars to Delivery Applicants will be effected directly by the Custodian. Once physical gold has been released by the Custodian or the precious metals dealer to a delivery service, as described below, for delivery to a Delivery Applicant, the physical gold cannot be returned and is no longer the responsibility of the Trust, the Trustee, the Custodian the precious metals dealer or the Sponsor; until such release to a delivery service, the physical gold will remain the property of the Trust 21 15 U.S.C. 80a–1. 22 17 U.S.C. 1. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 or a commodity trading adviser in connection with the Shares.23 The Exchange represents that the Shares satisfy the requirements of NYSE Arca Equities Rule 8.201 and thereby qualify for listing on the Exchange.24 The Trust will not hold or employ derivatives. Trust Objective According to the Registration Statement, the objective of the Trust is to provide investors with an opportunity to invest in gold through Shares, and be able to take delivery of physical gold in exchange for their Shares. The Trust’s secondary objective is for the Shares to reflect the performance of the price of gold less the expenses of the Trust’s operations. The Trust is not actively managed. It does not engage in any activities designed to obtain a profit from, or to compensate investors for losses caused by, changes in the price of gold. According to the Registration Statement, the Shares will provide investors with the opportunity to access the gold market though a traditional brokerage account. Further, according to the Registration Statement, the shares are intended to constitute a costefficient mechanism for investors to make an investment in gold. Although the shares are not the exact equivalent of an investment in gold, they provide investors with an alternative that allows a level of participation in the gold market through the securities market. 23 The Trust, like certain other gold trusts, transacts with Authorized Participants through unallocated gold accounts. See, e.g., Securities Exchange Act Release No. 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR–NYSEArca–2009–40) (approving listing on the Exchange of the ETFS Gold Trust) and SPDR Gold Trust’s Annual Report on Form 10–K for the year ended September 30, 2013. Unallocated gold, as described above, together with allocated gold held in the Trust Allocated Account and, under very limited circumstances, any physical gold pending delivery to a Delivery Applicant, cumulatively represents the Trust’s ownership of gold; the difference between allocated and unallocated gold accounts is that particular London Bars are designated as held in the Trust Allocated Account whereas the Trust Unallocated Account does not entitle the Trust to a particular London Bar. The Trust may hold no more than 430 Fine Ounces of unallocated gold in the Trust Unallocated Account. The Trust Unallocated Account is not itself an instrument or form of derivative contract, or other commodity futures contract, but instead represents actual gold credited to the account of, and held by, the Trust. As such, the Trust Unallocated Account is not a ‘‘commodity’’ and merely represents the manner in which the Trust’s gold is custodied, similar to a deposit in a bank account being represented by a credit to a depositor’s account. 24 With respect to application of Rule 10A–3 (17 CFR 240.10A–3) under the Act, the Trust relies on the exemption contained in Rule 10A–3(c)(7). E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES Operation of the Trust The Trust will hold its London Bars in allocated form in the Trust Allocated Account with the Custodian. The allocated gold will be held in a segregated fashion in the name of the Trust, not commingled with other depositor funds or assets. The Trust will have full title to the individually identified London Bars held in the Trust Allocated Account with the Custodian holding it on the Trust’s behalf. Each investor will own a pro-rata share of the Trust, and as such will hold a pro-rata ownership interest in the Trust assets, corresponding to the number of Shares held by such investor. Trust holdings in the Trust Allocated Account will be identified in a weight list of bars published on the Trust’s Web site showing the unique bar number, gross weight, the assay or fineness of each bar and its fine weight. Credits or debits to the holding [sic] will be effected by physical movements of bars to or from the Trust’s physical holding [sic]. The Trust’s holdings will be subject to periodic audits. All physical gold and unallocated gold held by the Trust will be valued based upon the Benchmark Price 25 for any day certain or, if the Benchmark Price for that day is not available, the most recently announced Benchmark Price prior to the evaluation time. However, if the Sponsor determines that the Benchmark Price is inappropriate as a basis for evaluation, it shall identify an alternative basis to be employed by the Trustee. The Gold Market According to the Registration Statement, global gold trade consists of the over-the-counter (‘‘OTC’’) market, the futures and options markets and the London interbank market. The OTC market accounts for the largest percentage of global gold trading volume. It trades on a 24-hour per business day continuous basis and provides a relatively flexible market in terms of quotes, size, price, destinations for delivery and other factors. The standard trade size ranges between 5,000 and 10,000 ounces. OTC market makers include the nine market-making members of the LBMA, and the main centers are London, New York, and Zurich. Market participants include jewelry manufacturers, mining companies, central banks, investors and 25 Benchmark Price means, as of any day, (i) such day’s London PM Fix; or (ii) if such day’s London PM Fix is not available then such day’s London AM Fix; or (iii) if such day’s London AM Fix is not available then another publicly available price the Sponsor may determine fairly represents the commercial value of gold held by the Trust. VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 speculators. Liquidity in the OTC market varies during the day, with the most liquid time periods generally occurring in business day mornings, when trading hours in European time zones overlap with trading hours in the United States. The London Bullion Market is the largest wholesale OTC market for gold and is operated by the LBMA, which acts as the principal point of contact between the market and its regulators. Gold must meet the requirements defined by the LBMA. Futures and Options Exchanges The major exchanges trading gold futures and options include the COMEX (an affiliate of the Chicago Mercantile Exchange, Inc. (‘‘CME’’)), the Multi Commodity Exchange of India, the Tokyo Commodities Exchange and the Shanghai Futures Exchange. Gold futures and options are traded on these exchanges in standardized transaction sizes and delivery dates. Only a small portion of the gold futures market turnover is typically physically delivered. The COMEX is the largest gold futures and options exchange. In 2012, it represented approximately 79% of global futures and options trading volume. The Multi Commodity Exchange of India is the second largest futures exchange in terms of gold futures trading volume, accounting for around 7.0% of the world total. The Tokyo Commodities Exchange accounted for about 6.8% of total gold futures trading volume in 2012. The Shanghai Futures Exchange accounted for 6.6% of total gold futures trading volume in 2012.26 Gold spot trades on over-the-counter markets throughout the world. Creation and Redemption of Shares According to the Registration Statement, the Trust will issue and redeem Baskets equal to a block of 50,000 Shares,27 and only to Authorized 26 Source: The CPM Gold Yearbook 2013, Page 198–199. For additional information regarding the gold bullion market, gold futures exchanges, and regulation of the global gold market, see Securities Exchange Act Release No. 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR–NYSEArca–2009–40) (order approving Exchange listing and trading of the ETFS Gold Trust). Additional information regarding the market for American Gold Eagle Coins is contained in the APMEX Release (see, note 3 [sic], supra.). 27 The Sponsor will also receive a fee that will accrue daily based on the prior business day’s net asset value and will be payable in Shares corresponding to the net asset value of the Shares at the time of payment on a monthly basis in arrears. According to the Registration Statement, paying the Sponsor’s fee in Shares of the Trust, rather than cash, eliminates the need for the Trust to sell gold to raise cash to pay the Sponsor’s fee. PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 76369 Participants.28 Orders to create and redeem Baskets may be placed only by Authorized Participants. The creation and redemption of Baskets will only be made in exchange for the delivery to the Trust or the distribution by the Trust of the amount of unallocated gold represented by the Baskets being created or redeemed, the amount of which will be based on the combined Fine Ounces represented by the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received. Creation Procedures—Authorized Participants Only Authorized Participants will deliver unallocated gold to the Trust in exchange for Shares. Such deliveries will take place through unallocated accounts and the Trust will not accept the delivery of physical gold. According to the Registration Statement, unallocated gold is delivered to the Trust through credits and debits between Authorized Participants’ unallocated accounts and the Trust Unallocated Account. When an Authorized Participant creates a Basket, unallocated gold will be transferred from an Authorized Participant to the Custodian. The transfer will appear as a debit to the Authorized Participant’s unallocated account and a credit to the Trust Unallocated Account. On the same business day, the Custodian will convert the deposit of unallocated gold to allocated gold, to be held in the Trust Allocated Account, and store such allocated gold for safekeeping. The Custodian must convert unallocated gold deposits to allocated gold in the Trust Allocated Account such that no more than 430 Fine Ounces of unallocated gold remain in the Trust Unallocated Account at the end of each business day. 28 An Authorized Participant must: (1) Be a registered broker-dealer or other securities market participant, such as a bank or other financial institution which, but for an exclusion from registration, would be required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) have an agreement with the Custodian establishing an Unallocated Account in London or have an existing Unallocated Account with another LBMA-member custodian identified by the Authorized Participant to the Custodian and the Trustee. Gold held in Authorized Participants’ Unallocated Accounts with the Custodian is typically not segregated from the Custodian’s assets. As a result, an Authorized Participant establishing an Unallocated Account with the Custodian will have no proprietary interest in any specific bars of gold held by the Custodian. Credits to such an Unallocated Account are therefore at risk of the Custodian’s or other bullion clearing bank’s insolvency. E:\FR\FM\17DEN1.SGM 17DEN1 76370 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices On any business day,29 an Authorized Participant may place an order with the Trustee to create one or more Baskets. Purchase orders must be placed by 3:59:59 p.m. Eastern time. The day on which the Trustee receives a valid purchase order is the purchase order date. Determination of Required Deposits The amount of the required deposit for a Basket will be determined by dividing the number of Fine Ounces of gold held by the Trust by the number of Baskets outstanding, as adjusted for the number of Fine Ounces of gold constituting estimated accrued but unpaid fees and expenses of the Trust. The number of Baskets outstanding is determined by dividing the number of Shares outstanding by 50,000 (or other number of Shares in a Basket for such business day). Fractions of a Fine Ounce of gold smaller than 0.001 of a Fine Ounce which are included in the unallocated gold deposit amount will be disregarded in the foregoing calculation. Delivery of Required Deposits An Authorized Participant who places a purchase order is responsible for crediting its unallocated gold account, if held at the Custodian, with the required deposit amount and, if the Authorized Participant does not maintain its unallocated gold account with the Custodian, causing the required deposit to be transferred to the Custodian, by 11:00 a.m. (London time) on the third business day following the purchase order date. Upon receipt of the deposit amount, the Custodian, after receiving appropriate instructions from the Authorized Participant and the Trustee, will transfer by 11:00 a.m. (London time) on the third business day following the purchase order date the deposit amount to the Trust Unallocated Account, and on the same business day, convert the deposit amount from the Trust Unallocated Account to the Trust Allocated Account such that no more than 430 Fine Ounces of unallocated gold remains [sic] in the Trust Unallocated Account. Upon wreier-aviles on DSK5TPTVN1PROD with NOTICES 29 For purposes of processing both purchase and redemption orders, a ‘‘business day’’ means any day other than a day: (1) When the NYSE Arca is closed for regular trading; or (2), if the order or other transaction requires the receipt or delivery, or the confirmation of receipt or delivery, of gold in the United Kingdom or in some other jurisdiction on a particular day, (A) when banks are authorized to close in the United Kingdom or in such other jurisdiction or when the London gold market is closed or (B) when banks in the United Kingdom or in such other jurisdiction are, or the London gold market is, not open for a full business day and the transaction requires the execution or completion of procedures which cannot be executed or completed by the close of the business day. VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 confirmation of the conversion of the deposit amount to the Trust Allocated Account, the Trustee will direct DTC to credit the number of Baskets ordered to the Authorized Participant’s DTC account. No Shares will be issued unless and until the Custodian has informed the Trustee that it has allocated to the Trust Allocated Account the corresponding allocated gold amount. If the Custodian notifies the Trustee and the Sponsor that it is unable to convert the deposit from the Trust Unallocated Account to the Trust Allocated Account in connection with a particular purchase order or generally, the Trustee will reject the particular purchase order as well as any other subsequent purchase orders on the same day. Redemption Procedures—Authorized Participants The procedures by which an Authorized Participant can redeem one or more Baskets will mirror the procedures for the creation of Baskets. On any business day, an Authorized Participant may place an order with the Trustee to redeem one or more Baskets. Redemption orders must be placed no later than 3:59:59 p.m. on each business day the NYSE Arca is open for regular trading. A redemption order so received will be effective on the date it is received in satisfactory form by the Trustee. By placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTC’s book-entry system to the Trust no later than the third business day following the effective date of the redemption order. Prior to the delivery of the redemption distribution for a redemption order, the Authorized Participant must also have wired to the Trustee the non-refundable transaction fee due for the redemption order. The redemption distribution from the Trust will be effected by (i) conversion of allocated gold in the Trust Allocated Account to unallocated gold in the Trust Unallocated Account and (ii) a debit from the Trust Unallocated Account and 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. Fractions of a Fine Ounce of gold included in the redemption distribution smaller than 0.001 of a Fine Ounce are disregarded for such calculation. Redemption distributions will be subject to the deduction of any applicable tax, fee or other governmental charge that may be due as well as any charges or fees in PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 connection with the transfer of gold and the issuance and delivery of shares, and any expense associated with the delivery of gold other than by credit to an Authorized Participant’s unallocated account with the Custodian. The redemption distribution due from the Trust will be delivered to the Authorized Participant on the third business day following the redemption order date if, by 9:00 a.m. Eastern time on such third business day, the Trustee’s DTC account has been credited with the Baskets to be redeemed. Suspension or Rejection of Redemption Orders The Trustee may, in its discretion, and will when directed by the Sponsor, suspend the right of redemption, or postpone the redemption settlement date or reject a particular redemption order, (1) for any period during which the NYSE Arca is closed other than customary weekend or holiday closings, or trading on the NYSE Arca is suspended or restricted or (2) for any period during which an emergency exists as a result of which delivery, disposal or evaluation of gold is not reasonably practicable.30 The Sponsor has represented that it will promptly notify the Exchange of any such suspension of redemption orders. Taking Delivery of Physical Gold— Delivery Applicants A Delivery Applicant wishing to deliver Shares of the Trust in exchange for physical gold must submit to the Sponsor a Delivery Application and payment for (1) the applicable processing fees, and (2) the applicable delivery fees to cover the cost of preparing and transporting physical gold from the Custodian or the precious metals dealer 31 from which they were obtained to the location specified by the Delivery Applicant in the Delivery Application. The Sponsor will screen and pre-approve the Delivery Application.32 The Share Submission Day 33 will typically be the third 30 The Exchange may suspend trading in the Shares in the event the Sponsor suspends the right of redemptions. 31 The Sponsor will not be affiliated with any precious metals dealer. 32 Prior to pre-approving a Delivery Application, the Sponsor will coordinate with a precious metals dealer to evaluate if the physical gold (other than London Bars) is available in the type and quantity of physical gold requested by the Delivery Applicant, and that the delivery method and location can be agreed upon with the Delivery Applicant. 33 According to the Registration Statement, the Share Submission Day is defined as the day on which a Delivery Applicant submits shares to the Trustee. E:\FR\FM\17DEN1.SGM 17DEN1 76371 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices business day following approval of the Delivery Application. The number of Shares to be delivered must (i) correspond to at least one Fine Ounce of physical gold and (ii) have a minimum dollar value in an amount that is specified by the Sponsor from time to time on the Trust’s Web site. Taking delivery of physical gold is subject to guidelines intended to minimize the amount of cash that will be distributed with physical gold. The Delivery Application is not binding until Shares are delivered to the Trustee.34 To minimize the cash portion of delivery by Delivery Applicants of physical gold for their Shares, the Sponsor will only approve Delivery Applications where the number of Shares to be submitted leads to a cash portion that is as low as practical in the assessment of the Sponsor. After the liquidation of unallocated gold to satisfy the cash portion of delivery, but before the actual delivery to the Delivery Applicant, the Trust will hold such cash temporarily. Upon pre-approval of the Delivery Application by the Sponsor, a Delivery Applicant will be required to instruct its broker-dealer to submit the Delivery Application and transfer Shares to the Trustee; such submission and transfer by the broker-dealer will be a binding and irrevocable request to take delivery of physical gold in exchange for Shares based on instructions in the Delivery Application (‘‘Share Submission’’). Once the Trustee has received a Delivery Applicant’s Share Submission, if the Delivery Applicant seeks physical gold other than London Bars, it will instruct the Custodian to (i) convert allocated gold not exceeding the Fine Ounces represented by the Shares surrendered as determined by the Sponsor from the Trust Allocated Account into unallocated gold in the Trust Unallocated Account, (ii) debit such amount of unallocated gold from the Trust Unallocated Account and credit a corresponding amount to the unallocated gold account of a precious metals dealer and (iii) instruct such precious metals dealer to acquire physical gold in the specifications requested by the Delivery Applicant and deliver such physical gold to the Delivery Applicant. Deliveries of London Bars will be effected by the Custodian. Processing Fees The exchange of Shares for the delivery of physical gold is subject to the following Processing Fees. The Processing Fees must be submitted with the Delivery Application. The Processing Fees include fees to compensate the Sponsor (‘‘Exchange Fee’’), and a delivery fee (‘‘Delivery Fee’’) associated with the transport of physical gold to Delivery Applicants.35 The Delivery Fee is only applicable if delivery is made outside of the lower 48 States. The Exchange Fee will compensate the Sponsor for services provided as part of the delivery process, including the cost to the Sponsor and the Trustee to process the Share Submission; and the cost associated with OTC transactions to convert gold held by the Trust into physical gold of different specifications, if applicable. The Exchange Fee is a percentage of the value of the gold represented by the Shares submitted on the Share Submission day based on the most recent quarter’s end spot price of gold, as set forth in the Registration Statement, subject to minimum fees as follows: Type of physical gold Percentage 1 ounce Coins: American Gold Eagle ........................................................................................................... 1 ounce Coins: other qualifying ..................................................................................................................... 1 ounce Bars ................................................................................................................................................. 10 ounce Bars ............................................................................................................................................... London Bars .................................................................................................................................................. wreier-aviles on DSK5TPTVN1PROD with NOTICES The Sponsor may waive or reduce applicable Processing Fees from time to time. Any waiver or reduction in applicable Processing Fees will be published on the Trust’s Web site and available to any eligible Delivery Applicant. Although waivers or reductions in Processing Fees are not currently available, in the future, waivers or reductions may apply during certain limited time periods, for Delivery Applicants seeking particular types of physical gold (i.e., coins or bars), or for Delivery Applicants completing multiple Delivery Applications over proscribed time periods. Delivery Method 34 Delivery Applicants may fail to submit Shares, or fail to submit Shares in the amount required on the Share Submission Day; accordingly, the Delivery Application is not binding until Shares are delivered to the Trustee. As noted above, the delivery of Shares in exchange for physical gold will take place at the NAV on the Share Submission Day such that any estimates provided in advance of the number of Shares required to be submitted must be non-binding since an additional Share or Shares may be required to be submitted if the NAV differs from the time the calculator is used so that neither the Delivery Applicant nor remaining shareholders are disadvantaged if the NAV changes between the time of the estimate and delivery. 35 The Exchange Fee will vary depending on the type of physical gold a Delivery Applicant would like to take delivery of and reflect costs arising VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 The Trustee will instruct the Custodian or the Sponsor shall instruct the precious metals dealer, as applicable, to deliver physical gold to a Delivery Applicant based on instructions in the Delivery Application. Once physical gold has been released by the Custodian or the precious metals dealer to a delivery service, as described below, for delivery to a Delivery Applicant, the physical gold cannot be returned and is no longer the responsibility of the Trust, the Trustee, the Custodian, the precious metals dealer or the Sponsor. The Custodian will ship London Bars and the precious metals dealer will ship PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 Minimum charge 7 6 3.5 2.5 2.5 $7,000 6,000 3,500 2,500 None all other forms of physical gold to a Delivery Applicant fully insured using accepted business practices for precious metals delivery that may include, amongst others, use of a conventional shipping carrier or an armored transportation service. Valuation of Gold and Computation of Net Asset Value On each business day that the NYSE Arca is open for regular trading, as promptly as practicable after 4:00 p.m., Eastern time, the Trustee will value the physical gold and unallocated gold held by the Trust and will determine the NAV of the Trust, as described below. The NAV of the Trust will be the aggregate value of physical gold and from: reviewing Delivery Applications, coordinating with Delivery Applicants and the Trust’s other service providers, the conversion of London Bars into physical gold to be delivered, and the related expenses of the Trustee and the Sponsor. The Exchange Fee for London Bars will be set at 2.5%. A delivery fee (as described in the Registration Statement) will cover the cost of the physical transfer to the Delivery Applicant. E:\FR\FM\17DEN1.SGM 17DEN1 wreier-aviles on DSK5TPTVN1PROD with NOTICES 76372 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices unallocated gold of the Trust (other than amounts credited to the Trust’s reserve account, if any) and cash, if any, less liabilities of the Trust, which include estimated accrued but unpaid fees and expenses. All physical gold and unallocated gold will be valued based on its Fine Ounce content, calculated by multiplying the weight of gold by its purity; the same methodology is applied independent of the type of physical gold and unallocated gold held by the Trust. Similarly, the value of up to 430 Fine Ounces of unallocated gold the Trust may hold is calculated by multiplying the number of Fine Ounces with the price of gold determined by the Trustee, as described below. In determining the NAV of the Trust, the Trustee will value the physical gold and unallocated gold held by the Trust on the basis of the price of a Fine Ounce of gold as set by the afternoon session of the twice daily fix of the price of a Fine Ounce of gold which starts at 3:00 p.m. London, England time and is performed by the five members of the London gold fix. If no London PM Fix is made on a particular evaluation day, the gold price from that day’s London AM Fix will be used in the determination of the NAV of the Trust or, if such day’s London AM Fix is not available, then another publicly available price which the Sponsor may determine fairly represents the commercial value of gold held by the Trust will be used. According to the Registration Statement, physical gold in the Trust will be valued at the price of gold independent of location and type of physical gold. The price of gold commonly quoted refers to the price of a London Bar in London. Any physical gold that is not a London Bar located in London may obtain a bid price when offered for sale that deviates from the price of gold. Nonetheless, the Trustee will value all physical gold at the price of gold. Conversely, in the unlikely event that such a conversion yields a profit, the Sponsor, not the Trust, will keep such profit. As a result, the value of physical gold in the Trust will be limited to the price of gold multiplied by the Fine Ounce content of the physical gold. Similarly, when investors exchange their Shares for physical gold other than London Bars, the Shares also will be valued at the price of gold for purposes of calculating their share in the Trust. The Sponsor may recover this conversion cost as part of the Exchange Fee. Once the value of gold has been determined, the Trustee will subtract all estimated accrued but unpaid fees (other than the fees accruing for such VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 day on which the valuation takes place computed by reference to the value of the Trust or its assets), expenses and other liabilities of the Trust from the total value of physical gold and unallocated gold and any other assets of the Trust, including cash, if any. The resulting figure will be the NAV of the Trust. The Trustee will also determine the NAV per Share by dividing NAV of the Trust by the number of the Shares outstanding as of the close of trading on the NYSE Arca (which will include the net number of any Shares created or redeemed on such evaluation day). Prior to commencement of trading on the Exchange, the Exchange will obtain a representation from the Sponsor that the NAV will be calculated daily and will be made available to all market participants at the same time. Termination of the Trust The Trustee will notify investors at least 30 days before the date for termination of the Trust Agreement and the Trust if any of the following occurs: • The Trustee is notified that the Shares are delisted from the NYSE Arca and are not approved for listing on another national securities exchange within five business days of their delisting; • Investors acting in respect of at least 75% of the outstanding Shares notify the Trustee that they elect to terminate the Trust; • 60 days have elapsed since the Trustee notified the Sponsor of the Trustee’s election to resign or since the Sponsor removed the Trustee, and a successor trustee has not been appointed and accepted its appointment; • Any sole Custodian then acting resigns or is removed and no successor custodian has been employed within 60 days of such resignation or removal; • The Commission determines that the Trust is an investment company under the 1940 Act, and the Trustee has actual knowledge of such Commission determination; • The CFTC determines that the Trust is a commodity pool under the Commodity Exchange Act, and the Trustee has actual knowledge of that determination; • The aggregate market capitalization of the Trust, based on the closing price for the Shares, is less than $350 million (as adjusted for inflation by reference to the U.S. Consumer Price Index) at any time more than 18 months after the Trust’s formation, and the Trustee receives, within six months after the last trading date on which such capitalization (as so based) was less than $350 million, notice from the PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 Sponsor of its decision to terminate the Trust; • The Trust fails to qualify for treatment, or ceases to be treated, as a ‘‘grantor trust’’ for federal tax purposes, and the Trustee receives notice from the Sponsor that the Sponsor determines that, because of that tax treatment or change in tax treatment, termination of the Trust is advisable; or • 60 days have elapsed since DTC or another depository has ceased to act as depository with respect to the Shares, and the Sponsor has not identified another depository that is willing to act in such capacity. Availability of Information The Web site for the Trust (www.merkgold.com), which the Trust will launch upon the closing of the initial public offering, will contain the following information, on a per Share 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 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 Web site for the Trust will also provide the Trust’s prospectus, as well as the two most recent reports to stockholders. The Trust Web site also will provide the last sale price of the Shares as traded in the US market, as well as a breakdown of the holdings of the Trust by the form in which gold is held. The value of the Trust’s holdings will be reported on the Trust’s Web site daily. Quotation and last-sale information regarding the Shares will be disseminated through the facilities of the Consolidated Tape Association (‘‘CTA’’). Investors may obtain gold pricing information based on the spot price for a Fine Ounce of gold from various financial information service providers. Current spot prices also are generally available with bid/ask spreads from gold bullion dealers. In addition, the Trust’s Web site will provide pricing information for gold spot prices and the Shares. Market prices for the Shares will be available from a variety of sources including brokerage firms, information Web sites and other information service providers. The NAV of the Trust will be published by the Sponsor on each day that the NYSE Arca is open for regular trading and will be posted on the Trust’s Web site. E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES Each day the NYSE Arca is open for trading, the Sponsor will publish on the Trust’s internet Web site a calculator to estimate the smallest whole number of Shares greater than the net assets of the Trust corresponding to the Fine Ounces of physical gold requested (‘‘Share Submission Quantity’’) and the ‘‘Cash Proceeds’’ (i.e., the difference between the value of a Delivery Applicant’s Shares and the value of physical gold to be delivered to the Delivery Applicant) for an exchange of one American Gold Eagle Coin, a London Bar or a bar of physical gold of another specification. The actual Cash Proceeds will be the net proceeds received from the sale of the excess Fine Ounces included in the Share Submission Quantity. The Share Submission Quantity may be rejected if the Trust incurs extraordinary expenses between the submission of the Delivery Application and the Share Submission Day. 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. In addition, there is a considerable amount of gold price and gold market information available on public Web sites and through professional and subscription services. The IIV relating to the Shares will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session.36 Investors may obtain on a 24-hour basis gold pricing information based on the spot price for a Fine Ounce of gold from various financial information service providers, such as Reuters and Bloomberg. Reuters and Bloomberg provide at no charge on their Web sites delayed information regarding the spot price of gold 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. An organization named EBS provides an electronic trading platform to institutions such as 36 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available IIVs taken from CTA or other data feeds. The Sponsor anticipates that the IIV will be calculated by a market vendor who provides IIVs for several other products. Currently, the gold price expected to be used by the market vendor for calculating the IIV is the mid point of the bid and ask price of the 24-hour Reuters composite spot rate in gold. VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 bullion banks and dealers for the trading of spot gold, as well as a feed of live streaming prices to Reuters and Moneyline Telerate subscribers. Complete real-time data for gold futures and options prices traded on the COMEX are available by subscription from Reuters and Bloomberg. The NYMEX also provides delayed futures and options information on current and past trading sessions and market news free of charge on its Web site. There are a variety of other public Web sites providing information on gold, ranging from those specializing in precious metals to sites maintained by major newspapers, such as The Wall Street Journal. In addition, the London AM Fix and London PM Fix are publicly available at no charge at www.thebulliondesk.com. The Trust’s daily NAV will be posted on the Trust’s Web site as soon as practicable. The Exchange will provide on its Web site (www.nyx.com) a link to the Trust’s Web site. In addition, the Exchange will make available over the Consolidated Tape quotation information, trading volume, closing prices and NAV for the Shares from the previous day. Criteria for Initial and Continued Listing The Trust and the Shares will be subject to the criteria in NYSE Arca Equities Rule 8.201(e) for initial and continued listing of the Shares. The Exchange will require that a minimum of 100,000 Shares will be outstanding at the start of trading. The minimum number of Shares required to be outstanding is comparable to requirements that have been applied to previously listed shares of the Sprott Physical Gold Trust.37 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 Fund 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 Equities Rule 7.34(a). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception 37 See PO 00000 note 7 [sic], supra. Frm 00105 Fmt 4703 of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. 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.38 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. Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products (including Commodity-Based Trust Shares) to monitor trading in the Shares. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. NYSE Arca Equities Rule 8.201 sets forth certain restrictions on ETP Holders acting as registered Market Makers in the Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule 8.201(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, related futures or options on futures, or any other related derivatives. Commentary .04 of NYSE Arca Equities Rule 6.3 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 38 See Sfmt 4703 76373 E:\FR\FM\17DEN1.SGM NYSE Arca Equities Rule 7.12. 17DEN1 76374 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices wreier-aviles on DSK5TPTVN1PROD with NOTICES 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. A subsidiary or affiliate of an ETP Holder that does business only in commodities or futures contracts would not be subject to Exchange jurisdiction, but 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. The Exchange’s current trading surveillance focuses on detecting securities trading outside their normal patterns. 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. Also, pursuant to NYSE Arca Equities Rule 8.201(g), the Exchange is able to obtain information regarding trading in the Shares and the underlying gold, gold futures contracts, options on gold futures, or any other gold derivative, 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 may obtain trading information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.39 The Exchange may obtain market surveillance information with respect to transactions occurring on the COMEX pursuant to the ISG membership of CME and NYMEX. The Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (1) The 39 A list of ISG members is available at www.isgportal.org. VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 procedures for purchases and redemptions of Shares; (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; (4) the possibility that trading spreads and the resulting premium or discount on the Shares may widen as a result of reduced liquidity of gold trading during the Core and Late Trading Sessions after the close of the major world gold markets; and (5) trading information. For example, the Information Bulletin will advise ETP Holders, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Trust. The Exchange notes that investors purchasing Shares directly from the Trust will receive a prospectus. ETP Holders purchasing Shares from the Trust for resale to investors will deliver a prospectus to such investors. In addition, the Information Bulletin will reference that the Trust is subject to various fees and expenses described in the Registration Statement. The Information Bulletin will also reference the fact that there is no regulated source of last sale information regarding physical gold, that the Commission has no jurisdiction over the trading of gold as a physical commodity, and that the CFTC has regulatory jurisdiction over the trading of gold futures contracts and options on gold futures contracts. The Information Bulletin will also discuss any relief, if granted, by the Commission or the staff from any rules under the Act. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 40 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.201. The Exchange has in place 40 15 PO 00000 U.S.C. 78f(b)(5). Frm 00106 Fmt 4703 Sfmt 4703 surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Exchange may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. The Exchange may obtain market surveillance information with respect to transactions occurring on the COMEX pursuant to the ISG membership of CME and NYMEX. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that there is a considerable amount of gold price and gold market information available on public Web sites and through professional and subscription services. Investors may obtain on a 24-hour basis gold pricing information based on the spot price for a Fine Ounce of gold from various financial information service providers. Current spot prices also are generally available with bid/ask spreads from gold bullion dealers. In addition, the Trust’s Web site will provide pricing information for gold spot prices and the Shares. Market prices for the Shares will be available from a variety of sources including brokerage firms, information Web sites and other information service providers. The NAV of the Trust will be published by the Sponsor on each day that the NYSE Arca is open for regular trading and will be posted on the Trust’s Web site. The IIV relating to the Shares will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. Complete real-time data for gold futures and options prices traded on the COMEX are available by subscription from Reuters and Bloomberg. In addition, the London AM Fix and London PM Fix are publicly available at no charge at www.thebulliondesk.com. The Trust’s Web site will also provide the Trust’s prospectus, as well as the two most recent reports to stockholders, when available. The Exchange will provide on its Web site a link to the Trust’s Web site. In addition, the Exchange will make available over the Consolidated Tape quotation information, trading volume, closing prices and NAV for the Shares from the previous day. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of exchange-traded product that will enhance competition E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / Notices among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding gold pricing and gold futures information. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change would permit listing and trading on the Exchange of an additional and unique issue of Commodity-Based Trust Shares based on gold, which will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action wreier-aviles on DSK5TPTVN1PROD with NOTICES Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: VerDate Mar<15>2010 14:45 Dec 16, 2013 Jkt 232001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2013–137 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2013–137. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2013–137 and should be submitted on or before January 7, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.41 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–29893 Filed 12–16–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71033; File No. SR–ISE– 2013–68] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the Short Term Option Series Program December 11, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that, on December 6, 2013, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (‘‘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 Exchange proposes to amend Supplementary Material .02 to Rule 504 and Supplementary Material .01 to Rule 2009 to allow the Exchange to list five Short Term Option Series at one time, and to specify that new series of Short Term Option Series may be listed up to, and including on, the expiration date. The text of the proposed rule change is available on the Exchange’s Internet Web site at http://www.ise.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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 self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. 1 15 41 17 PO 00000 CFR 200.30–3(a)(12). Frm 00107 Fmt 4703 Sfmt 4703 76375 2 17 E:\FR\FM\17DEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 17DEN1

Agencies

[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76367-76375]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29893]



[[Page 76367]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71038; File No. SR-NYSEArca-2013-137]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To 
List and Trade Shares of the Merk Gold Trust Pursuant to NYSE Arca 
Equities Rule 8.201

December 11, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 27, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change, which filing was amended and 
replaced in part by Amendment No. 1 thereto on December 11, 2013,\4\ as 
described in Items I, II, and III below, which Items have been prepared 
by the self-regulatory organization. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ According to the Exchange, Amendment No. 1 seeks to clarify 
certain statements in the filing with respect to: (i) The 
Custodian's information barriers between itself and its broker 
dealer affiliate; (ii) the use of unallocated gold accounts by other 
gold trusts; and (iii) the Trustee's role in valuing the Trust's 
physical gold holdings.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the Merk Gold 
Trust (the ``Trust'') pursuant to NYSE Arca Equities Rule 8.201. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
Trust under NYSE Arca Equities Rule 8.201.\5\ Under NYSE Arca Equities 
Rule 8.201, the Exchange may propose to list and/or trade pursuant to 
unlisted trading privileges (``UTP'') ``Commodity-Based Trust Shares.'' 
\6\ The Commission has previously approved listing on the Exchange 
under NYSE Arca Equities Rule 8.201 shares of the APMEX Physical-1 oz. 
Gold Redeemable Trust \7\, as well as the ETFS Gold Trust \8\ and the 
Sprott Physical Gold Trust.\9\ In addition, the Commission has approved 
listing on the Exchange of streetTRACKS Gold Trust and iShares COMEX 
Gold Trust.\10\ Prior to their listing on the Exchange, the Commission 
approved listing of the streetTRACKS Gold Trust on the New York Stock 
Exchange (``NYSE'') and listing of iShares COMEX Gold Trust on the 
American Stock Exchange LLC.\11\
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    \5\ See the registration statement for the Trust on Form S-1 
under the Securities Act of 1933 (15 U.S.C. 77a), filed with the 
Commission on April 8, 2013 (No. 333-180868) (the ``Registration 
Statement''). The descriptions of the Trust, the Shares and the gold 
market contained herein are based, in part, on the Registration 
Statement.
    \6\ 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.
    \7\ Securities Exchange Act Release No 66930 (May 7, 2012), 77 
FR 27817 (May 11, 2012) (SR-NYSEArca-2012-18) (``APMEX Release'').
    \8\ Securities Exchange Act Release No. 59895 (May 8, 2009), 74 
FR 22993 (May 15, 2009) (SR-NYSEArca-2009-40).
    \9\ Securities Exchange Act Release No. 61496 (February 4, 
2010), 75 FR 6758 (February 10, 2010) (SR-NYSEArca-2009-113).
    \10\ See Securities Exchange Act Release Nos. 56224 (August 8, 
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76) 
(approving listing on the Exchange of the streetTRACKS Gold Trust); 
56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) (SR-NYSEArca-
2007-43) (order approving listing on the Exchange of iShares COMEX 
Gold Trust).
    \11\ See Securities Exchange Act Release Nos. 50603 (October 28, 
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order 
approving listing of streetTRACKS Gold Trust on NYSE); 51058 
(January 19, 2005), 70 FR 3749 (January 26, 2005) (SR-Amex-2004-38) 
(order approving listing of iShares COMEX Gold Trust on the American 
Stock Exchange LLC).
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    The sponsor of the Trust is Merk Investments LLC (``Sponsor''), a 
Delaware limited liability company.\12\ The trustee for the Trust is 
The Bank of New York Mellon (``Trustee'').\13\ The custodian is 
JPMorgan Chase Bank, N.A. (the ``Custodian'').\14\
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    \12\ The Sponsor generally oversees the performance of the 
Trustee and the Trust's principal service providers, but does not 
exercise day-to-day oversight of the Trustee or such service 
providers.
    The Sponsor has agreed to assume the following administrative 
and marketing expenses incurred by the Trust: the Trustee's monthly 
fee and out-of-pocket expenses; the fee of the Custodian (as 
described below); the marketing support fees and expenses; expenses 
reimbursable under the custody agreement; the precious metals 
dealer's fees and expenses reimbursable under its agreement with the 
Sponsor; Exchange listing fees; Commission registration fees; 
printing and mailing costs; maintenance expenses for the Trust's Web 
site; audit fees and up to $100,000 per annum in legal expenses. The 
Sponsor also will pay the costs of the Trust's organization and the 
initial sale of the Shares, including applicable Commission 
registration fees. The Sponsor will undertake other activities for 
the Trust, as described in the Registration Statement.
    \13\ The Trustee will be responsible for the day-to-day 
administration of the Trust. The Trustee's responsibilities will 
include: (1) Valuing the Trust's physical gold and unallocated gold 
and calculating the net asset value (``NAV'') per Share of the 
Trust, (2) supplying inventory information to the Sponsor for the 
Trust's Web site; (3) receiving and processing orders from 
``Authorized Participants'' (as described below) for the creation 
and redemption of ``Baskets'' (as described below); (4) coordinating 
the processing of orders from Authorized Participants with the 
Custodian and The Depository Trust Company (``DTC''), including 
coordinating with the Custodian the receipt of unallocated gold 
transferred to the Trust in connection with each issuance of 
Baskets; (5) cooperating with the Sponsor, the precious metals 
dealer and the Custodian in connection with the delivery of 
``physical gold'' (as defined below) to ``Delivery Applicants'', as 
described below, in exchange for their Shares; (6) issuing and 
allocating Shares to the Sponsor in lieu of paying the fee to 
compensate the Sponsor (``Sponsor Fee'') in cash; (7) issuing and 
allocating Shares to the Sponsor to reimburse cash payments owed by 
the Trust, but undertaken by the Sponsor; (8) selling gold pursuant 
to the Sponsor's direction or otherwise as needed to pay any 
extraordinary Trust expenses that are not assumed by the Sponsor; 
(9) holding the Trust's cash and other financial assets, if any; 
(10) when appropriate, making distributions of cash or other 
property to investors; and (11) receiving and reviewing reports on 
the custody of and transactions in physical and unallocated gold 
from the Custodian and taking such other actions in connection with 
the custody of physical or unallocated gold as the Sponsor 
instructs.
    \14\ The Custodian will be responsible for the safekeeping of 
the Trust's allocated gold (as described below) and supplying 
inventory information to the Trustee and the Sponsor. The Custodian 
also will be responsible for facilitating the transfer of allocated 
gold and unallocated gold in and out of the Trust and facilitating 
the shipment of London Bars to Delivery Applicants. The Custodian 
will deposit into the Trust's unallocated gold account 
(``Unallocated Account'') unallocated gold (as described below) 
received from an Authorized Participant in exchange for Baskets. The 
Custodian will promptly convert the deposit to allocated gold to be 
held in London Bars, as described below, unless the Sponsor 
instructs the Custodian to convert a portion of the unallocated gold 
received into physical gold for delivery to a Delivery Applicant. 
The Custodian has represented that it has policies and procedures in 
place to enable it to comply with its regulatory obligations in 
relation to appropriate information barriers and controls to 
safeguard client confidentiality, including, but not limited to, 
information barriers and controls between itself and its broker 
dealer affiliate so that its 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.

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[[Page 76368]]

The Trust Shares
    According to the Registration Statement, each Share will represent 
a fractional undivided beneficial interest in the Trust's net assets. 
The Trust's assets will consist principally of gold bullion held on the 
Trust's behalf in financial institutions for safekeeping. The Trust's 
gold bullion will consist of (i) London Bars \15\ (``London Bars'') as 
allocated gold in the Trust Allocated Account \16\ and (ii) no more 
than 430 Fine Ounces \17\ of unallocated gold held with the Custodian 
in the Trust Unallocated Account.\18\ The Trust may hold other types of 
physical gold \19\ for short periods, but only, if at all, in 
connection with the delivery of other types of physical gold to 
Delivery Applicants (as defined below). Thus, under these limited 
circumstances, the Trust may also hold (i) gold bars (other than London 
Bars) or gold coins, in each case without numismatic value and having a 
minimum fineness (or purity) of 99.5% or (ii) American Gold Eagle gold 
coins, with a minimum fineness of 91.67% (``American Gold Eagle 
Coins''), solely for delivery to an investor who would like to take 
delivery of physical gold in exchange for its Shares (such investor, a 
``Delivery Applicant'').\20\ The Trust will not normally hold cash or 
any other assets, but may hold a very limited amount of cash in 
connection with the delivery of physical gold to Delivery Applicants as 
described below.
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    \15\ According to the Registration Statement, a London Bar is a 
gold bar meeting the London Good Delivery Standards and is also 
known as a London Good Delivery Bar. According to the Registration 
Statement, the London Good Delivery Standards are the specifications 
for weight, dimensions, fineness (or purity), identifying marks and 
appearance of gold bars set forth in ``The Good Delivery Rules for 
Gold and Silver Bars'' published by the London Bullion Market 
Association (``LBMA''). According to the Registration Statement, a 
London Bar varies in size between 350 Fine Ounces and 430 Fine 
Ounces. As used herein, London Bars are one form of ``physical 
gold'' held by the Trust. See note 19.
    \16\ According to the Registration Statement, allocated gold is 
stored in a vault under a custody arrangement, and the individual 
bars are the property of the owner. London Bars will be held by the 
Trust as allocated gold in the Trust Allocated Account.
    \17\ Ounce is defined in the Registration Statement to mean one 
troy ounce, equal to 31.103 grams (1.0971428 ounces avoirdupois). 
Fine Ounce is defined in the Registration Statement as an Ounce of 
100% pure gold.
    \18\ According to the Registration Statement, unallocated gold 
(sometimes referred to as ``paper gold'') is a claim on a non-
specific pool of gold held by a financial institution. Gold is said 
to be held in unallocated form when the person in whose name such 
gold is held is entitled to receive delivery of gold in the amount 
standing to the credit of that person's account, but that person has 
no ownership interest in any particular gold that the custodian for 
financial assets maintaining the account owns or holds. Unallocated 
gold facilitates transactions with Authorized Participants and to 
convert gold into different specifications to meet delivery requests 
from Delivery Applicants of physical gold. Upon receipt of a deposit 
of unallocated gold from an Authorized Participant, the Custodian 
will allocate such deposit to allocated gold consisting of London 
Bars held in the Trust Allocated Account. Because London Bars vary 
in size between 350-430 Fine Ounces, the Custodian may not have 
access to London Bars precisely matching the Fine Ounces of 
unallocated gold deposited by an Authorized Participant. However, 
the Custodian will transfer a deposit of unallocated gold into 
allocated gold in the Trust Allocated Account so that no more than 
430 Fine Ounces remain in the Trust Unallocated Account.
    \19\ According to the Registration Statement, the term 
``physical gold'' means the physical gold bullion the Trust may 
hold, consisting of (i) London Bars, (ii) gold bars (other than 
London Bars) or gold coins, in each case without numismatic value 
and having a minimum fineness (or purity) of 99.5% or (iii) American 
Gold Eagle Coins. Unallocated gold is not considered ``physical 
gold.''
    \20\ According to the Registration Statement, the Trust permits 
individual investors, known as Delivery Applicants, to deliver 
Shares to the Trust in an amount less than a Basket, in exchange for 
physical gold. Upon receipt of a Delivery Application, as defined 
below, from a Delivery Applicant and an appropriate number of 
Shares, the Trust will arrange for delivery of physical gold, in 
accordance with the procedures described herein, to the Delivery 
Applicant. In order to effect a transfer of physical gold (other 
than London Bars) to a Delivery Applicant, the Trust will instruct 
the Custodian to transfer an amount of unallocated gold from the 
Trust Unallocated Account equal to the Fine Ounce content of the 
requested physical gold to the unallocated account of a precious 
metals dealer. Such precious metals dealer will then acquire 
physical gold in such specifications as the Delivery Applicant may 
request and arrange for delivery of such physical gold to the 
Delivery Applicant. Delivery of London Bars to Delivery Applicants 
will be effected directly by the Custodian. Once physical gold has 
been released by the Custodian or the precious metals dealer to a 
delivery service, as described below, for delivery to a Delivery 
Applicant, the physical gold cannot be returned and is no longer the 
responsibility of the Trust, the Trustee, the Custodian the precious 
metals dealer or the Sponsor; until such release to a delivery 
service, the physical gold will remain the property of the Trust
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    According to the Registration Statement, the Trust is not an 
investment company registered under the Investment Company Act of 1940, 
as amended \21\ (``1940 Act''), and is not required to register with 
the Commission thereunder. The Trust will not hold or trade in 
commodity futures contracts regulated by the Commodity Exchange Act 
\22\ (``CEA''), as administered by the Commodity Futures Trading 
Commission (``CFTC''). The Trust is not a commodity pool for purposes 
of the CEA and neither the Sponsor nor the Trustee is subject to 
regulation as a commodity pool operator or a commodity trading adviser 
in connection with the Shares.\23\
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    \21\ 15 U.S.C. 80a-1.
    \22\ 17 U.S.C. 1.
    \23\ The Trust, like certain other gold trusts, transacts with 
Authorized Participants through unallocated gold accounts. See, 
e.g., Securities Exchange Act Release No. 59895 (May 8, 2009), 74 FR 
22993 (May 15, 2009) (SR-NYSEArca-2009-40) (approving listing on the 
Exchange of the ETFS Gold Trust) and SPDR Gold Trust's Annual Report 
on Form 10-K for the year ended September 30, 2013. Unallocated 
gold, as described above, together with allocated gold held in the 
Trust Allocated Account and, under very limited circumstances, any 
physical gold pending delivery to a Delivery Applicant, cumulatively 
represents the Trust's ownership of gold; the difference between 
allocated and unallocated gold accounts is that particular London 
Bars are designated as held in the Trust Allocated Account whereas 
the Trust Unallocated Account does not entitle the Trust to a 
particular London Bar. The Trust may hold no more than 430 Fine 
Ounces of unallocated gold in the Trust Unallocated Account. The 
Trust Unallocated Account is not itself an instrument or form of 
derivative contract, or other commodity futures contract, but 
instead represents actual gold credited to the account of, and held 
by, the Trust. As such, the Trust Unallocated Account is not a 
``commodity'' and merely represents the manner in which the Trust's 
gold is custodied, similar to a deposit in a bank account being 
represented by a credit to a depositor's account.
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    The Exchange represents that the Shares satisfy the requirements of 
NYSE Arca Equities Rule 8.201 and thereby qualify for listing on the 
Exchange.\24\
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    \24\ With respect to application of Rule 10A-3 (17 CFR 240.10A-
3) under the Act, the Trust relies on the exemption contained in 
Rule 10A-3(c)(7).
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    The Trust will not hold or employ derivatives.
Trust Objective
    According to the Registration Statement, the objective of the Trust 
is to provide investors with an opportunity to invest in gold through 
Shares, and be able to take delivery of physical gold in exchange for 
their Shares. The Trust's secondary objective is for the Shares to 
reflect the performance of the price of gold less the expenses of the 
Trust's operations. The Trust is not actively managed. It does not 
engage in any activities designed to obtain a profit from, or to 
compensate investors for losses caused by, changes in the price of 
gold.
    According to the Registration Statement, the Shares will provide 
investors with the opportunity to access the gold market though a 
traditional brokerage account. Further, according to the Registration 
Statement, the shares are intended to constitute a cost-efficient 
mechanism for investors to make an investment in gold. Although the 
shares are not the exact equivalent of an investment in gold, they 
provide investors with an alternative that allows a level of 
participation in the gold market through the securities market.

[[Page 76369]]

Operation of the Trust
    The Trust will hold its London Bars in allocated form in the Trust 
Allocated Account with the Custodian. The allocated gold will be held 
in a segregated fashion in the name of the Trust, not commingled with 
other depositor funds or assets. The Trust will have full title to the 
individually identified London Bars held in the Trust Allocated Account 
with the Custodian holding it on the Trust's behalf. Each investor will 
own a pro-rata share of the Trust, and as such will hold a pro-rata 
ownership interest in the Trust assets, corresponding to the number of 
Shares held by such investor. Trust holdings in the Trust Allocated 
Account will be identified in a weight list of bars published on the 
Trust's Web site showing the unique bar number, gross weight, the assay 
or fineness of each bar and its fine weight. Credits or debits to the 
holding [sic] will be effected by physical movements of bars to or from 
the Trust's physical holding [sic]. The Trust's holdings will be 
subject to periodic audits.
    All physical gold and unallocated gold held by the Trust will be 
valued based upon the Benchmark Price \25\ for any day certain or, if 
the Benchmark Price for that day is not available, the most recently 
announced Benchmark Price prior to the evaluation time. However, if the 
Sponsor determines that the Benchmark Price is inappropriate as a basis 
for evaluation, it shall identify an alternative basis to be employed 
by the Trustee.
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    \25\ Benchmark Price means, as of any day, (i) such day's London 
PM Fix; or (ii) if such day's London PM Fix is not available then 
such day's London AM Fix; or (iii) if such day's London AM Fix is 
not available then another publicly available price the Sponsor may 
determine fairly represents the commercial value of gold held by the 
Trust.
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The Gold Market
    According to the Registration Statement, global gold trade consists 
of the over-the-counter (``OTC'') market, the futures and options 
markets and the London interbank market. The OTC market accounts for 
the largest percentage of global gold trading volume. It trades on a 
24-hour per business day continuous basis and provides a relatively 
flexible market in terms of quotes, size, price, destinations for 
delivery and other factors. The standard trade size ranges between 
5,000 and 10,000 ounces.
    OTC market makers include the nine market-making members of the 
LBMA, and the main centers are London, New York, and Zurich. Market 
participants include jewelry manufacturers, mining companies, central 
banks, investors and speculators. Liquidity in the OTC market varies 
during the day, with the most liquid time periods generally occurring 
in business day mornings, when trading hours in European time zones 
overlap with trading hours in the United States.
    The London Bullion Market is the largest wholesale OTC market for 
gold and is operated by the LBMA, which acts as the principal point of 
contact between the market and its regulators. Gold must meet the 
requirements defined by the LBMA.
Futures and Options Exchanges
    The major exchanges trading gold futures and options include the 
COMEX (an affiliate of the Chicago Mercantile Exchange, Inc. 
(``CME'')), the Multi Commodity Exchange of India, the Tokyo 
Commodities Exchange and the Shanghai Futures Exchange. Gold futures 
and options are traded on these exchanges in standardized transaction 
sizes and delivery dates. Only a small portion of the gold futures 
market turnover is typically physically delivered.
    The COMEX is the largest gold futures and options exchange. In 
2012, it represented approximately 79% of global futures and options 
trading volume. The Multi Commodity Exchange of India is the second 
largest futures exchange in terms of gold futures trading volume, 
accounting for around 7.0% of the world total. The Tokyo Commodities 
Exchange accounted for about 6.8% of total gold futures trading volume 
in 2012. The Shanghai Futures Exchange accounted for 6.6% of total gold 
futures trading volume in 2012.\26\
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    \26\ Source: The CPM Gold Yearbook 2013, Page 198-199. For 
additional information regarding the gold bullion market, gold 
futures exchanges, and regulation of the global gold market, see 
Securities Exchange Act Release No. 59895 (May 8, 2009), 74 FR 22993 
(May 15, 2009) (SR-NYSEArca-2009-40) (order approving Exchange 
listing and trading of the ETFS Gold Trust). Additional information 
regarding the market for American Gold Eagle Coins is contained in 
the APMEX Release (see, note 3 [sic], supra.).
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    Gold spot trades on over-the-counter markets throughout the world.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
redeem Baskets equal to a block of 50,000 Shares,\27\ and only to 
Authorized Participants.\28\ Orders to create and redeem Baskets may be 
placed only by Authorized Participants. The creation and redemption of 
Baskets will only be made in exchange for the delivery to the Trust or 
the distribution by the Trust of the amount of unallocated gold 
represented by the Baskets being created or redeemed, the amount of 
which will be based on the combined Fine Ounces represented by the 
number of Shares included in the Baskets being created or redeemed 
determined on the day the order to create or redeem Baskets is properly 
received.
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    \27\ The Sponsor will also receive a fee that will accrue daily 
based on the prior business day's net asset value and will be 
payable in Shares corresponding to the net asset value of the Shares 
at the time of payment on a monthly basis in arrears. According to 
the Registration Statement, paying the Sponsor's fee in Shares of 
the Trust, rather than cash, eliminates the need for the Trust to 
sell gold to raise cash to pay the Sponsor's fee.
    \28\ An Authorized Participant must: (1) Be a registered broker-
dealer or other securities market participant, such as a bank or 
other financial institution which, but for an exclusion from 
registration, would be required to register as a broker-dealer to 
engage in securities transactions, (2) be a participant in DTC, and 
(3) have an agreement with the Custodian establishing an Unallocated 
Account in London or have an existing Unallocated Account with 
another LBMA-member custodian identified by the Authorized 
Participant to the Custodian and the Trustee. Gold held in 
Authorized Participants' Unallocated Accounts with the Custodian is 
typically not segregated from the Custodian's assets. As a result, 
an Authorized Participant establishing an Unallocated Account with 
the Custodian will have no proprietary interest in any specific bars 
of gold held by the Custodian. Credits to such an Unallocated 
Account are therefore at risk of the Custodian's or other bullion 
clearing bank's insolvency.
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Creation Procedures--Authorized Participants
    Only Authorized Participants will deliver unallocated gold to the 
Trust in exchange for Shares. Such deliveries will take place through 
unallocated accounts and the Trust will not accept the delivery of 
physical gold. According to the Registration Statement, unallocated 
gold is delivered to the Trust through credits and debits between 
Authorized Participants' unallocated accounts and the Trust Unallocated 
Account. When an Authorized Participant creates a Basket, unallocated 
gold will be transferred from an Authorized Participant to the 
Custodian. The transfer will appear as a debit to the Authorized 
Participant's unallocated account and a credit to the Trust Unallocated 
Account. On the same business day, the Custodian will convert the 
deposit of unallocated gold to allocated gold, to be held in the Trust 
Allocated Account, and store such allocated gold for safekeeping. The 
Custodian must convert unallocated gold deposits to allocated gold in 
the Trust Allocated Account such that no more than 430 Fine Ounces of 
unallocated gold remain in the Trust Unallocated Account at the end of 
each business day.

[[Page 76370]]

    On any business day,\29\ an Authorized Participant may place an 
order with the Trustee to create one or more Baskets. Purchase orders 
must be placed by 3:59:59 p.m. Eastern time. The day on which the 
Trustee receives a valid purchase order is the purchase order date.
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    \29\ For purposes of processing both purchase and redemption 
orders, a ``business day'' means any day other than a day: (1) When 
the NYSE Arca is closed for regular trading; or (2), if the order or 
other transaction requires the receipt or delivery, or the 
confirmation of receipt or delivery, of gold in the United Kingdom 
or in some other jurisdiction on a particular day, (A) when banks 
are authorized to close in the United Kingdom or in such other 
jurisdiction or when the London gold market is closed or (B) when 
banks in the United Kingdom or in such other jurisdiction are, or 
the London gold market is, not open for a full business day and the 
transaction requires the execution or completion of procedures which 
cannot be executed or completed by the close of the business day.
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Determination of Required Deposits
    The amount of the required deposit for a Basket will be determined 
by dividing the number of Fine Ounces of gold held by the Trust by the 
number of Baskets outstanding, as adjusted for the number of Fine 
Ounces of gold constituting estimated accrued but unpaid fees and 
expenses of the Trust. The number of Baskets outstanding is determined 
by dividing the number of Shares outstanding by 50,000 (or other number 
of Shares in a Basket for such business day). Fractions of a Fine Ounce 
of gold smaller than 0.001 of a Fine Ounce which are included in the 
unallocated gold deposit amount will be disregarded in the foregoing 
calculation.
Delivery of Required Deposits
    An Authorized Participant who places a purchase order is 
responsible for crediting its unallocated gold account, if held at the 
Custodian, with the required deposit amount and, if the Authorized 
Participant does not maintain its unallocated gold account with the 
Custodian, causing the required deposit to be transferred to the 
Custodian, by 11:00 a.m. (London time) on the third business day 
following the purchase order date. Upon receipt of the deposit amount, 
the Custodian, after receiving appropriate instructions from the 
Authorized Participant and the Trustee, will transfer by 11:00 a.m. 
(London time) on the third business day following the purchase order 
date the deposit amount to the Trust Unallocated Account, and on the 
same business day, convert the deposit amount from the Trust 
Unallocated Account to the Trust Allocated Account such that no more 
than 430 Fine Ounces of unallocated gold remains [sic] in the Trust 
Unallocated Account. Upon confirmation of the conversion of the deposit 
amount to the Trust Allocated Account, the Trustee will direct DTC to 
credit the number of Baskets ordered to the Authorized Participant's 
DTC account.
    No Shares will be issued unless and until the Custodian has 
informed the Trustee that it has allocated to the Trust Allocated 
Account the corresponding allocated gold amount. If the Custodian 
notifies the Trustee and the Sponsor that it is unable to convert the 
deposit from the Trust Unallocated Account to the Trust Allocated 
Account in connection with a particular purchase order or generally, 
the Trustee will reject the particular purchase order as well as any 
other subsequent purchase orders on the same day.
Redemption Procedures--Authorized Participants
    The procedures by which an Authorized Participant can redeem one or 
more Baskets will mirror the procedures for the creation of Baskets. On 
any business day, an Authorized Participant may place an order with the 
Trustee to redeem one or more Baskets. Redemption orders must be placed 
no later than 3:59:59 p.m. on each business day the NYSE Arca is open 
for regular trading. A redemption order so received will be effective 
on the date it is received in satisfactory form by the Trustee.
    By placing a redemption order, an Authorized Participant agrees to 
deliver the Baskets to be redeemed through DTC's book-entry system to 
the Trust no later than the third business day following the effective 
date of the redemption order. Prior to the delivery of the redemption 
distribution for a redemption order, the Authorized Participant must 
also have wired to the Trustee the non-refundable transaction fee due 
for the redemption order.
    The redemption distribution from the Trust will be effected by (i) 
conversion of allocated gold in the Trust Allocated Account to 
unallocated gold in the Trust Unallocated Account and (ii) a debit from 
the Trust Unallocated Account and 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. Fractions of a Fine Ounce of gold included in 
the redemption distribution smaller than 0.001 of a Fine Ounce are 
disregarded for such calculation. Redemption distributions will be 
subject to the deduction of any applicable tax, fee or other 
governmental charge that may be due as well as any charges or fees in 
connection with the transfer of gold and the issuance and delivery of 
shares, and any expense associated with the delivery of gold other than 
by credit to an Authorized Participant's unallocated account with the 
Custodian.
    The redemption distribution due from the Trust will be delivered to 
the Authorized Participant on the third business day following the 
redemption order date if, by 9:00 a.m. Eastern time on such third 
business day, the Trustee's DTC account has been credited with the 
Baskets to be redeemed.
Suspension or Rejection of Redemption Orders
    The Trustee may, in its discretion, and will when directed by the 
Sponsor, suspend the right of redemption, or postpone the redemption 
settlement date or reject a particular redemption order, (1) for any 
period during which the NYSE Arca is closed other than customary 
weekend or holiday closings, or trading on the NYSE Arca is suspended 
or restricted or (2) for any period during which an emergency exists as 
a result of which delivery, disposal or evaluation of gold is not 
reasonably practicable.\30\ The Sponsor has represented that it will 
promptly notify the Exchange of any such suspension of redemption 
orders.
---------------------------------------------------------------------------

    \30\ The Exchange may suspend trading in the Shares in the event 
the Sponsor suspends the right of redemptions.
---------------------------------------------------------------------------

Taking Delivery of Physical Gold--Delivery Applicants
    A Delivery Applicant wishing to deliver Shares of the Trust in 
exchange for physical gold must submit to the Sponsor a Delivery 
Application and payment for (1) the applicable processing fees, and (2) 
the applicable delivery fees to cover the cost of preparing and 
transporting physical gold from the Custodian or the precious metals 
dealer \31\ from which they were obtained to the location specified by 
the Delivery Applicant in the Delivery Application. The Sponsor will 
screen and pre-approve the Delivery Application.\32\ The Share 
Submission Day \33\ will typically be the third

[[Page 76371]]

business day following approval of the Delivery Application. The number 
of Shares to be delivered must (i) correspond to at least one Fine 
Ounce of physical gold and (ii) have a minimum dollar value in an 
amount that is specified by the Sponsor from time to time on the 
Trust's Web site. Taking delivery of physical gold is subject to 
guidelines intended to minimize the amount of cash that will be 
distributed with physical gold. The Delivery Application is not binding 
until Shares are delivered to the Trustee.\34\
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    \31\ The Sponsor will not be affiliated with any precious metals 
dealer.
    \32\ Prior to pre-approving a Delivery Application, the Sponsor 
will coordinate with a precious metals dealer to evaluate if the 
physical gold (other than London Bars) is available in the type and 
quantity of physical gold requested by the Delivery Applicant, and 
that the delivery method and location can be agreed upon with the 
Delivery Applicant.
    \33\ According to the Registration Statement, the Share 
Submission Day is defined as the day on which a Delivery Applicant 
submits shares to the Trustee.
    \34\ Delivery Applicants may fail to submit Shares, or fail to 
submit Shares in the amount required on the Share Submission Day; 
accordingly, the Delivery Application is not binding until Shares 
are delivered to the Trustee. As noted above, the delivery of Shares 
in exchange for physical gold will take place at the NAV on the 
Share Submission Day such that any estimates provided in advance of 
the number of Shares required to be submitted must be non-binding 
since an additional Share or Shares may be required to be submitted 
if the NAV differs from the time the calculator is used so that 
neither the Delivery Applicant nor remaining shareholders are 
disadvantaged if the NAV changes between the time of the estimate 
and delivery.
---------------------------------------------------------------------------

    To minimize the cash portion of delivery by Delivery Applicants of 
physical gold for their Shares, the Sponsor will only approve Delivery 
Applications where the number of Shares to be submitted leads to a cash 
portion that is as low as practical in the assessment of the Sponsor. 
After the liquidation of unallocated gold to satisfy the cash portion 
of delivery, but before the actual delivery to the Delivery Applicant, 
the Trust will hold such cash temporarily.
    Upon pre-approval of the Delivery Application by the Sponsor, a 
Delivery Applicant will be required to instruct its broker-dealer to 
submit the Delivery Application and transfer Shares to the Trustee; 
such submission and transfer by the broker-dealer will be a binding and 
irrevocable request to take delivery of physical gold in exchange for 
Shares based on instructions in the Delivery Application (``Share 
Submission'').
    Once the Trustee has received a Delivery Applicant's Share 
Submission, if the Delivery Applicant seeks physical gold other than 
London Bars, it will instruct the Custodian to (i) convert allocated 
gold not exceeding the Fine Ounces represented by the Shares 
surrendered as determined by the Sponsor from the Trust Allocated 
Account into unallocated gold in the Trust Unallocated Account, (ii) 
debit such amount of unallocated gold from the Trust Unallocated 
Account and credit a corresponding amount to the unallocated gold 
account of a precious metals dealer and (iii) instruct such precious 
metals dealer to acquire physical gold in the specifications requested 
by the Delivery Applicant and deliver such physical gold to the 
Delivery Applicant. Deliveries of London Bars will be effected by the 
Custodian.
Processing Fees
    The exchange of Shares for the delivery of physical gold is subject 
to the following Processing Fees. The Processing Fees must be submitted 
with the Delivery Application. The Processing Fees include fees to 
compensate the Sponsor (``Exchange Fee''), and a delivery fee 
(``Delivery Fee'') associated with the transport of physical gold to 
Delivery Applicants.\35\ The Delivery Fee is only applicable if 
delivery is made outside of the lower 48 States.
---------------------------------------------------------------------------

    \35\ The Exchange Fee will vary depending on the type of 
physical gold a Delivery Applicant would like to take delivery of 
and reflect costs arising from: reviewing Delivery Applications, 
coordinating with Delivery Applicants and the Trust's other service 
providers, the conversion of London Bars into physical gold to be 
delivered, and the related expenses of the Trustee and the Sponsor. 
The Exchange Fee for London Bars will be set at 2.5%. A delivery fee 
(as described in the Registration Statement) will cover the cost of 
the physical transfer to the Delivery Applicant.
---------------------------------------------------------------------------

    The Exchange Fee will compensate the Sponsor for services provided 
as part of the delivery process, including the cost to the Sponsor and 
the Trustee to process the Share Submission; and the cost associated 
with OTC transactions to convert gold held by the Trust into physical 
gold of different specifications, if applicable. The Exchange Fee is a 
percentage of the value of the gold represented by the Shares submitted 
on the Share Submission day based on the most recent quarter's end spot 
price of gold, as set forth in the Registration Statement, subject to 
minimum fees as follows:

------------------------------------------------------------------------
       Type of physical gold             Percentage      Minimum charge
------------------------------------------------------------------------
1 ounce Coins: American Gold Eagle.                7              $7,000
1 ounce Coins: other qualifying....                6               6,000
1 ounce Bars.......................                3.5             3,500
10 ounce Bars......................                2.5             2,500
London Bars........................                2.5              None
------------------------------------------------------------------------

    The Sponsor may waive or reduce applicable Processing Fees from 
time to time. Any waiver or reduction in applicable Processing Fees 
will be published on the Trust's Web site and available to any eligible 
Delivery Applicant. Although waivers or reductions in Processing Fees 
are not currently available, in the future, waivers or reductions may 
apply during certain limited time periods, for Delivery Applicants 
seeking particular types of physical gold (i.e., coins or bars), or for 
Delivery Applicants completing multiple Delivery Applications over 
proscribed time periods.
Delivery Method
    The Trustee will instruct the Custodian or the Sponsor shall 
instruct the precious metals dealer, as applicable, to deliver physical 
gold to a Delivery Applicant based on instructions in the Delivery 
Application. Once physical gold has been released by the Custodian or 
the precious metals dealer to a delivery service, as described below, 
for delivery to a Delivery Applicant, the physical gold cannot be 
returned and is no longer the responsibility of the Trust, the Trustee, 
the Custodian, the precious metals dealer or the Sponsor.
    The Custodian will ship London Bars and the precious metals dealer 
will ship all other forms of physical gold to a Delivery Applicant 
fully insured using accepted business practices for precious metals 
delivery that may include, amongst others, use of a conventional 
shipping carrier or an armored transportation service.
Valuation of Gold and Computation of Net Asset Value
    On each business day that the NYSE Arca is open for regular 
trading, as promptly as practicable after 4:00 p.m., Eastern time, the 
Trustee will value the physical gold and unallocated gold held by the 
Trust and will determine the NAV of the Trust, as described below.
    The NAV of the Trust will be the aggregate value of physical gold 
and

[[Page 76372]]

unallocated gold of the Trust (other than amounts credited to the 
Trust's reserve account, if any) and cash, if any, less liabilities of 
the Trust, which include estimated accrued but unpaid fees and 
expenses. All physical gold and unallocated gold will be valued based 
on its Fine Ounce content, calculated by multiplying the weight of gold 
by its purity; the same methodology is applied independent of the type 
of physical gold and unallocated gold held by the Trust. Similarly, the 
value of up to 430 Fine Ounces of unallocated gold the Trust may hold 
is calculated by multiplying the number of Fine Ounces with the price 
of gold determined by the Trustee, as described below.
    In determining the NAV of the Trust, the Trustee will value the 
physical gold and unallocated gold held by the Trust on the basis of 
the price of a Fine Ounce of gold as set by the afternoon session of 
the twice daily fix of the price of a Fine Ounce of gold which starts 
at 3:00 p.m. London, England time and is performed by the five members 
of the London gold fix. If no London PM Fix is made on a particular 
evaluation day, the gold price from that day's London AM Fix will be 
used in the determination of the NAV of the Trust or, if such day's 
London AM Fix is not available, then another publicly available price 
which the Sponsor may determine fairly represents the commercial value 
of gold held by the Trust will be used.
    According to the Registration Statement, physical gold in the Trust 
will be valued at the price of gold independent of location and type of 
physical gold. The price of gold commonly quoted refers to the price of 
a London Bar in London. Any physical gold that is not a London Bar 
located in London may obtain a bid price when offered for sale that 
deviates from the price of gold. Nonetheless, the Trustee will value 
all physical gold at the price of gold. Conversely, in the unlikely 
event that such a conversion yields a profit, the Sponsor, not the 
Trust, will keep such profit. As a result, the value of physical gold 
in the Trust will be limited to the price of gold multiplied by the 
Fine Ounce content of the physical gold. Similarly, when investors 
exchange their Shares for physical gold other than London Bars, the 
Shares also will be valued at the price of gold for purposes of 
calculating their share in the Trust. The Sponsor may recover this 
conversion cost as part of the Exchange Fee.
    Once the value of gold has been determined, the Trustee will 
subtract all estimated accrued but unpaid fees (other than the fees 
accruing for such day on which the valuation takes place computed by 
reference to the value of the Trust or its assets), expenses and other 
liabilities of the Trust from the total value of physical gold and 
unallocated gold and any other assets of the Trust, including cash, if 
any. The resulting figure will be the NAV of the Trust. The Trustee 
will also determine the NAV per Share by dividing NAV of the Trust by 
the number of the Shares outstanding as of the close of trading on the 
NYSE Arca (which will include the net number of any Shares created or 
redeemed on such evaluation day).
    Prior to commencement of trading on the Exchange, the Exchange will 
obtain a representation from the Sponsor that the NAV will be 
calculated daily and will be made available to all market participants 
at the same time.
Termination of the Trust
    The Trustee will notify investors at least 30 days before the date 
for termination of the Trust Agreement and the Trust if any of the 
following occurs:
     The Trustee is notified that the Shares are delisted from 
the NYSE Arca and are not approved for listing on another national 
securities exchange within five business days of their delisting;
     Investors acting in respect of at least 75% of the 
outstanding Shares notify the Trustee that they elect to terminate the 
Trust;
     60 days have elapsed since the Trustee notified the 
Sponsor of the Trustee's election to resign or since the Sponsor 
removed the Trustee, and a successor trustee has not been appointed and 
accepted its appointment;
     Any sole Custodian then acting resigns or is removed and 
no successor custodian has been employed within 60 days of such 
resignation or removal;
     The Commission determines that the Trust is an investment 
company under the 1940 Act, and the Trustee has actual knowledge of 
such Commission determination;
     The CFTC determines that the Trust is a commodity pool 
under the Commodity Exchange Act, and the Trustee has actual knowledge 
of that determination;
     The aggregate market capitalization of the Trust, based on 
the closing price for the Shares, is less than $350 million (as 
adjusted for inflation by reference to the U.S. Consumer Price Index) 
at any time more than 18 months after the Trust's formation, and the 
Trustee receives, within six months after the last trading date on 
which such capitalization (as so based) was less than $350 million, 
notice from the Sponsor of its decision to terminate the Trust;
     The Trust fails to qualify for treatment, or ceases to be 
treated, as a ``grantor trust'' for federal tax purposes, and the 
Trustee receives notice from the Sponsor that the Sponsor determines 
that, because of that tax treatment or change in tax treatment, 
termination of the Trust is advisable; or
     60 days have elapsed since DTC or another depository has 
ceased to act as depository with respect to the Shares, and the Sponsor 
has not identified another depository that is willing to act in such 
capacity.
Availability of Information
    The Web site for the Trust (www.merkgold.com), which the Trust will 
launch upon the closing of the initial public offering, will contain 
the following information, on a per Share 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 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 Web site 
for the Trust will also provide the Trust's prospectus, as well as the 
two most recent reports to stockholders.
    The Trust Web site also will provide the last sale price of the 
Shares as traded in the US market, as well as a breakdown of the 
holdings of the Trust by the form in which gold is held. The value of 
the Trust's holdings will be reported on the Trust's Web site daily. 
Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association (``CTA'').
    Investors may obtain gold pricing information based on the spot 
price for a Fine Ounce of gold from various financial information 
service providers. Current spot prices also are generally available 
with bid/ask spreads from gold bullion dealers. In addition, the 
Trust's Web site will provide pricing information for gold spot prices 
and the Shares. Market prices for the Shares will be available from a 
variety of sources including brokerage firms, information Web sites and 
other information service providers. The NAV of the Trust will be 
published by the Sponsor on each day that the NYSE Arca is open for 
regular trading and will be posted on the Trust's Web site.

[[Page 76373]]

    Each day the NYSE Arca is open for trading, the Sponsor will 
publish on the Trust's internet Web site a calculator to estimate the 
smallest whole number of Shares greater than the net assets of the 
Trust corresponding to the Fine Ounces of physical gold requested 
(``Share Submission Quantity'') and the ``Cash Proceeds'' (i.e., the 
difference between the value of a Delivery Applicant's Shares and the 
value of physical gold to be delivered to the Delivery Applicant) for 
an exchange of one American Gold Eagle Coin, a London Bar or a bar of 
physical gold of another specification. The actual Cash Proceeds will 
be the net proceeds received from the sale of the excess Fine Ounces 
included in the Share Submission Quantity. The Share Submission 
Quantity may be rejected if the Trust incurs extraordinary expenses 
between the submission of the Delivery Application and the Share 
Submission Day.
    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. In addition, there is 
a considerable amount of gold price and gold market information 
available on public Web sites and through professional and subscription 
services. The IIV relating to the Shares will be widely disseminated by 
one or more major market data vendors at least every 15 seconds during 
the Core Trading Session.\36\
---------------------------------------------------------------------------

    \36\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
taken from CTA or other data feeds. The Sponsor anticipates that the 
IIV will be calculated by a market vendor who provides IIVs for 
several other products. Currently, the gold price expected to be 
used by the market vendor for calculating the IIV is the mid point 
of the bid and ask price of the 24-hour Reuters composite spot rate 
in gold.
---------------------------------------------------------------------------

    Investors may obtain on a 24-hour basis gold pricing information 
based on the spot price for a Fine Ounce of gold from various financial 
information service providers, such as Reuters and Bloomberg. Reuters 
and Bloomberg provide at no charge on their Web sites delayed 
information regarding the spot price of gold 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. An organization named EBS provides an 
electronic trading platform to institutions such as bullion banks and 
dealers for the trading of spot gold, as well as a feed of live 
streaming prices to Reuters and Moneyline Telerate subscribers.
    Complete real-time data for gold futures and options prices traded 
on the COMEX are available by subscription from Reuters and Bloomberg. 
The NYMEX also provides delayed futures and options information on 
current and past trading sessions and market news free of charge on its 
Web site. There are a variety of other public Web sites providing 
information on gold, ranging from those specializing in precious metals 
to sites maintained by major newspapers, such as The Wall Street 
Journal. In addition, the London AM Fix and London PM Fix are publicly 
available at no charge at www.thebulliondesk.com.
    The Trust's daily NAV will be posted on the Trust's Web site as 
soon as practicable. The Exchange will provide on its Web site 
(www.nyx.com) a link to the Trust's Web site. In addition, the Exchange 
will make available over the Consolidated Tape quotation information, 
trading volume, closing prices and NAV for the Shares from the previous 
day.
Criteria for Initial and Continued Listing
    The Trust and the Shares will be subject to the criteria in NYSE 
Arca Equities Rule 8.201(e) for initial and continued listing of the 
Shares.
    The Exchange will require that a minimum of 100,000 Shares will be 
outstanding at the start of trading. The minimum number of Shares 
required to be outstanding is comparable to requirements that have been 
applied to previously listed shares of the Sprott Physical Gold 
Trust.\37\ The Exchange believes that the anticipated minimum number of 
Shares outstanding at the start of trading is sufficient to provide 
adequate market liquidity.
---------------------------------------------------------------------------

    \37\ See note 7 [sic], supra.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Fund 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 Equities Rule 
7.34(a). The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions. As provided in NYSE Arca 
Equities Rule 7.6, Commentary .03, the minimum price variation 
(``MPV'') for quoting and entry of orders in equity securities traded 
on the NYSE Arca Marketplace is $0.01, with the exception of securities 
that are priced less than $1.00 for which the MPV for order entry is 
$0.0001.
    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.\38\ 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.
---------------------------------------------------------------------------

    \38\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (including Commodity-Based 
Trust Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.
    NYSE Arca Equities Rule 8.201 sets forth certain restrictions on 
ETP Holders acting as registered Market Makers in the Shares to 
facilitate surveillance. Pursuant to NYSE Arca Equities Rule 8.201(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, related futures or options on futures, 
or any other related derivatives. Commentary .04 of NYSE Arca Equities 
Rule 6.3 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

[[Page 76374]]

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. A subsidiary or affiliate of an 
ETP Holder that does business only in commodities or futures contracts 
would not be subject to Exchange jurisdiction, but 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.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. 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. Also, pursuant to NYSE 
Arca Equities Rule 8.201(g), the Exchange is able to obtain information 
regarding trading in the Shares and the underlying gold, gold futures 
contracts, options on gold futures, or any other gold derivative, 
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 may obtain trading information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\39\ The Exchange may obtain market 
surveillance information with respect to transactions occurring on the 
COMEX pursuant to the ISG membership of CME and NYMEX.
---------------------------------------------------------------------------

    \39\ A list of ISG members is available at www.isgportal.org.
---------------------------------------------------------------------------

    The Exchange also has a general policy prohibiting the distribution 
of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares; (2) NYSE Arca Equities Rule 
9.2(a), which imposes a duty of due diligence on its ETP Holders to 
learn the essential facts relating to every customer prior to trading 
the Shares; (3) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; (4) the possibility that 
trading spreads and the resulting premium or discount on the Shares may 
widen as a result of reduced liquidity of gold trading during the Core 
and Late Trading Sessions after the close of the major world gold 
markets; and (5) trading information. For example, the Information 
Bulletin will advise ETP Holders, prior to the commencement of trading, 
of the prospectus delivery requirements applicable to the Trust. The 
Exchange notes that investors purchasing Shares directly from the Trust 
will receive a prospectus. ETP Holders purchasing Shares from the Trust 
for resale to investors will deliver a prospectus to such investors.
    In addition, the Information Bulletin will reference that the Trust 
is subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also reference the fact that 
there is no regulated source of last sale information regarding 
physical gold, that the Commission has no jurisdiction over the trading 
of gold as a physical commodity, and that the CFTC has regulatory 
jurisdiction over the trading of gold futures contracts and options on 
gold futures contracts.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \40\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.201. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. The Exchange may obtain market surveillance information with 
respect to transactions occurring on the COMEX pursuant to the ISG 
membership of CME and NYMEX.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that there is a considerable amount of gold price and gold market 
information available on public Web sites and through professional and 
subscription services. Investors may obtain on a 24-hour basis gold 
pricing information based on the spot price for a Fine Ounce of gold 
from various financial information service providers. Current spot 
prices also are generally available with bid/ask spreads from gold 
bullion dealers. In addition, the Trust's Web site will provide pricing 
information for gold spot prices and the Shares. Market prices for the 
Shares will be available from a variety of sources including brokerage 
firms, information Web sites and other information service providers. 
The NAV of the Trust will be published by the Sponsor on each day that 
the NYSE Arca is open for regular trading and will be posted on the 
Trust's Web site. The IIV relating to the Shares will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session. Complete real-time data for 
gold futures and options prices traded on the COMEX are available by 
subscription from Reuters and Bloomberg. In addition, the London AM Fix 
and London PM Fix are publicly available at no charge at 
www.thebulliondesk.com. The Trust's Web site will also provide the 
Trust's prospectus, as well as the two most recent reports to 
stockholders, when available. The Exchange will provide on its Web site 
a link to the Trust's Web site. In addition, the Exchange will make 
available over the Consolidated Tape quotation information, trading 
volume, closing prices and NAV for the Shares from the previous day.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition

[[Page 76375]]

among market participants, to the benefit of investors and the 
marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding gold pricing and gold futures 
information.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change would permit listing and trading on the Exchange 
of an additional and unique issue of Commodity-Based Trust Shares based 
on gold, which will enhance competition among market participants, to 
the benefit of investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-137 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2013-137. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2013-137 and should 
be submitted on or before January 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29893 Filed 12-16-13; 8:45 am]
BILLING CODE 8011-01-P