Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the Sprott ESG Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares), 60516-60522 [2021-23810]
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Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Notices
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 self-regulatory organization.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly.
jspears on DSK121TN23PROD with NOTICES1
V. Date of Timing for Commission
Action
Section 806(e)(1)(G) of the Clearing
Supervision Act provides that OCC may
implement the changes if it has not
received an objection to the proposed
changes within 60 days of the later of (i)
the date that the Commission receives
the Advance Notice or (ii) the date that
any additional information requested by
the Commission is received,78 unless
extended as described below.
Pursuant to Section 806(e)(1)(H) of the
Clearing Supervision Act, the
Commission may extend the review
period of an advance notice for an
additional 60 days, if the changes
proposed in the advance notice raise
novel or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension.79
Here, as the Commission has not
requested any additional information,
the date that is 60 days after OCC filed
the Advance Notice with the
Commission is December 7, 2021.
However, the Commission finds the
issues raised by the Advance Notice
complex because OCC proposes to
migrate its clearing, risk management,
and data management applications to a
cloud infrastructure with an on-demand
network of configurable information
technology resources running on virtual
infrastructure hosted by a third party.
The Commission also finds the issues
raised by the Advance Notice novel
because the proposed migration of a
covered clearing agency’s clearing, risk
management, and data management
applications to a third-party-hosted
cloud infrastructure represents a novel
circumstance in the U.S. markets that
would require careful scrutiny and
consideration of its associated risks.
Therefore, the Commission finds it
appropriate to extend the review period
of the Advance Notice for an additional
78 12
79 12
U.S.C. 5465(e)(1)(G).
U.S.C. 5465(e)(1)(H).
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60 days under Section 806(e)(1)(H) of
the Clearing Supervision Act.80
Accordingly, the Commission,
pursuant to Section 806(e)(1)(H) of the
Clearing Supervision Act,81 extends the
review period for an additional 60 days
so that the Commission shall have until
February 5, 2022 to issue an objection
or non-objection to advance notice SR–
OCC–2021–802.
All submissions should refer to File
Number SR–OCC–2021–802 and should
be submitted on or before November 23,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.82
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–23816 Filed 11–1–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93434; File No. SR–
NYSEArca–2021–65]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To List and Trade Shares
of the Sprott ESG Gold ETF Under
NYSE Arca Rule 8.201–E (CommodityBased Trust Shares)
October 27, 2021.
I. Introduction
On July 19, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
Sprott ESG Gold ETF (‘‘Trust’’) under
NYSE Arca Rule 8.201–E (‘‘CommodityBased Trust Shares’’). The proposed rule
change was published for comment in
the Federal Register on July 30, 2021.3
On September 2, 2021, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
80 Id.
81 Id.
82 17
CFR 200.30–3(a)(91).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 92506
(July 26, 2021), 86 FR 41109.
4 15 U.S.C. 78s(b)(2).
1 15
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determine whether to approve or
disapprove the proposed rule change.5
The Commission has received no
comments on the proposed rule change.
The Commission is publishing this
order to institute proceedings pursuant
to Section 19(b)(2)(B) of the Act 6 to
determine whether to approve or
disapprove the proposed rule change.
II. Description of the Proposed Rule
Change 7
The Exchange proposes to list and
trade Shares of the Trust 8 under NYSE
Arca Rule 8.201–E, which governs the
listing and trading of Commodity-Based
Trust Shares 9 on the Exchange. The
Sponsor of the Trust is Sprott Asset
Management LP, a Canadian limited
partnership (‘‘Sponsor’’). The Bank of
New York Mellon serves as the Trust’s
administrator (‘‘Administrator’’) and
transfer agent (‘‘Transfer Agent’’). The
Delaware Trust Company is the trustee
of the Trust (‘‘Trustee’’).10 The Royal
Canadian Mint is the custodian of the
Trust’s gold (‘‘Gold Custodian’’ or
‘‘Mint’’).11 The Bank of New York
5 See Securities Exchange Act Release No. 92867,
86 FR 50568 (September 9, 2021). The Commission
designated October 28, 2021, as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
approve or disapprove, the proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
7 Additional information regarding the Trust and
the Shares, including investment strategies, creation
and redemption procedures, and portfolio holdings
can be found in the Notice, supra note 3.
8 On February 11, 2021, the Trust submitted to
the Commission on a confidential basis its draft
registration statement on Form S–1 under the
Securities Act of 1933, and on July 1, 2021, the
Trust submitted to the Commission the most recent
amendment to its draft registration statement
(collectively, the ‘‘Registration Statement’’). The
Registration Statement is not yet effective, and the
Exchange will not commence trading in Shares
until the Registration Statement becomes effective.
9 Commodity-Based Trust Shares are securities
issued by a trust that represent investors’ discrete
identifiable and undivided beneficial ownership
interest in the commodities deposited into the
Trust. The Exchange represents that the Shares will
satisfy the requirements of NYSE Arca Rule 8.201–
E and thereby qualify for listing on the Exchange
and that the Trust relies on the exemption
contained in Rule 10A–3(c)(7) regarding the
application of Rule 10A–3 (17 CFR 240.10A–3)
under the Act.
10 The Trustee is a fiduciary under the Trust
Agreement and must satisfy the requirements of
Section 3807 of the Delaware Statutory Trust Act.
However, the fiduciary duties, responsibilities and
liabilities of the Trustee are limited by, and are only
those specifically set forth in, the Trust Agreement.
The Trust does not have a Board of Directors or
persons acting in a similar capacity.
11 The Mint operates pursuant to the Royal
Canadian Mint Act (Canada) and is a Canadian
Crown corporation. Crown corporations are
corporations wholly-owned by the Government of
Canada. The Mint is, for all its purposes, an agent
of Her Majesty in right of Canada and, as such, its
obligations generally constitute unconditional
obligations of the Government of Canada. The Gold
Custodian is responsible for safekeeping the gold
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Mellon will also serve as the Trust’s
cash custodian (‘‘Cash Custodian’’)
pursuant to the terms of the agreement
between the Trust and the Cash
Custodian. In its capacity as cash
custodian, the Cash Custodian will
maintain a custodial account that holds
cash for the benefit of the Trust for the
purpose of payment of the Sponsor’s fee
in cash or the other expenses of the
Trust.
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Operation of the Trust
The investment objective of the Trust
will be for the Shares to reflect the
performance of the price of gold, less
the Trust’s expenses and liabilities. The
Trust will issue Shares which represent
units of fractional undivided beneficial
interest in and ownership of the Trust.
The Trust’s assets are expected to
consist primarily of fully allocated
unencumbered physical gold bullion
held by the Mint on behalf of the Trust
that meets certain environmental, social
and governance (‘‘ESG’’) standards and
criteria established by the Sponsor
(‘‘ESG Approved Gold’’), and will also
include unallocated unencumbered
physical gold bullion held by the Mint
on behalf of the Trust and cash.
The Trust does not intend to hold a
certain amount of gold in unallocated
form to satisfy redemption requests or to
pay expenses, but the Trust expects to
hold some amount of unallocated gold
at any given point in time. The Trust’s
holdings of unallocated gold may be a
significant percentage of the Trust’s
assets if, for example, the Trust has
received more requests for creations
than redemptions or the Trust’s
unallocated gold holdings are not
sufficient to meet certain minimum size
requirements to convert unallocated
gold to ESG Approved Gold at the Mint.
The Trust may need to instruct the Mint
to convert ESG Approved Gold into
unallocated gold if insufficient
unallocated gold is available to be sold
owned by the Trust pursuant to gold storage and
custody agreements. The Gold Custodian will hold
gold for the account of the Trust on an allocated
basis (the ‘‘Trust Allocated Account’’), except
where gold is temporarily held in an unallocated
account (the ‘‘Trust Unallocated Account’’). The
Sponsor may cause the Trust to engage unaffiliated
gold brokers to transfer unallocated gold between
the Trust’s custody accounts maintained for the
benefit of the Trust by the Gold Custodian in
Ottawa, Canada and London, United Kingdom
where it can be delivered to a redeeming
Authorized Participant (as defined below) if
additional unallocated gold is needed by the Trust
to satisfy the redeeming Authorized Participant’s
redemption request. The Gold Custodian is
responsible for allocating specific bars of gold to the
Trust Allocated Account. The Gold Custodian will
provide the Trust with regular reports detailing the
gold transfers in and out of the Trust Unallocated
Account with the Gold Custodian and identifying
the gold bars held in the Trust Allocated Account.
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to pay expenses or to meet redemption
requests. The Mint will exchange ESG
Approved Gold for an equal amount of
unallocated gold upon the receipt of
proper instructions from the Sponsor.
The ESG standards and criteria used
by the Sponsor (the ‘‘ESG Criteria’’) are
designed to provide investors with an
enhanced level of ESG scrutiny along
with disclosure of the provenance of the
metal sourced, and include an
evaluation of mining companies and
mines.12 Mining companies and mines
that meet the ESG Criteria (‘‘ESG
Approved Mining Companies’’ and
‘‘ESG Approved Mines’’, respectively)
must also comply with the Mint
Responsible Sourcing Requirements. An
overview of the Sponsor’s application of
the ESG Criteria to mining companies
and mines that can provide the material
for ESG Approved Gold is provided
below.13
The application of the ESG Criteria
involves multiple levels of analysis.
While the Sponsor’s evaluation of mines
and mining companies will include the
objective factors discussed below, the
Sponsor will also evaluate company
reports and, where possible, interview
key personnel to assess whether such a
mining company or mine meets the ESG
Criteria, which will require the
subjective judgment of the Sponsor. The
selection of these factors and how they
are applied will be based, at least to
some degree, on the judgment of the
Sponsor and may or may not be
consistent with current or future
standards used by others in the
industry. The ESG Criteria is subject to
change by the Sponsor in its sole
discretion.
The ESG Criteria are in addition to
those used in the London Bullion
Market Association’s (‘‘LBMA’’)
Responsible Sourcing Program, as
detailed in the LBMA’s Responsible
Gold Guidance, and are designed to
provide investors with an enhanced
level of ESG scrutiny along with
disclosure of the provenance of the
metal sourced. The Mint currently
requires that its refining customers,
including mines, meet the requirements
12 The ESG Criteria are anticipated to evolve over
time at the discretion of the Sponsor. Also, one or
more criterion may not be relevant with respect to
all sources of gold that are eligible for investment.
Factors that could be considered by the Sponsor in
modifying the ESG Criteria include changes to
current gold mining techniques or standards,
evolving legal standards, the introduction of new
standards or evaluation frameworks within the
mining industry or the elimination of existing
standards or frameworks that in the view of the
Sponsor are relevant to the ESG assessment of a
mining company or mine site.
13 The ESG Criteria and the Sponsor’s application
of the ESG Criteria are disclosed in the Registration
Statement.
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outlined in the OECD Due Diligence
Guidance for Responsible Supply
Chains of Minerals from ConflictAffected and High-Risk Areas, the
LBMA Responsible Gold Guidance, the
Mint’s Responsible Metals Program and
the Mint’s Anti-Money Laundering and
Anti-Terrorist Financing Program in
compliance with the Proceeds of Crime
(Money Laundering) and Terrorist
Financing Act (Canada) (collectively,
the ‘‘Mint Responsible Sourcing
Requirements’’). Only mines which the
Mint determines meet and maintain the
Mint Responsible Sourcing
Requirements and with whom the Mint
has a contractual refining relationship
(each a ‘‘Mint Approved Mine’’,
collectively the ‘‘Mint Approved
Mines’’) will be eligible for
consideration by the Sponsor as a
provider of ESG Approved Gold. The
Mint will cease refining gold from any
Mint Approved Mine that no longer
meets the Mint Responsible Sourcing
Requirements, as determined by the
Mint from time to time.
The ESG factors used for the ESG
assessment of mines and miners
generally will encompass the following
factors:
• Environmental Factors
Æ Energy use and greenhouse gas
emissions
Æ Tailings and waste management
Æ Conservation and water
management
Æ Mine site remediation
• Social Factors
Æ Worker safety and health
Æ Community relations
Æ Natural resource benefit to local
communities
Æ Child and forced labor
• Governance Factors
Æ Corporate governance
Æ Workplace and gender diversity
Æ Fair executive compensation
Æ Corporate transparency and
disclosures
Mining companies that qualify for the
LBMA’s Responsible Sourcing Program
and are Mint Approved Mines will then
be subject to two levels of ESG
screening by the Sponsor: At the overall
company level and at the individual
mine site level.
First, the Sponsor will evaluate a
mining company using ESG factors
determined by the Sponsor (described
above). This evaluation will use a
number of tools, which include ratings
from third-party research providers,
such as Sustainalytics ESG Risk Ratings,
along with sell-side equity research
reports. With respect to corporate
governance, the Sponsor will evaluate
recommendations from proxy voting
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research providers, such as the Glass
Lewis Proxy Review. The Sponsor will
also use compliance with precious
metals industry standards as an
objective factor in its evaluation of
mining companies. Each mining
company with high ESG ratings and
favorable recommendations from proxy
voting research providers that complies
with precious metals industry standards
will be designated as an ESG Approved
Mining Company.
Second, the Sponsor will evaluate
individual mine site locations of each
ESG Approved Mining Company. Each
mine location of an ESG Approved
Mining Company will then be evaluated
by the Sponsor as follows: (1) The
performance of each mine against
various indicators in the Mining
Association of Canada’s Towards
Sustainable Mining standards; (2) using
the ESG factors described above; and (3)
whether such mine is in a heightened
risk or conflict area. Each mining
location of that ESG Approved Mining
Company that (a) the Sponsor
determines to meet the Mining
Association of Canada’s Towards
Sustainable Mining standards and the
ESG factors, and (b) is not in a
heightened risk or conflict area will be
designated as an ESG Approved Mine.
Only ESG Approved Mines will be
permitted to supply the raw material for
ESG Approved Gold to the Mint, which
will then refine the raw material to
create ESG Approved Gold for the Trust.
This means that the provenance of ESG
Approved Gold will be known to the
Trust.
Heightened risk or conflict areas
include areas where:
• Human rights abuses, forced or
child labor, war crimes or genocide are
prevalent;
• mines are involved in direct or
indirect support to non-state actors that
use arms without legal authority;
• mines transport gold or supplies
along routes that involve payment of
illegal taxes or extortions; and
• mines are involved in money
laundering or terrorism financing.
The Sponsor will be responsible for
any costs associated with researching,
establishing and maintaining the ESG
Criteria, assessing mining companies
and mines against certain of the ESG
Criteria and the diligence of the Trust’s
ESG Approved Gold Holdings. The
Sponsor will conduct research on each
mining company using its in-house
investment professionals, and may use
the services of outside consultants.
The Trust will not trade in gold
futures, options or swap contracts on
any futures exchange or over the
counter (‘‘OTC’’). The Trust will not
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hold or trade in commodity futures
contracts, ‘‘commodity interests,’’ or any
other instruments regulated by the
Commodity Exchange Act. The Trust’s
Cash Custodian may hold cash
temporarily received from the sale of
gold. The Trust’s assets will only consist
of ESG Approved Gold, unallocated
gold and cash.
Operation of the Gold Market
The global trade in gold consists of
OTC transactions in spot, forwards, and
options and other derivatives, together
with exchange-traded futures and
options. The ESG Criteria and the
processes and methods for refining and
using ESG Approved Gold for the
Trust’s operations have been developed
by the Sponsor specifically for the
Trust, and thus no ESG Approved Gold
that meets the ESG Criteria has been
produced. Therefore, there have been no
market transactions in ESG Approved
Gold. The Trust is not aware of a
separate market for ESG Approved Gold
and does not believe that one will
develop. ESG Approved Gold will be a
subset of allocated gold bullion that is
already currently refined by the Mint for
its customers.
The OTC gold market includes spot,
forward, and option and other
derivative transactions conducted on a
principal-to-principal basis. While this
is a global, nearly 24-hour per day
market, its main centers are London,
New York, and Zurich.
According to the Exchange, most OTC
market trades are cleared through
London. The LBMA plays an important
role in setting OTC gold trading
industry standards. A London Good
Delivery Bar (as described below),
which is acceptable for settlement of
any OTC transaction, will be acceptable
for delivery to the Trust in connection
with the issuance of Creation Units
(defined below).
The most significant gold futures
exchange in the U.S. is COMEX,
operated by Commodities Exchange,
Inc., a subsidiary of New York
Mercantile Exchange, Inc., and a
subsidiary of the Chicago Mercantile
Exchange Group (the ‘‘CME Group’’).
Other commodity exchanges include the
Tokyo Commodity Exchange
(‘‘TOCOM’’), the Multi Commodity
Exchange Of India (‘‘MCX’’), the
Shanghai Futures Exchange, ICE Futures
US (the ‘‘ICE’’), and the Dubai Gold &
Commodities Exchange. The CME
Group and ICE are members of the
Intermarket Surveillance Group (‘‘ISG’’).
The London Gold Bullion Market
According to the Exchange, most
trading in physical gold is conducted on
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the OTC market, predominantly in
London. LBMA coordinates various
OTC-market activities, including
clearing and vaulting, acts as the
principal intermediary between
physical gold market participants and
the relevant regulators, promotes good
trading practices and develops standard
market documentation. In addition, the
LBMA promotes refining standards for
the gold market by maintaining the
‘‘London Good Delivery List,’’ which
identifies refiners of gold that have been
approved by the LBMA. In the OTC
market, gold bars that meet the
specifications for weight, dimensions,
fineness (or purity), identifying marks
(including the assay stamp of an LBMAacceptable refiner) and appearance
described in ‘‘The Good Delivery Rules
for Gold and Silver Bars’’ published by
the LBMA are referred to as ‘‘London
Good Delivery Bars.’’ A London Good
Delivery Bar (typically called a ‘‘400
ounce bar’’) must contain between 350
and 430 fine troy ounces of gold (1 troy
ounce = 31.1034768 grams), with a
minimum fineness (or purity) of 995
parts per 1,000 (99.5%), be of good
appearance and be easy to handle and
stack. The fine gold content of a gold bar
is calculated by multiplying the gross
weight of the bar (expressed in units of
0.025 troy ounces) by the fineness of the
bar. A London Good Delivery Bar must
also bear the stamp of one of the refiners
identified on the London Good Delivery
List.
Following the enactment of the
Financial Markets Act 2012, the
Prudential Regulation Authority of the
Bank of England is responsible for
regulating most of the financial firms
that are active in the bullion market,
and the Financial Conduct Authority is
responsible for consumer and
competition issues. Trading in spot,
forwards and wholesale deposits in the
bullion market is subject to the NonInvestment Products (‘‘NIPS’’) Code
adopted by market participants.
Creation and Redemption of Shares
The Trust will create and redeem
Shares on a continuous basis in one or
more blocks of 25,000 Shares (a block of
25,000 Shares is called a ‘‘Creation
Unit’’). As described below, the Trust
will issue Shares in Creation Units to
certain authorized participants
(‘‘Authorized Participants’’) on an
ongoing basis.
Creation Units may be created or
redeemed only by Authorized
Participants. Orders must be placed by
3:59 p.m. Eastern Time (‘‘E.T.’’). The
day on which a Trust receives a valid
purchase or redemption order is the
order date. In connection with creations
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and redemptions of Creation Units,
Authorized Participants will be required
to deliver or receive unallocated gold to
or from the Trust, as applicable. An
Authorized Participant will be required
to enter into a trading agreement with
the Mint for purposes of facilitating
transfers of unallocated gold between
the Trust and the Authorized
Participant.
Unallocated gold received from
Authorized Participants will be
converted into ESG Approved Gold by
the Mint. The Mint will convert
unallocated gold into ESG Approved
Gold after receipt of a completed
withdrawal request form from the
Sponsor to withdraw an amount of
unallocated gold from the Trust
Unallocated Account and deposit ESG
Approved Gold into the Trust Allocated
Account.
The Trust will redeem Shares using
unallocated gold. To the extent that the
Trust’s existing holdings of unallocated
gold are insufficient to meet a
redemption request, the Trust will be
required to request that the Mint convert
ESG Approved Gold to unallocated
gold, which may result in delays in the
Trust’s ability to meet redemption
requests from Authorized Participants.
The Mint will exchange ESG Approved
Gold for an equal amount of unallocated
gold upon the receipt of proper
instructions from the Sponsor. The Mint
will issue a confirmation of a completed
exchange to the Sponsor by facsimile or
by email on the business day that the
exchange is completed.
The Mint expects that it will be able
to refine and produce ESG Approved
Gold within approximately five
business days following the receipt of
completed withdrawal request, subject
to production capacity, availability and
minimum size requirements. The
business day on which the physical
withdrawal is to occur will be
confirmed to the Sponsor in writing by
the Mint. A receipt of deposit will be
issued to the Sponsor by facsimile or by
email on the business day the
production of all ESG Approved Gold
underlying a withdrawal request form is
completed.
Creation Units are only issued or
redeemed on a day that the Exchange is
open for regular trading in an amount of
gold determined by the Administrator.
Because ESG Approved Gold can be
sourced by the Mint only from a limited
number of suppliers, from time-to-time,
on a temporary basis until additional
ESG Approved Gold can be refined by
the Mint, the Trust will hold gold in
unallocated form. No Shares will be
issued unless the Mint has allocated to
the Trust Unallocated Account the
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corresponding amount of unallocated
gold from the Authorized Participant’s
account.
Each Authorized Participant must be
a registered broker-dealer, a participant
in Depository Trust Corporation
(‘‘DTC’’), have entered into an
agreement with the Trustee (the
‘‘Authorized Participant Agreement’’)
and be in a position to deliver or receive
to or from the Trust, as applicable, an
amount of gold that is at least equal to
the aggregate NAV of the number of
Creation Units that are part of a
purchase order or redemption order, as
the case may be.
According to the Registration
Statement, Authorized Participants may
surrender Creation Units in exchange
for the corresponding amount of
unallocated gold announced by the
Transfer Agent. Upon the surrender of
such Shares and the payment of the
Transfer Agent’s applicable fee and of
any expenses, taxes or charges, the
Transfer Agent will deliver to the order
of the redeeming Authorized Participant
the amount of unallocated gold
corresponding to the redeemed Creation
Units. Shares can only be surrendered
for redemption in Creation Units of
25,000 Shares each.
Before surrendering Creation Units for
redemption, an Authorized Participant
must deliver to the Trustee a written
request indicating the number of
Creation Units it intends to redeem. The
date the Trustee receives that order
determines the amount of unallocated
gold to be received in exchange.
However, orders received by the Trustee
after 3:59 p.m. Eastern Time (‘‘E.T.’’)
will be rejected.
The redemption distribution from the
Trust will consist of a credit to the
redeeming Authorized Participant’s
unallocated account representing the
amount of the gold held by the Trust
evidenced by the Shares being
redeemed as of the date of the
redemption order.
Net Asset Value
The NAV of the Trust will be
calculated by subtracting the Trust’s
expenses and liabilities on any day from
the value of the gold and other assets
owned by the Trust on that day; the
NAV per Share will be obtained by
dividing the NAV of the Trust on a
given day by the number of Shares
outstanding on that day. On each day on
which the Exchange is open for regular
trading, the Administrator will
determine the NAV as promptly as
practicable after 4:00 p.m. E.T. The
Administrator will value the Trust’s
gold on the basis of LBMA Gold Price
PM or LBMA Gold Price AM. If the
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60519
Sponsor deems it necessary, the
Sponsor and the Administrator may
agree to use a widely recognized pricing
service for purposes of ascertaining the
price of gold to use when calculating the
NAV. The NAV per Share will be
calculated by taking the current price of
the Trust’s total assets, subtracting any
liabilities, and dividing by the total
number of Shares outstanding.
Authorized Participants will not
receive from the Sponsor, the Trust or
any affiliates any fee or other
compensation in connection with the
offering of the Shares.
Availability of Information Regarding
Gold
Currently, the Consolidated Tape Plan
does not provide for dissemination of
the spot price of a commodity such as
gold over the Consolidated Tape.
However, there will be disseminated
over the Consolidated Tape the last sale
price for the Shares, as is the case for
all equity securities traded on the
Exchange (including exchange-traded
funds). In addition, there is a
considerable amount of information
about gold and gold markets available
on public websites and through
professional and subscription services.
Investors may obtain gold pricing
information on a 24-hour basis based on
the spot price for an ounce of Gold from
various financial information service
providers, such as Reuters and
Bloomberg.
Reuters and Bloomberg, for example,
provide at no charge on their websites
delayed information regarding the spot
price of Gold and last sale prices of Gold
futures, as well as information about
news and developments in the gold
market. Reuters and Bloomberg also
offer a professional service to
subscribers for a fee that provides
information on Gold prices directly
from market participants. Complete realtime data for Gold futures and options
prices traded on the COMEX are
available by subscription from Reuters
and Bloomberg. There are a variety of
other public websites providing
information on gold, ranging from those
specializing in precious metals to sites
maintained by major newspapers. In
addition, the LBMA Gold Price is
publicly available at no charge at
www.lbma.org.uk.
Availability of Information
The intraday indicative value (‘‘IIV’’)
per Share for the Shares will be
disseminated by one or more major
market data vendors. The IIV will be
calculated based on the amount of gold
held by the Trust and a price of gold
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derived from updated bids and offers
indicative of the spot price of gold.14
The website for the Trust (https://
sprott.com/investment-strategies/
physical-bullion-trusts) will contain the
following information, on a per Share
basis, for the Trust: (a) The mid-point of
the bid-ask price 15 at the close of
trading (‘‘Bid/Ask Price’’), and a
calculation of the premium or discount
of such price against such NAV; and (b)
data in chart format displaying the
frequency distribution of discounts and
premiums of the Bid/Ask Price against
the NAV, within appropriate ranges, for
each of the four previous calendar
quarters. The website for the Trust will
also provide the Trust’s prospectus.
Finally, the Trust’s website will be
updated once daily to provide the last
sale price of the Shares as traded in the
U.S. market at the end of regular
trading. In addition, information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers.
The Trust will maintain on its website
current lists of the ESG Criteria and ESG
Approved Mines and ESG Approved
Mining Companies from which the
Trust sources its ESG Approved Gold.
The Trust anticipates that ESG
Approved Mines and ESG Approved
Mining Companies may be added or
removed from such lists over time based
on, among other things, whether such
ESG Approved Mines and ESG
Approved Mining Companies meet the
evolving ESG Criteria and whether they
are Mint Approved Mines. The Trust
will update the information on its
website promptly after any change to
the ESG Criteria, ESG Approved Mines
or ESG Approved Mining Companies.
jspears on DSK121TN23PROD with NOTICES1
Criteria for Initial and Continued Listing
The Trust will be subject to the
criteria in NYSE Arca Rule 8.201–E(e)
for initial and continued listing of the
Shares.
A minimum of two Creation Units or
50,000 Shares will be required to be
outstanding at the start of trading,
which is equivalent to 10,000 fine
14 The IIV on a per Share basis disseminated
during the Core Trading Session should not be
viewed as a real-time update of the NAV, which is
calculated once a day.
15 The bid-ask price of the Shares will be
determined using the highest bid and lowest offer
on the Consolidated Tape as of the time of
calculation of the closing day NAV.
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17:42 Nov 01, 2021
Jkt 256001
ounces of gold or about $18,550,000 as
of June 14, 2021. The Exchange believes
that the anticipated minimum number
of Shares outstanding at the start of
trading is sufficient to provide adequate
market liquidity.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Trust subject to the Exchange’s
existing rules governing the trading of
equity securities. Trading in the Shares
on the Exchange will occur in
accordance with NYSE Arca Rule 7.34–
E(a). The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions. As
provided in NYSE Arca Rule 7.6–E,
Commentary .03, the minimum price
variation (‘‘MPV’’) for quoting and entry
of orders in equity securities traded on
the NYSE Arca Marketplace is $0.01,
with the exception of securities that are
priced less than $1.00 for which the
MPV for order entry is $0.0001.
Further, NYSE Arca Rule 8.201–E sets
forth certain restrictions on ETP Holders
acting as registered Market Makers in
the Shares to facilitate surveillance.
Under NYSE Arca Rule 8.201–E(g), an
ETP Holder acting as a registered Market
Maker in the Shares is required to
provide the Exchange with information
relating to its trading in the underlying
gold, any related futures or options on
futures, or any other related derivatives.
Commentary .04 of NYSE Arca Rule
6.3–E requires an ETP Holder acting as
a registered Market Maker, and its
affiliates, in the Shares to establish,
maintain and enforce written policies
and procedures reasonably designed to
prevent the misuse of any material
nonpublic information with respect to
such products, any components of the
related products, any physical asset or
commodity underlying the product,
applicable currencies, underlying
indexes, related futures or options on
futures, and any related derivative
instruments (including the Shares).
As a general matter, the Exchange has
regulatory jurisdiction over its ETP
Holders and their associated persons,
which include any person or entity
controlling an ETP Holder. To the extent
the Exchange may be found to lack
jurisdiction over a subsidiary or affiliate
of an ETP Holder that does business
only in commodities or futures
contracts, the Exchange could obtain
information regarding the activities of
such subsidiary or affiliate through
surveillance sharing agreements with
regulatory organizations of which such
subsidiary or affiliate is a member.
With respect to trading halts, the
Exchange may consider all relevant
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading on the Exchange in the Shares
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which
conditions in the underlying gold
market have caused disruptions and/or
lack of trading, or (2) whether other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present. In
addition, trading in Shares will be
subject to trading halts caused by
extraordinary market volatility pursuant
to the Exchange’s ‘‘circuit breaker’’
rule.16 The Exchange will halt trading in
the Shares if the NAV of the Trust is not
calculated or disseminated daily. The
Exchange may halt trading during the
day in which an interruption occurs to
the dissemination of the IIV, as
described above. If the interruption to
the dissemination of the IIV persists
past the trading day in which it occurs,
the Exchange will halt trading no later
than the beginning of the trading day
following the interruption.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances
administered by the Exchange, as well
as cross-market surveillances
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.17 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
16 See
NYSE Arca Rule 7.12–E.
conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
17 FINRA
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jspears on DSK121TN23PROD with NOTICES1
communicate as needed regarding
trading in the Shares with other markets
and other entities that are members of
the ISG, and the Exchange or FINRA, on
behalf of the Exchange, or both, may
obtain trading information regarding
trading in the Shares from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.18
Also, pursuant to NYSE Arca Rule
8.201–E(g), the Exchange is able to
obtain information regarding trading in
the Shares and the underlying gold
through ETP Holders acting as
registered Market Makers, in connection
with such ETP Holders’ proprietary or
customer trades through ETP Holders
which they effect on any relevant
market.
In addition, the Exchange also has a
general policy prohibiting the improper
distribution of material, non-public
information by its employees.
All statements and representations
made in this filing regarding (a) the
description of the portfolio, (b)
limitations on portfolio holdings or
reference assets, or (c) the applicability
of Exchange listing rules specified in
this rule filing shall constitute
continued listing requirements for
listing the Shares of the Trust on the
Exchange.
The issuer has represented to the
Exchange that it will advise the
Exchange of any failure by the Trust to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements. If the Trust is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
III. Proceedings To Determine Whether
To Approve or Disapprove SR–
NYSEArca–2021–65 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 19 to determine
whether the proposed rule change
should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposal. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
Rather, as described below, the
Commission seeks and encourages
interested persons to provide comments
on the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,20 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposal’s
consistency with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange be ‘‘designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade,’’ and ‘‘to
protect investors and the public
interest.’’ 21
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the Exchange Act and
the rules and regulations issued
thereunder . . . is on the [SRO] that
proposed the rule change.’’ 22 The
description of a proposed rule change,
its purpose and operation, its effect, and
a legal analysis of its consistency with
applicable requirements must all be
sufficiently detailed and specific to
support an affirmative Commission
finding,23 and any failure of an SRO to
provide this information may result in
the Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.24
The Commission is concerned that
certain aspects of the proposal are not
sufficiently described and that the
Exchange has not met its burden to
demonstrate that the proposed rule
change is consistent with the Act and
the rules and regulations issued
thereunder. For example, with respect
to creation and redemption of Shares,
the Exchange describes a process
whereby the Mint will convert
unallocated gold into ESG Approved
Gold or convert ESG Approved Gold
into unallocated gold.25 However, the
Exchange does not explain how this
conversion process will take place or
provide sufficient details on how costly
it will be for the Mint to perform such
a conversion on the Fund’s behalf and
the extent to which these costs will be
20 Id.
21 15
U.S.C. 78f(b)(5).
CFR 201.700(b)(3).
23 See id.
24 See id.
25 See Notice, supra note 3.
borne by investors in the Shares. The
Exchange also does not explain why this
conversion from unallocated gold to
ESG Approved Gold is necessary rather
than allowing Authorized Participants
to submit Creation Units of ESG
Approved Gold that they have sourced
from the Mint. In addition, the
Exchange states that to the extent that
the Trust’s existing holdings of
unallocated gold are insufficient to meet
a redemption request, the Trust will be
required to request that the Mint convert
ESG Approved Gold to unallocated
gold, which may result in delays in the
Trust’s ability to meet redemption
requests from Authorized Participants.
However, the Exchange does not
sufficiently explain why such a
conversion is necessary to effect
redemptions instead of the Fund
redeeming Shares using ESG Approved
Gold without a delay, or why this delay
does not raise concerns under the Act.26
As such, the Commission has concerns
about the proposed conversion process
and whether the proposal is sufficiently
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to protect investors and the
public interest, as required by Section
6(b)(5) of the Act.
Furthermore, the Commission is
concerned that the Exchange does not
adequately explain how other aspects of
the proposal are designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and to protect
investors and the public interest, as
required by Section 6(b)(5) of the Act.
For example, the Exchange represents
that the Administrator will value the
Trust’s gold, including both ESG
Approved Gold and unallocated gold
held by the Trust, based on LBMA Gold
Price PM or LBMA Gold Price AM.27
The Exchange further states that the
Trust is not aware of a separate market
for ESG Approved Gold and does not
believe that one will develop.28
However, given that ESG Approved
Gold may constitute, by construction, a
small portion of the total gold
outstanding in the market, the Exchange
has not sufficiently explained why the
Trust can expect to trade or value ESG
Approved Gold at the same price as
unallocated gold. In addition, the
proposal does not address the potential
effects that the listing and trading of the
Shares may have on the development of
a separate market for ESG Approved
Gold or differential pricing terms for
22 17
18 For a list of the current members of ISG, see
www.isgportal.org.
19 15 U.S.C. 78s(b)(2)(B).
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17:42 Nov 01, 2021
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60521
26 See
Notice, supra note 3.
id.
28 See id.
27 See
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ESG Approved Gold in existing gold
markets. The proposal also does not
address the effect such a differential
may have on the valuation of the Shares,
potential pricing dislocations between
the NAV per Share and Share price or
between the NAV and the true value of
the underlying assets, or how such
dislocations might affect investors in the
Shares, nor how those effects would be
consistent with the Act.
For these reasons, the Commission
believes it is appropriate to institute
proceedings pursuant to Section
19(b)(2)(B) of the Act 29 to determine
whether the proposal should be
approved or disapproved.
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposed rule change is consistent with
Section 6(b)(5) or any other provision of
the Act, or the rules and regulations
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval that would be
facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4, any request for an
opportunity to make an oral
presentation.30
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposed rule change should be
approved or disapproved by November
23, 2021. Any person who wishes to file
a rebuttal to any other person’s
submission must file that rebuttal by
December 7, 2021.
The Commission asks that
commenters address the sufficiency of
the Exchange’s statements in support of
the proposal in addition to any other
comments they may wish to submit
about the proposed rule change. In this
regard, the Commission seeks
commenters’ views regarding the
29 15
U.S.C. 78s(b)(2)(B).
19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
jspears on DSK121TN23PROD with NOTICES1
30 Section
VerDate Sep<11>2014
17:42 Nov 01, 2021
Jkt 256001
Exchange’s proposal to list and trade the
Shares is adequately designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and to
protect investors and the public interest,
consistent with the Act.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2021–65 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2021–65. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2021–65 and
should be submitted by November 23,
2021. Rebuttal comments should be
submitted by December 7, 2021.
31 17
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Frm 00082
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–23810 Filed 11–1–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93435; File No. SR–MSRB–
2021–06]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Further Extend the
Regulatory Relief and Permit Dealers
To Conduct Office Inspections
Remotely Until June 30, 2022, Pursuant
to MSRB Rule G–27, on Supervision
October 27, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on October 26, 2021 the Municipal
Securities Rulemaking Board (‘‘MSRB’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the MSRB. 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 MSRB filed with the Commission
a proposed rule change to amend
Supplementary Material .01, Temporary
Relief for Completing Office
Inspections, of MSRB Rule G–27, on
supervision, to further extend the
regulatory relief and permit brokers,
dealers and municipal securities dealers
(collectively, ‘‘dealers’’) to conduct
office inspections, due to be completed
during calendar year 2022, remotely
until June 30, 2022 (the ‘‘proposed rule
change’’).
The MSRB has designated the
proposed rule change as constituting a
‘‘noncontroversial’’ rule change under
Section 19(b)(3)(A) 3 of the Act and Rule
19b–4(f)(6) 4 thereunder, which renders
the proposal effective upon receipt of
this filing by the Commission. The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
2 17
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]]>Agencies
[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60516-60522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23810]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93434; File No. SR-NYSEArca-2021-65]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change To List and Trade Shares of the Sprott ESG Gold ETF Under
NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares)
October 27, 2021.
I. Introduction
On July 19, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
Sprott ESG Gold ETF (``Trust'') under NYSE Arca Rule 8.201-E
(``Commodity-Based Trust Shares''). The proposed rule change was
published for comment in the Federal Register on July 30, 2021.\3\ On
September 2, 2021, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to approve or disapprove the proposed
rule change.\5\ The Commission has received no comments on the proposed
rule change. The Commission is publishing this order to institute
proceedings pursuant to Section 19(b)(2)(B) of the Act \6\ to determine
whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92506 (July 26,
2021), 86 FR 41109.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 92867, 86 FR 50568
(September 9, 2021). The Commission designated October 28, 2021, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change \7\
---------------------------------------------------------------------------
\7\ Additional information regarding the Trust and the Shares,
including investment strategies, creation and redemption procedures,
and portfolio holdings can be found in the Notice, supra note 3.
---------------------------------------------------------------------------
The Exchange proposes to list and trade Shares of the Trust \8\
under NYSE Arca Rule 8.201-E, which governs the listing and trading of
Commodity-Based Trust Shares \9\ on the Exchange. The Sponsor of the
Trust is Sprott Asset Management LP, a Canadian limited partnership
(``Sponsor''). The Bank of New York Mellon serves as the Trust's
administrator (``Administrator'') and transfer agent (``Transfer
Agent''). The Delaware Trust Company is the trustee of the Trust
(``Trustee'').\10\ The Royal Canadian Mint is the custodian of the
Trust's gold (``Gold Custodian'' or ``Mint'').\11\ The Bank of New York
[[Page 60517]]
Mellon will also serve as the Trust's cash custodian (``Cash
Custodian'') pursuant to the terms of the agreement between the Trust
and the Cash Custodian. In its capacity as cash custodian, the Cash
Custodian will maintain a custodial account that holds cash for the
benefit of the Trust for the purpose of payment of the Sponsor's fee in
cash or the other expenses of the Trust.
---------------------------------------------------------------------------
\8\ On February 11, 2021, the Trust submitted to the Commission
on a confidential basis its draft registration statement on Form S-1
under the Securities Act of 1933, and on July 1, 2021, the Trust
submitted to the Commission the most recent amendment to its draft
registration statement (collectively, the ``Registration
Statement''). The Registration Statement is not yet effective, and
the Exchange will not commence trading in Shares until the
Registration Statement becomes effective.
\9\ Commodity-Based Trust Shares are securities issued by a
trust that represent investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
Trust. The Exchange represents that the Shares will satisfy the
requirements of NYSE Arca Rule 8.201-E and thereby qualify for
listing on the Exchange and that the Trust relies on the exemption
contained in Rule 10A-3(c)(7) regarding the application of Rule 10A-
3 (17 CFR 240.10A-3) under the Act.
\10\ The Trustee is a fiduciary under the Trust Agreement and
must satisfy the requirements of Section 3807 of the Delaware
Statutory Trust Act. However, the fiduciary duties, responsibilities
and liabilities of the Trustee are limited by, and are only those
specifically set forth in, the Trust Agreement. The Trust does not
have a Board of Directors or persons acting in a similar capacity.
\11\ The Mint operates pursuant to the Royal Canadian Mint Act
(Canada) and is a Canadian Crown corporation. Crown corporations are
corporations wholly-owned by the Government of Canada. The Mint is,
for all its purposes, an agent of Her Majesty in right of Canada
and, as such, its obligations generally constitute unconditional
obligations of the Government of Canada. The Gold Custodian is
responsible for safekeeping the gold owned by the Trust pursuant to
gold storage and custody agreements. The Gold Custodian will hold
gold for the account of the Trust on an allocated basis (the ``Trust
Allocated Account''), except where gold is temporarily held in an
unallocated account (the ``Trust Unallocated Account''). The Sponsor
may cause the Trust to engage unaffiliated gold brokers to transfer
unallocated gold between the Trust's custody accounts maintained for
the benefit of the Trust by the Gold Custodian in Ottawa, Canada and
London, United Kingdom where it can be delivered to a redeeming
Authorized Participant (as defined below) if additional unallocated
gold is needed by the Trust to satisfy the redeeming Authorized
Participant's redemption request. The Gold Custodian is responsible
for allocating specific bars of gold to the Trust Allocated Account.
The Gold Custodian will provide the Trust with regular reports
detailing the gold transfers in and out of the Trust Unallocated
Account with the Gold Custodian and identifying the gold bars held
in the Trust Allocated Account.
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Operation of the Trust
The investment objective of the Trust will be for the Shares to
reflect the performance of the price of gold, less the Trust's expenses
and liabilities. The Trust will issue Shares which represent units of
fractional undivided beneficial interest in and ownership of the Trust.
The Trust's assets are expected to consist primarily of fully
allocated unencumbered physical gold bullion held by the Mint on behalf
of the Trust that meets certain environmental, social and governance
(``ESG'') standards and criteria established by the Sponsor (``ESG
Approved Gold''), and will also include unallocated unencumbered
physical gold bullion held by the Mint on behalf of the Trust and cash.
The Trust does not intend to hold a certain amount of gold in
unallocated form to satisfy redemption requests or to pay expenses, but
the Trust expects to hold some amount of unallocated gold at any given
point in time. The Trust's holdings of unallocated gold may be a
significant percentage of the Trust's assets if, for example, the Trust
has received more requests for creations than redemptions or the
Trust's unallocated gold holdings are not sufficient to meet certain
minimum size requirements to convert unallocated gold to ESG Approved
Gold at the Mint. The Trust may need to instruct the Mint to convert
ESG Approved Gold into unallocated gold if insufficient unallocated
gold is available to be sold to pay expenses or to meet redemption
requests. The Mint will exchange ESG Approved Gold for an equal amount
of unallocated gold upon the receipt of proper instructions from the
Sponsor.
The ESG standards and criteria used by the Sponsor (the ``ESG
Criteria'') are designed to provide investors with an enhanced level of
ESG scrutiny along with disclosure of the provenance of the metal
sourced, and include an evaluation of mining companies and mines.\12\
Mining companies and mines that meet the ESG Criteria (``ESG Approved
Mining Companies'' and ``ESG Approved Mines'', respectively) must also
comply with the Mint Responsible Sourcing Requirements. An overview of
the Sponsor's application of the ESG Criteria to mining companies and
mines that can provide the material for ESG Approved Gold is provided
below.\13\
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\12\ The ESG Criteria are anticipated to evolve over time at the
discretion of the Sponsor. Also, one or more criterion may not be
relevant with respect to all sources of gold that are eligible for
investment. Factors that could be considered by the Sponsor in
modifying the ESG Criteria include changes to current gold mining
techniques or standards, evolving legal standards, the introduction
of new standards or evaluation frameworks within the mining industry
or the elimination of existing standards or frameworks that in the
view of the Sponsor are relevant to the ESG assessment of a mining
company or mine site.
\13\ The ESG Criteria and the Sponsor's application of the ESG
Criteria are disclosed in the Registration Statement.
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The application of the ESG Criteria involves multiple levels of
analysis. While the Sponsor's evaluation of mines and mining companies
will include the objective factors discussed below, the Sponsor will
also evaluate company reports and, where possible, interview key
personnel to assess whether such a mining company or mine meets the ESG
Criteria, which will require the subjective judgment of the Sponsor.
The selection of these factors and how they are applied will be based,
at least to some degree, on the judgment of the Sponsor and may or may
not be consistent with current or future standards used by others in
the industry. The ESG Criteria is subject to change by the Sponsor in
its sole discretion.
The ESG Criteria are in addition to those used in the London
Bullion Market Association's (``LBMA'') Responsible Sourcing Program,
as detailed in the LBMA's Responsible Gold Guidance, and are designed
to provide investors with an enhanced level of ESG scrutiny along with
disclosure of the provenance of the metal sourced. The Mint currently
requires that its refining customers, including mines, meet the
requirements outlined in the OECD Due Diligence Guidance for
Responsible Supply Chains of Minerals from Conflict-Affected and High-
Risk Areas, the LBMA Responsible Gold Guidance, the Mint's Responsible
Metals Program and the Mint's Anti-Money Laundering and Anti-Terrorist
Financing Program in compliance with the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada) (collectively, the
``Mint Responsible Sourcing Requirements''). Only mines which the Mint
determines meet and maintain the Mint Responsible Sourcing Requirements
and with whom the Mint has a contractual refining relationship (each a
``Mint Approved Mine'', collectively the ``Mint Approved Mines'') will
be eligible for consideration by the Sponsor as a provider of ESG
Approved Gold. The Mint will cease refining gold from any Mint Approved
Mine that no longer meets the Mint Responsible Sourcing Requirements,
as determined by the Mint from time to time.
The ESG factors used for the ESG assessment of mines and miners
generally will encompass the following factors:
Environmental Factors
[cir] Energy use and greenhouse gas emissions
[cir] Tailings and waste management
[cir] Conservation and water management
[cir] Mine site remediation
Social Factors
[cir] Worker safety and health
[cir] Community relations
[cir] Natural resource benefit to local communities
[cir] Child and forced labor
Governance Factors
[cir] Corporate governance
[cir] Workplace and gender diversity
[cir] Fair executive compensation
[cir] Corporate transparency and disclosures
Mining companies that qualify for the LBMA's Responsible Sourcing
Program and are Mint Approved Mines will then be subject to two levels
of ESG screening by the Sponsor: At the overall company level and at
the individual mine site level.
First, the Sponsor will evaluate a mining company using ESG factors
determined by the Sponsor (described above). This evaluation will use a
number of tools, which include ratings from third-party research
providers, such as Sustainalytics ESG Risk Ratings, along with sell-
side equity research reports. With respect to corporate governance, the
Sponsor will evaluate recommendations from proxy voting
[[Page 60518]]
research providers, such as the Glass Lewis Proxy Review. The Sponsor
will also use compliance with precious metals industry standards as an
objective factor in its evaluation of mining companies. Each mining
company with high ESG ratings and favorable recommendations from proxy
voting research providers that complies with precious metals industry
standards will be designated as an ESG Approved Mining Company.
Second, the Sponsor will evaluate individual mine site locations of
each ESG Approved Mining Company. Each mine location of an ESG Approved
Mining Company will then be evaluated by the Sponsor as follows: (1)
The performance of each mine against various indicators in the Mining
Association of Canada's Towards Sustainable Mining standards; (2) using
the ESG factors described above; and (3) whether such mine is in a
heightened risk or conflict area. Each mining location of that ESG
Approved Mining Company that (a) the Sponsor determines to meet the
Mining Association of Canada's Towards Sustainable Mining standards and
the ESG factors, and (b) is not in a heightened risk or conflict area
will be designated as an ESG Approved Mine. Only ESG Approved Mines
will be permitted to supply the raw material for ESG Approved Gold to
the Mint, which will then refine the raw material to create ESG
Approved Gold for the Trust. This means that the provenance of ESG
Approved Gold will be known to the Trust.
Heightened risk or conflict areas include areas where:
Human rights abuses, forced or child labor, war crimes or
genocide are prevalent;
mines are involved in direct or indirect support to non-
state actors that use arms without legal authority;
mines transport gold or supplies along routes that involve
payment of illegal taxes or extortions; and
mines are involved in money laundering or terrorism
financing.
The Sponsor will be responsible for any costs associated with
researching, establishing and maintaining the ESG Criteria, assessing
mining companies and mines against certain of the ESG Criteria and the
diligence of the Trust's ESG Approved Gold Holdings. The Sponsor will
conduct research on each mining company using its in-house investment
professionals, and may use the services of outside consultants.
The Trust will not trade in gold futures, options or swap contracts
on any futures exchange or over the counter (``OTC''). The Trust will
not hold or trade in commodity futures contracts, ``commodity
interests,'' or any other instruments regulated by the Commodity
Exchange Act. The Trust's Cash Custodian may hold cash temporarily
received from the sale of gold. The Trust's assets will only consist of
ESG Approved Gold, unallocated gold and cash.
Operation of the Gold Market
The global trade in gold consists of OTC transactions in spot,
forwards, and options and other derivatives, together with exchange-
traded futures and options. The ESG Criteria and the processes and
methods for refining and using ESG Approved Gold for the Trust's
operations have been developed by the Sponsor specifically for the
Trust, and thus no ESG Approved Gold that meets the ESG Criteria has
been produced. Therefore, there have been no market transactions in ESG
Approved Gold. The Trust is not aware of a separate market for ESG
Approved Gold and does not believe that one will develop. ESG Approved
Gold will be a subset of allocated gold bullion that is already
currently refined by the Mint for its customers.
The OTC gold market includes spot, forward, and option and other
derivative transactions conducted on a principal-to-principal basis.
While this is a global, nearly 24-hour per day market, its main centers
are London, New York, and Zurich.
According to the Exchange, most OTC market trades are cleared
through London. The LBMA plays an important role in setting OTC gold
trading industry standards. A London Good Delivery Bar (as described
below), which is acceptable for settlement of any OTC transaction, will
be acceptable for delivery to the Trust in connection with the issuance
of Creation Units (defined below).
The most significant gold futures exchange in the U.S. is COMEX,
operated by Commodities Exchange, Inc., a subsidiary of New York
Mercantile Exchange, Inc., and a subsidiary of the Chicago Mercantile
Exchange Group (the ``CME Group''). Other commodity exchanges include
the Tokyo Commodity Exchange (``TOCOM''), the Multi Commodity Exchange
Of India (``MCX''), the Shanghai Futures Exchange, ICE Futures US (the
``ICE''), and the Dubai Gold & Commodities Exchange. The CME Group and
ICE are members of the Intermarket Surveillance Group (``ISG'').
The London Gold Bullion Market
According to the Exchange, most trading in physical gold is
conducted on the OTC market, predominantly in London. LBMA coordinates
various OTC-market activities, including clearing and vaulting, acts as
the principal intermediary between physical gold market participants
and the relevant regulators, promotes good trading practices and
develops standard market documentation. In addition, the LBMA promotes
refining standards for the gold market by maintaining the ``London Good
Delivery List,'' which identifies refiners of gold that have been
approved by the LBMA. In the OTC market, gold bars that meet the
specifications for weight, dimensions, fineness (or purity),
identifying marks (including the assay stamp of an LBMA-acceptable
refiner) and appearance described in ``The Good Delivery Rules for Gold
and Silver Bars'' published by the LBMA are referred to as ``London
Good Delivery Bars.'' A London Good Delivery Bar (typically called a
``400 ounce bar'') must contain between 350 and 430 fine troy ounces of
gold (1 troy ounce = 31.1034768 grams), with a minimum fineness (or
purity) of 995 parts per 1,000 (99.5%), be of good appearance and be
easy to handle and stack. The fine gold content of a gold bar is
calculated by multiplying the gross weight of the bar (expressed in
units of 0.025 troy ounces) by the fineness of the bar. A London Good
Delivery Bar must also bear the stamp of one of the refiners identified
on the London Good Delivery List.
Following the enactment of the Financial Markets Act 2012, the
Prudential Regulation Authority of the Bank of England is responsible
for regulating most of the financial firms that are active in the
bullion market, and the Financial Conduct Authority is responsible for
consumer and competition issues. Trading in spot, forwards and
wholesale deposits in the bullion market is subject to the Non-
Investment Products (``NIPS'') Code adopted by market participants.
Creation and Redemption of Shares
The Trust will create and redeem Shares on a continuous basis in
one or more blocks of 25,000 Shares (a block of 25,000 Shares is called
a ``Creation Unit''). As described below, the Trust will issue Shares
in Creation Units to certain authorized participants (``Authorized
Participants'') on an ongoing basis.
Creation Units may be created or redeemed only by Authorized
Participants. Orders must be placed by 3:59 p.m. Eastern Time
(``E.T.''). The day on which a Trust receives a valid purchase or
redemption order is the order date. In connection with creations
[[Page 60519]]
and redemptions of Creation Units, Authorized Participants will be
required to deliver or receive unallocated gold to or from the Trust,
as applicable. An Authorized Participant will be required to enter into
a trading agreement with the Mint for purposes of facilitating
transfers of unallocated gold between the Trust and the Authorized
Participant.
Unallocated gold received from Authorized Participants will be
converted into ESG Approved Gold by the Mint. The Mint will convert
unallocated gold into ESG Approved Gold after receipt of a completed
withdrawal request form from the Sponsor to withdraw an amount of
unallocated gold from the Trust Unallocated Account and deposit ESG
Approved Gold into the Trust Allocated Account.
The Trust will redeem Shares using unallocated gold. To the extent
that the Trust's existing holdings of unallocated gold are insufficient
to meet a redemption request, the Trust will be required to request
that the Mint convert ESG Approved Gold to unallocated gold, which may
result in delays in the Trust's ability to meet redemption requests
from Authorized Participants. The Mint will exchange ESG Approved Gold
for an equal amount of unallocated gold upon the receipt of proper
instructions from the Sponsor. The Mint will issue a confirmation of a
completed exchange to the Sponsor by facsimile or by email on the
business day that the exchange is completed.
The Mint expects that it will be able to refine and produce ESG
Approved Gold within approximately five business days following the
receipt of completed withdrawal request, subject to production
capacity, availability and minimum size requirements. The business day
on which the physical withdrawal is to occur will be confirmed to the
Sponsor in writing by the Mint. A receipt of deposit will be issued to
the Sponsor by facsimile or by email on the business day the production
of all ESG Approved Gold underlying a withdrawal request form is
completed.
Creation Units are only issued or redeemed on a day that the
Exchange is open for regular trading in an amount of gold determined by
the Administrator. Because ESG Approved Gold can be sourced by the Mint
only from a limited number of suppliers, from time-to-time, on a
temporary basis until additional ESG Approved Gold can be refined by
the Mint, the Trust will hold gold in unallocated form. No Shares will
be issued unless the Mint has allocated to the Trust Unallocated
Account the corresponding amount of unallocated gold from the
Authorized Participant's account.
Each Authorized Participant must be a registered broker-dealer, a
participant in Depository Trust Corporation (``DTC''), have entered
into an agreement with the Trustee (the ``Authorized Participant
Agreement'') and be in a position to deliver or receive to or from the
Trust, as applicable, an amount of gold that is at least equal to the
aggregate NAV of the number of Creation Units that are part of a
purchase order or redemption order, as the case may be.
According to the Registration Statement, Authorized Participants
may surrender Creation Units in exchange for the corresponding amount
of unallocated gold announced by the Transfer Agent. Upon the surrender
of such Shares and the payment of the Transfer Agent's applicable fee
and of any expenses, taxes or charges, the Transfer Agent will deliver
to the order of the redeeming Authorized Participant the amount of
unallocated gold corresponding to the redeemed Creation Units. Shares
can only be surrendered for redemption in Creation Units of 25,000
Shares each.
Before surrendering Creation Units for redemption, an Authorized
Participant must deliver to the Trustee a written request indicating
the number of Creation Units it intends to redeem. The date the Trustee
receives that order determines the amount of unallocated gold to be
received in exchange. However, orders received by the Trustee after
3:59 p.m. Eastern Time (``E.T.'') will be rejected.
The redemption distribution from the Trust will consist of a credit
to the redeeming Authorized Participant's unallocated account
representing the amount of the gold held by the Trust evidenced by the
Shares being redeemed as of the date of the redemption order.
Net Asset Value
The NAV of the Trust will be calculated by subtracting the Trust's
expenses and liabilities on any day from the value of the gold and
other assets owned by the Trust on that day; the NAV per Share will be
obtained by dividing the NAV of the Trust on a given day by the number
of Shares outstanding on that day. On each day on which the Exchange is
open for regular trading, the Administrator will determine the NAV as
promptly as practicable after 4:00 p.m. E.T. The Administrator will
value the Trust's gold on the basis of LBMA Gold Price PM or LBMA Gold
Price AM. If the Sponsor deems it necessary, the Sponsor and the
Administrator may agree to use a widely recognized pricing service for
purposes of ascertaining the price of gold to use when calculating the
NAV. The NAV per Share will be calculated by taking the current price
of the Trust's total assets, subtracting any liabilities, and dividing
by the total number of Shares outstanding.
Authorized Participants will not receive from the Sponsor, the
Trust or any affiliates any fee or other compensation in connection
with the offering of the Shares.
Availability of Information Regarding Gold
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a commodity such as gold over the
Consolidated Tape. However, there will be disseminated over the
Consolidated Tape the last sale price for the Shares, as is the case
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of
information about gold and gold markets available on public websites
and through professional and subscription services.
Investors may obtain gold pricing information on a 24-hour basis
based on the spot price for an ounce of Gold from various financial
information service providers, such as Reuters and Bloomberg.
Reuters and Bloomberg, for example, provide at no charge on their
websites delayed information regarding the spot price of Gold and last
sale prices of Gold futures, as well as information about news and
developments in the gold market. Reuters and Bloomberg also offer a
professional service to subscribers for a fee that provides information
on Gold prices directly from market participants. Complete real-time
data for Gold futures and options prices traded on the COMEX are
available by subscription from Reuters and Bloomberg. There are a
variety of other public websites providing information on gold, ranging
from those specializing in precious metals to sites maintained by major
newspapers. In addition, the LBMA Gold Price is publicly available at
no charge at www.lbma.org.uk.
Availability of Information
The intraday indicative value (``IIV'') per Share for the Shares
will be disseminated by one or more major market data vendors. The IIV
will be calculated based on the amount of gold held by the Trust and a
price of gold
[[Page 60520]]
derived from updated bids and offers indicative of the spot price of
gold.\14\
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\14\ The IIV on a per Share basis disseminated during the Core
Trading Session should not be viewed as a real-time update of the
NAV, which is calculated once a day.
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The website for the Trust (https://sprott.com/investment-strategies/physical-bullion-trusts) will contain the following
information, on a per Share basis, for the Trust: (a) The mid-point of
the bid-ask price \15\ at the close of trading (``Bid/Ask Price''), and
a calculation of the premium or discount of such price against such
NAV; and (b) data in chart format displaying the frequency distribution
of discounts and premiums of the Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters.
The website for the Trust will also provide the Trust's prospectus.
Finally, the Trust's website will be updated once daily to provide the
last sale price of the Shares as traded in the U.S. market at the end
of regular trading. In addition, information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services. Information regarding the previous day's closing
price and trading volume information for the Shares will be published
daily in the financial section of newspapers.
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\15\ The bid-ask price of the Shares will be determined using
the highest bid and lowest offer on the Consolidated Tape as of the
time of calculation of the closing day NAV.
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The Trust will maintain on its website current lists of the ESG
Criteria and ESG Approved Mines and ESG Approved Mining Companies from
which the Trust sources its ESG Approved Gold. The Trust anticipates
that ESG Approved Mines and ESG Approved Mining Companies may be added
or removed from such lists over time based on, among other things,
whether such ESG Approved Mines and ESG Approved Mining Companies meet
the evolving ESG Criteria and whether they are Mint Approved Mines. The
Trust will update the information on its website promptly after any
change to the ESG Criteria, ESG Approved Mines or ESG Approved Mining
Companies.
Criteria for Initial and Continued Listing
The Trust will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
A minimum of two Creation Units or 50,000 Shares will be required
to be outstanding at the start of trading, which is equivalent to
10,000 fine ounces of gold or about $18,550,000 as of June 14, 2021.
The Exchange believes that the anticipated minimum number of Shares
outstanding at the start of trading is sufficient to provide adequate
market liquidity.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Trust subject to the Exchange's existing rules
governing the trading of equity securities. Trading in the Shares on
the Exchange will occur in accordance with NYSE Arca Rule 7.34-E(a).
The Exchange has appropriate rules to facilitate transactions in the
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-
E, Commentary .03, the minimum price variation (``MPV'') for quoting
and entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on
ETP Holders acting as registered Market Makers in the Shares to
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder
acting as a registered Market Maker in the Shares is required to
provide the Exchange with information relating to its trading in the
underlying gold, any related futures or options on futures, or any
other related derivatives. Commentary .04 of NYSE Arca Rule 6.3-E
requires an ETP Holder acting as a registered Market Maker, and its
affiliates, in the Shares to establish, maintain and enforce written
policies and procedures reasonably designed to prevent the misuse of
any material nonpublic information with respect to such products, any
components of the related products, any physical asset or commodity
underlying the product, applicable currencies, underlying indexes,
related futures or options on futures, and any related derivative
instruments (including the Shares).
As a general matter, the Exchange has regulatory jurisdiction over
its ETP Holders and their associated persons, which include any person
or entity controlling an ETP Holder. To the extent the Exchange may be
found to lack jurisdiction over a subsidiary or affiliate of an ETP
Holder that does business only in commodities or futures contracts, the
Exchange could obtain information regarding the activities of such
subsidiary or affiliate through surveillance sharing agreements with
regulatory organizations of which such subsidiary or affiliate is a
member.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading on the Exchange in the Shares may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which conditions in the underlying gold
market have caused disruptions and/or lack of trading, or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\16\ The Exchange will halt trading in the Shares if the
NAV of the Trust is not calculated or disseminated daily. The Exchange
may halt trading during the day in which an interruption occurs to the
dissemination of the IIV, as described above. If the interruption to
the dissemination of the IIV persists past the trading day in which it
occurs, the Exchange will halt trading no later than the beginning of
the trading day following the interruption.
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\16\ See NYSE Arca Rule 7.12-E.
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Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\17\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
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\17\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
[[Page 60521]]
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\18\
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\18\ For a list of the current members of ISG, see
www.isgportal.org.
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Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able
to obtain information regarding trading in the Shares and the
underlying gold through ETP Holders acting as registered Market Makers,
in connection with such ETP Holders' proprietary or customer trades
through ETP Holders which they effect on any relevant market.
In addition, the Exchange also has a general policy prohibiting the
improper distribution of material, non-public information by its
employees.
All statements and representations made in this filing regarding
(a) the description of the portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
listing rules specified in this rule filing shall constitute continued
listing requirements for listing the Shares of the Trust on the
Exchange.
The issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Trust to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Trust is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-65 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \19\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposal. Institution of proceedings does not
indicate that the Commission has reached any conclusions with respect
to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
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\19\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\20\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposal's consistency with Section 6(b)(5) of the Act,
which requires, among other things, that the rules of a national
securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade,'' and ``to protect investors and the public
interest.'' \21\
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\20\ Id.
\21\ 15 U.S.C. 78f(b)(5).
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
[SRO] that proposed the rule change.'' \22\ The description of a
proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all
be sufficiently detailed and specific to support an affirmative
Commission finding,\23\ and any failure of an SRO to provide this
information may result in the Commission not having a sufficient basis
to make an affirmative finding that a proposed rule change is
consistent with the Act and the applicable rules and regulations.\24\
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\22\ 17 CFR 201.700(b)(3).
\23\ See id.
\24\ See id.
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The Commission is concerned that certain aspects of the proposal
are not sufficiently described and that the Exchange has not met its
burden to demonstrate that the proposed rule change is consistent with
the Act and the rules and regulations issued thereunder. For example,
with respect to creation and redemption of Shares, the Exchange
describes a process whereby the Mint will convert unallocated gold into
ESG Approved Gold or convert ESG Approved Gold into unallocated
gold.\25\ However, the Exchange does not explain how this conversion
process will take place or provide sufficient details on how costly it
will be for the Mint to perform such a conversion on the Fund's behalf
and the extent to which these costs will be borne by investors in the
Shares. The Exchange also does not explain why this conversion from
unallocated gold to ESG Approved Gold is necessary rather than allowing
Authorized Participants to submit Creation Units of ESG Approved Gold
that they have sourced from the Mint. In addition, the Exchange states
that to the extent that the Trust's existing holdings of unallocated
gold are insufficient to meet a redemption request, the Trust will be
required to request that the Mint convert ESG Approved Gold to
unallocated gold, which may result in delays in the Trust's ability to
meet redemption requests from Authorized Participants. However, the
Exchange does not sufficiently explain why such a conversion is
necessary to effect redemptions instead of the Fund redeeming Shares
using ESG Approved Gold without a delay, or why this delay does not
raise concerns under the Act.\26\ As such, the Commission has concerns
about the proposed conversion process and whether the proposal is
sufficiently designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and to
protect investors and the public interest, as required by Section
6(b)(5) of the Act.
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\25\ See Notice, supra note 3.
\26\ See Notice, supra note 3.
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Furthermore, the Commission is concerned that the Exchange does not
adequately explain how other aspects of the proposal are designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and to protect investors and the
public interest, as required by Section 6(b)(5) of the Act. For
example, the Exchange represents that the Administrator will value the
Trust's gold, including both ESG Approved Gold and unallocated gold
held by the Trust, based on LBMA Gold Price PM or LBMA Gold Price
AM.\27\ The Exchange further states that the Trust is not aware of a
separate market for ESG Approved Gold and does not believe that one
will develop.\28\ However, given that ESG Approved Gold may constitute,
by construction, a small portion of the total gold outstanding in the
market, the Exchange has not sufficiently explained why the Trust can
expect to trade or value ESG Approved Gold at the same price as
unallocated gold. In addition, the proposal does not address the
potential effects that the listing and trading of the Shares may have
on the development of a separate market for ESG Approved Gold or
differential pricing terms for
[[Page 60522]]
ESG Approved Gold in existing gold markets. The proposal also does not
address the effect such a differential may have on the valuation of the
Shares, potential pricing dislocations between the NAV per Share and
Share price or between the NAV and the true value of the underlying
assets, or how such dislocations might affect investors in the Shares,
nor how those effects would be consistent with the Act.
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\27\ See id.
\28\ See id.
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For these reasons, the Commission believes it is appropriate to
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \29\
to determine whether the proposal should be approved or disapproved.
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\29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is consistent with Section 6(b)(5) or any other provision of the Act,
or the rules and regulations thereunder. Although there do not appear
to be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\30\
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\30\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by November 23, 2021. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
December 7, 2021.
The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal in addition to any
other comments they may wish to submit about the proposed rule change.
In this regard, the Commission seeks commenters' views regarding the
Exchange's proposal to list and trade the Shares is adequately designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and to protect investors and
the public interest, consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2021-65 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2021-65. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2021-65 and should be submitted
by November 23, 2021. Rebuttal comments should be submitted by December
7, 2021.
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\31\ 17 CFR 200.30-3(a)(57).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23810 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P
