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]
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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
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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
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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
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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
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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
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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.
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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).
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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.
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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.
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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.
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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
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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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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
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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.
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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 ..................................................................................................................................................
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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
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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
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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.
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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
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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
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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.
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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.
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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
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Frm 00105
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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
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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.
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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 (https://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 (https://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 https://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
---------------------------------------------------------------------------
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.
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\30\ The Exchange may suspend trading in the Shares in the event
the Sponsor suspends the right of redemptions.
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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.
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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.
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\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.
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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\
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\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.
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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.
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\37\ See note 7 [sic], supra.
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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.
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\38\ See NYSE Arca Equities Rule 7.12.
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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.
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\39\ A list of ISG members is available at www.isgportal.org.
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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.
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\40\ 15 U.S.C. 78f(b)(5).
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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 (https://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 (https://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
