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 Franklin Responsibly Sourced Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust Shares), 70555-70560 [2021-26712]

Download as PDF Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices prohibiting undue influence over the Chief Compliance Officers of securitybased swap dealers and major securitybased swap participants and requiring reporting of large security-based swap positions. 3. The Commission will consider whether to propose amendments to certain rules that govern money market funds under the Investment Company Act of 1940. 4. The Commission will consider whether to propose amendments to modernize share repurchase disclosure, including more detailed and more frequent disclosure about issuer share repurchases and requiring issuers to present the disclosure using a structured data language. 5. The Commission will consider whether to propose amendments to Rule 10b5–1 and new disclosure regarding 10b5–1 trading arrangements and insider trading policies and procedures, as well as amendments regarding the disclosure of the timing of certain equity compensation awards and reporting of gifts on Form 4. CONTACT PERSON FOR MORE INFORMATION: For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. Authority: 5 U.S.C. 552b. Dated: December 8, 2021. Vanessa A. Countryman, Secretary. [FR Doc. 2021–26945 Filed 12–9–21; 4:15 pm] thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the Franklin Responsibly Sourced Gold ETF (‘‘Fund’’), a series of the Franklin Templeton Holdings Trust (‘‘Trust’’), under NYSE Arca Rule 8.201–E. The proposed rule change was published for comment in the Federal Register on September 8, 2021.3 On September 29, 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. II. Description of the Proposed Rule Change 7 The Exchange proposes to list and trade Shares of the Fund 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 Fund is Franklin Holdings, LLC, a Delaware limited liability company. BNY Mellon Asset Servicing, a division of The Bank of New York Mellon (‘‘BNYM’’), serves as the Fund’s administrator (‘‘Administrator’’) and transfer agent (the ‘‘Transfer Agent’’). Delaware Trust BILLING CODE 8011–01–P 2 17 [Release No. 34–93720; File No. SR– NYSEArca–2021–73] 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 Franklin Responsibly Sourced Gold ETF Under NYSE Arca Rule 8.201–E (Commodity-Based Trust Shares) jspears on DSK121TN23PROD with NOTICES1 December 6, 2021. I. Introduction On August 23, 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 U.S.C. 78s(b)(1). VerDate Sep<11>2014 17:03 Dec 09, 2021 Jkt 256001 Company, a subsidiary of the Corporation Service Company serves as trustee of the Trust (‘‘Trustee’’). J.P. Morgan Chase Bank, N.A., London branch is the custodian of the Fund’s Gold Bullion (as defined in the Registration Statement) (the ‘‘Gold Custodian’’).10 BNYM will serve as the custodian of the Fund’s cash, if any (the ‘‘Cash Custodian’’). Exchange’s Description of the Operation of the Trust and Fund The investment objective of the Fund will be for the Shares to reflect the performance of the price of gold bullion, less the expenses of the Fund’s operations. Shares of the Fund will represent units of fractional undivided beneficial interest in and ownership of the net assets of the Fund. The Fund seeks to predominantly hold responsibly sourced gold bullion, defined as London Good Delivery gold bullion bars produced after January 2012 in accordance with London Bullion Market Association’s (‘‘LBMA’’) Responsible Gold Guidance (the ‘‘Guidance’’). From time to time, in certain circumstances a portion of the Fund’s assets may include pre-2012 LBMA gold bullion (i.e., London Good Delivery gold bars produced prior to January 2012 which was not subject to the Guidance), including, for example, due to availability constraints. In those circumstances, the Gold Custodian will seek to replace any pre-2012 LBMA gold bullion in the Fund Allocated Account with LBMA good delivery bars produced after January 2012 as soon as is practicable. 3 See SECURITIES AND EXCHANGE COMMISSION 1 15 CFR 240.19b–4. Securities Exchange Act Release No. 92840 (September 1, 2021), 86 FR 50385 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 93179, 86 FR 55033 (October 5, 2021). The Commission designated December 7, 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 Fund, 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 April 22, 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 (‘‘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. 70555 PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 10 The Gold Custodian is responsible for safekeeping the Fund’s gold pursuant to the Allocated Gold Account Agreement and the Unallocated Gold Account Agreement. The Gold Custodian will facilitate the transfer of gold in and out of the Fund through (i) the unallocated gold accounts it may maintain for each Authorized Participant (as defined below) or unallocated gold accounts that may be maintained for an Authorized Participant by another London Precious Metals Clearing Limited clearing bank, and (ii) the unallocated and allocated gold accounts it will maintain for the Fund. The Gold Custodian is responsible for allocating specific bars of gold to the Fund Allocated Account. As used herein, ‘‘Fund Allocated Account’’ means the allocated gold account of the Trust established with the Gold Custodian on behalf of the Fund by the Allocated Gold Account Agreement, to be used to hold gold that is transferred from the Fund Unallocated Account to be held by the Fund in allocated form; the ‘‘Fund Unallocated Account’’ means the unallocated gold account of the Trust established with the Gold Custodian on behalf of the Fund by the Unallocated Gold Account Agreement, to be used to facilitate the transfer of gold in and out of the Fund. The Gold Custodian will provide the Fund with regular reports detailing the gold transfers into and out of the Fund Unallocated Account and the Fund Allocated Account and identifying the gold bars held in the Fund Allocated Account. E:\FR\FM\10DEN1.SGM 10DEN1 70556 Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 The Guidance is a mandatory governance framework for the responsible sourcing of gold applicable to LBMA approved good delivery refiners that is designed to promote the integrity of the global supply chain for the wholesale gold markets. Among other things, the Guidance includes measures to address environmental issues, avoid materials from conflictafflicted areas, and combat money laundering, financing of terrorism, and human rights abuses, including child labor. The Guidance requires each LBMA good delivery refinery to undergo a comprehensive audit, at least annually, in order to confirm compliance with the LBMA’s minimum requirements related to the responsible sourcing of gold and to publicly report results (audits are made available on the LBMA website). The audits, among other aspects, focus on the refiner’s management systems and controls, and whether they are robust and appropriate to addressing the refiner’s risk profile. Additional information regarding the LBMA’s efforts to promote ethical sourcing of gold and a copy of the current version of the Guidance is available at https://www.lbma.org.uk/ responsible-sourcing. The Fund will not trade in gold futures, options, or swap contracts on any futures exchange or over-thecounter (‘‘OTC’’). The Fund will not hold or trade in commodity futures contracts, ‘‘commodity interests,’’ or any other instruments regulated by the Commodity Exchange Act. The Fund’s Cash Custodian may hold cash proceeds from gold sales and other cash received by the Fund. The Shares are intended to constitute a simple and cost-efficient means of gaining investment benefits similar to those of holding gold bullion directly, by providing investors an opportunity to participate in the responsibly sourced gold market through an investment in the Shares, instead of the traditional means of purchasing, storing and insuring gold. Operation of the Gold Market The global gold trading market consists of OTC transactions in spot, forwards, and options and other derivatives, together with exchangetraded futures and options. 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 Registration Statement, most OTC market trades are VerDate Sep<11>2014 17:03 Dec 09, 2021 Jkt 256001 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 delivery in settlement of any OTC transaction, will be acceptable for delivery to the Fund, as discussed below. The most significant gold futures exchange 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, the Shanghai Gold 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 Registration Statement, most trading in physical gold is conducted on the OTC market and is predominantly cleared through London. In addition to coordinating market activities, the LBMA acts as the principal point of contact between the market and its regulators. A primary function of the LBMA is its involvement in the promotion of refining standards by maintenance of the ‘‘London Good Delivery Lists,’’ which are the lists of LBMA accredited melters and assayers of gold. The LBMA also coordinates market clearing and vaulting, promotes good trading practices and develops standard documentation. The term ‘‘loco London’’ refers to gold bars physically held in London that meet the specifications for weight, dimensions, fineness (or purity), identifying marks (including the assay stamp of an LBMA acceptable refiner), and appearance set forth in the good delivery rules promulgated by the LBMA from time to time. Gold bars meeting these requirements are known as ‘‘London Good Delivery Bars.’’ The unit of trade in London is the troy ounce, whose conversion between grams is: 1,000 grams = 32.1507465 troy ounces and 1 troy ounce = 31.1034768 grams. A London Good Delivery Bar is acceptable for delivery in settlement of a transaction on the OTC market. Typically referred to as 400-ounce bars, a London Good Delivery Bar must contain between 350 and 430 fine troy ounces of gold, 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 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 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. Creation and Redemption of Shares According to the Registration Statement, the Fund will create and redeem Shares on a continuous basis in one or more Creation Units. A Creation Unit equals a block of 50,000 Shares. The Fund will issue Shares in Creation Units to certain authorized participants (‘‘Authorized Participants’’) on an ongoing basis. Each Authorized Participant must be a registered brokerdealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, a participant in The Depository Trust Company (‘‘DTC’’), and have entered into an agreement with the Administrator (the ‘‘Participant Agreement’’), and has established an unallocated gold account with the Gold Custodian or another London Precious Metals Clearing Limited clearing bank. Creation Units may be created or redeemed only by Authorized Participants. The creation and redemption of Creation Units is only made in exchange for the delivery to the Fund or the distribution by the Fund of the amount of gold represented by the Creation Units being created or redeemed. The amount of gold required to be delivered to the Fund in connection with any creation, or paid out upon redemption, is based on the combined NAV of the number of Shares included in the Creation Units being created or redeemed as determined on the day the order to create or redeem Creation Units is properly received and accepted. Orders must be placed by 3:59:59 p.m. New York time. The day on which the Administrator receives a valid purchase or redemption order is the order date. Creation Units may only be issued or redeemed on a day that the Exchange is open for regular trading. According to the Registration Statement, the total deposit required to create each Creation Unit, or a Creation Unit Gold Delivery Amount, is an amount of gold and cash, if any, that is in the same proportion to the total assets of the Fund (net of estimated accrued expenses and other liabilities) on the date the order to purchase is properly received as the number of Shares to be created under the purchase order is in proportion to the total number of Shares outstanding on the date the order is received. An Authorized Participant who places a purchase order is E:\FR\FM\10DEN1.SGM 10DEN1 Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 responsible for transferring the Creation Unit Gold Delivery Amount to the Fund Unallocated Account. Upon receipt, the Administrator will direct DTC to credit the number of Creation Units ordered to the Authorized Participant’s DTC account. The Gold Custodian will transfer the Creation Unit Gold Delivery Amount from the Fund Unallocated Account to the Fund Allocated Account by allocating to the Fund Allocated Account specific bars of gold which the Gold Custodian holds, or instructing a sub-custodian to allocate specific bars of gold held by or for the sub-custodian. The redemption distribution from the Fund consists of a credit to the redeeming Authorized Participant’s unallocated account in the amount of the Creation Unit Gold Delivery Amount. The Creation Unit Gold Delivery Amount for redemptions is the number of ounces of gold held by the Fund to be paid out upon redemption of a Creation Unit. The Gold Custodian will transfer the redemption amount from the Fund Allocated Account to the Fund Unallocated Account and, thereafter, to the redeeming Authorized Participant’s unallocated account. Net Asset Value To determine the Fund’s NAV, the Administrator will value the gold held by the Fund on the basis of the LBMA Gold Price PM, as published by the ICE Benchmark Administration Limited (the ‘‘IBA’’). IBA operates electronic auctions for spot, unallocated loco London gold, providing a market-based platform for buyers and sellers to trade. The auctions are run at 10:30 a.m. and 3:00 p.m. London time for gold. The final auction prices are published to the market as the LBMA Gold Price AM and the LBMA Gold Price PM, respectively. The Administrator will calculate the NAV on each day the Exchange is open for regular trading, at the earlier LBMA Gold Price PM for the day or 12:00 p.m. New York time. If no LBMA Gold Price (AM or PM) is made on a particular evaluation day or if the LBMA Gold Price PM has not been announced by 12:00 p.m. New York time on a particular evaluation day, the next most recent LBMA Gold Price AM or PM will be used in the determination of the NAV, unless the Sponsor determines that such price is inappropriate to use as the basis for such determination. Once the value of the gold has been determined, the Administrator will subtract all estimated accrued expenses and other liabilities of the Fund from the total value of the gold and all other assets of the Fund. The resulting figure is the NAV. The Administrator will determine the NAV per Share by VerDate Sep<11>2014 17:03 Dec 09, 2021 Jkt 256001 dividing the NAV of the Fund by the number of Shares outstanding as of the close of trading on the Exchange. 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 Fund and a price of gold derived from updated bids and offers indicative of the spot price of gold.11 The Fund’s website will contain the following information, on a per Share basis: (a) The Official Closing Price 12 11 The IIV on a per Share basis disseminated during the Exchange’s Core Trading Session, as defined in NYSE Arca Rule 7.34–E, should not be viewed as a real-time update of the NAV, which is calculated once a day. 12 The term ‘‘Official Closing Price’’ is defined in NYSE Arca Rule 1.1(ll) as the reference price to determine the closing price in a security for purposes of Rule 7–E Equities Trading, and the PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 70557 and a calculation of the premium or discount of such Official Closing Price against the Fund’s NAV; and (b) data in chart format displaying the frequency distribution of discounts and premiums of the Official Closing Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. The website for the Fund will also provide its prospectus. 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. Criteria for Initial and Continued Listing The Fund 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 100,000 Shares will be required to be outstanding at the start of trading, which is equivalent to 1,384 fine ounces of gold or approximately $2,500,000 as of July 22, 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 Fund subject to the Exchange’s existing rules governing the trading of equity securities. Trading in the Shares on the Exchange will occur in accordance with NYSE Arca 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. procedures for determining the Official Closing Price are set forth in that rule. E:\FR\FM\10DEN1.SGM 10DEN1 jspears on DSK121TN23PROD with NOTICES1 70558 Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices Commentary .04 of NYSE Arca Rule 11.3–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.13 The Exchange will halt trading in the Shares if the NAV of the Fund 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 13 See NYSE Arca Rule 7.12–E. VerDate Sep<11>2014 17:03 Dec 09, 2021 Jkt 256001 administered by the Exchange, as well as cross-market surveillances administered by the Financial Industry Regulatory Authority Inc. (‘‘FINRA’’), on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.14 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 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.15 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 14 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. 15 For a list of the current members of ISG, see www.isgportal.org. PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 this rule filing shall constitute continued listing requirements for listing the Shares of the Fund on the Exchange. The Trust has represented to the Exchange that it will advise the Exchange of any failure by the Fund 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 Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5–E(m). Information Bulletin Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (including noting that Shares are not individually redeemable); (2) NYSE Arca Rule 9.2–E(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) how information regarding the IIV is disseminated; (4) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; (5) the possibility that trading spreads and the premium or discount on the Shares may widen as a result of reduced liquidity of gold trading during the Core and Late Trading Sessions after the close of the major world gold markets; and (6) trading information. For example, the Information Bulletin will advise ETP Holders, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Fund. The Exchange notes that investors purchasing Shares directly from the Fund will receive a prospectus. ETP Holders purchasing Shares from the Fund for resale to investors will deliver a prospectus to such investors. In addition, the Information Bulletin will reference that the Fund is subject to various fees and expenses as will be described in the Registration Statement. The Information Bulletin will also reference the fact that there is no regulated source of last sale information regarding physical gold, that the Commission has no jurisdiction over the trading of gold as a physical commodity, and that the CFTC has regulatory E:\FR\FM\10DEN1.SGM 10DEN1 Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices jurisdiction over the trading of gold futures contracts and options on gold futures contracts. The Information Bulletin will also discuss any relief, if granted, by the Commission or the staff from any rules under the Act. jspears on DSK121TN23PROD with NOTICES1 III. Proceedings To Determine Whether To Approve or Disapprove SR– NYSEArca–2021–73 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 16 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,17 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.’’ 18 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.’’ 19 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,20 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 16 15 with the Act and the applicable rules and regulations.21 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 states that the Gold Custodian will transfer the Creation Unit Gold Delivery Amount from the Fund Unallocated Account to the Fund Allocated Account by allocating to the Fund Allocated Account specific bars of gold which the Gold Custodian holds, or instructing a sub-custodian to allocate specific bars of gold held by or for the sub-custodian.22 However, the Exchange does not explain how this process will take place or provide sufficient details on how the costs involved will be allocated. 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. The Exchange states that the Administrator will value the gold held by the Fund using the LBMA Gold Price PM as published by the IBA.23 This suggests that currently there is no price difference between responsibly sourced gold and non-responsibly sourced gold, but the Exchange does not provide sufficient evidence for the Commission to conclude that the price of responsibly sourced gold in the OTC spot market for gold is not different than for nonresponsibly sourced gold. For these reasons, the Commission believes it is appropriate to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 24 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 U.S.C. 78s(b)(2)(B). 17 Id. 21 See 18 15 22 See U.S.C. 78f(b)(5). 19 17 CFR 201.700(b)(3). 20 See id. VerDate Sep<11>2014 17:03 Dec 09, 2021 id. Notice, supra note 3, 86 FR at 50388. 23 Id. 24 15 Jkt 256001 PO 00000 U.S.C. 78s(b)(2)(B). Frm 00130 Fmt 4703 Sfmt 4703 70559 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.25 Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by January 3, 2022. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by January 14, 2022. 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 rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2021–73 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–2021–73. 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 25 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). E:\FR\FM\10DEN1.SGM 10DEN1 70560 Federal Register / Vol. 86, No. 235 / Friday, December 10, 2021 / Notices 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–2021–73 and should be submitted by January 3, 2022. Rebuttal comments should be submitted by January 14, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–26712 Filed 12–9–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93721; File No. SR–CBOE– 2021–070] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Temporary Remote Inspection Relief for Trading Permit Holder’s Office Inspections for Calendar Years 2020 and 2021 To Include Calendar Year 2022 Through June 30, 2022 jspears on DSK121TN23PROD with NOTICES1 December 6, 2021. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 24, 2021, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change to extend the temporary remote inspection relief for Trading Permit Holder’s office inspections for calendar years 2020 and 2021 to include calendar year 2022 through June 30, 2022. The text of the proposed rule change is also available on the Exchange’s website (https://www.cboe.com/ AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The COVID–19 pandemic has caused a host of operational disruptions to the securities industry and impacted Trading Permit Holders (‘‘TPHs’’), regulators, investors and other stakeholders. In response to the pandemic, the Exchange began providing temporary relief to TPHs from specified Exchange Rules and requirements, including Rule 9.2(d) 26 17 1 15 VerDate Sep<11>2014 17:03 Dec 09, 2021 3 15 4 17 Jkt 256001 PO 00000 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). Frm 00131 Fmt 4703 Sfmt 4703 (Annual Branch Inspections). In November 2020, the Exchange adopted a provision in Rule 8.16(f) (Office Inspections), which has expired by its terms, that extended the time by which TPHs must complete their calendar year 2020 inspection obligations under Rule 8.16(f) to March 31, 2021, but with the expectation that firms would conduct their inspections on-site.5 The Exchange also adopted Rule 9.2(d)(5), which automatically sunsets on December 31, 2021, to provide firms the option of satisfying their inspection obligations under Rule 8.16(f) and 9.2(d) remotely for calendar years 2020 and 2021, subject to specified conditions,6 due to the logistical challenges of going on-site while public health and safety concerns related to COVID–19 persisted. The Exchange notes that these temporary rules are substantively identical to the temporary inspection extension and remote relief rules filed by the Financial Industry Regulatory Authority (‘‘FINRA’’) in 2020.7 While there are signs of improvement, much uncertainty remains. The emergence of the Delta variant,8 dissimilar vaccination rates throughout the United States, and the uptick in transmissions in many locations indicate that COVID–19 remains an active and real public health concern.9 5 See Securities Exchange Act Release No. 90583 (December 7, 2020), 85 FR 80207 (December 12, 2020) (SR–CBOE–2020–112). 6 See id. 7 See Securities and Exchange Act Release Nos. 89188 (June 30, 2020), 85 FR 40713 (July 7, 2020) (SR–FINRA–2020–019); and 90454 (November 18, 2020), 85 FR 75097 (November 24, 2020) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2020–040). 8 See The Centers for Disease Control and Prevention (‘‘CDC’’), What You Need to Know about Variants (stating, in part, that ‘‘the Delta variant causes more infections and spreads faster than earlier forms of the virus that causes COVID19.’’), https://www.cdc.gov/coronavirus/2019-ncov/ variants/variant.html (updated September 3, 2021). See also CDC, The Possibility of COVID–19 Illness after Vaccination: Breakthrough Infections (stating, in part, that ‘‘COVID–19 vaccines are effective at preventing infection, serious illness, and death. Most people who get COVID–19 are unvaccinated. However, since vaccines are not 100% effective at preventing infection, some people who are fully vaccinated will still get COVID–19 . . . People who get vaccine breakthrough infections can be contagious.’’), https://www.cdc.gov/coronavirus/ 2019-ncov/vaccines/effectiveness/why-measureeffectiveness/breakthrough-cases.html (updated August 23, 2021). 9 For example, President Joe Biden on July 29, 2021, announced several measures to increase the number of people vaccinated against COVID–19 and to slow the spread of the Delta variant, including strengthening safety protocols for federal government employees and contractors. See https:// www.whitehouse.gov/briefing-room/statementsreleases/2021/07/29/factsheet-president-biden-toannounce-new-actions-to-get-moreamericansvaccinated-and-slow-the-spread-of-thedelta-variant/. More recently, President Joe Biden E:\FR\FM\10DEN1.SGM 10DEN1

Agencies

[Federal Register Volume 86, Number 235 (Friday, December 10, 2021)]
[Notices]
[Pages 70555-70560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26712]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93720; File No. SR-NYSEArca-2021-73]


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 Franklin Responsibly 
Sourced Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust 
Shares)

December 6, 2021.

I. Introduction

    On August 23, 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 
Franklin Responsibly Sourced Gold ETF (``Fund''), a series of the 
Franklin Templeton Holdings Trust (``Trust''), under NYSE Arca Rule 
8.201-E. The proposed rule change was published for comment in the 
Federal Register on September 8, 2021.\3\ On September 29, 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. 92840 (September 1, 
2021), 86 FR 50385 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 93179, 86 FR 55033 
(October 5, 2021). The Commission designated December 7, 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 Fund, 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 Fund \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 
Fund is Franklin Holdings, LLC, a Delaware limited liability company. 
BNY Mellon Asset Servicing, a division of The Bank of New York Mellon 
(``BNYM''), serves as the Fund's administrator (``Administrator'') and 
transfer agent (the ``Transfer Agent''). Delaware Trust Company, a 
subsidiary of the Corporation Service Company serves as trustee of the 
Trust (``Trustee''). J.P. Morgan Chase Bank, N.A., London branch is the 
custodian of the Fund's Gold Bullion (as defined in the Registration 
Statement) (the ``Gold Custodian'').\10\ BNYM will serve as the 
custodian of the Fund's cash, if any (the ``Cash Custodian'').
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    \8\ On April 22, 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 (``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 Gold Custodian is responsible for safekeeping the 
Fund's gold pursuant to the Allocated Gold Account Agreement and the 
Unallocated Gold Account Agreement. The Gold Custodian will 
facilitate the transfer of gold in and out of the Fund through (i) 
the unallocated gold accounts it may maintain for each Authorized 
Participant (as defined below) or unallocated gold accounts that may 
be maintained for an Authorized Participant by another London 
Precious Metals Clearing Limited clearing bank, and (ii) the 
unallocated and allocated gold accounts it will maintain for the 
Fund. The Gold Custodian is responsible for allocating specific bars 
of gold to the Fund Allocated Account. As used herein, ``Fund 
Allocated Account'' means the allocated gold account of the Trust 
established with the Gold Custodian on behalf of the Fund by the 
Allocated Gold Account Agreement, to be used to hold gold that is 
transferred from the Fund Unallocated Account to be held by the Fund 
in allocated form; the ``Fund Unallocated Account'' means the 
unallocated gold account of the Trust established with the Gold 
Custodian on behalf of the Fund by the Unallocated Gold Account 
Agreement, to be used to facilitate the transfer of gold in and out 
of the Fund. The Gold Custodian will provide the Fund with regular 
reports detailing the gold transfers into and out of the Fund 
Unallocated Account and the Fund Allocated Account and identifying 
the gold bars held in the Fund Allocated Account.
---------------------------------------------------------------------------

Exchange's Description of the Operation of the Trust and Fund

    The investment objective of the Fund will be for the Shares to 
reflect the performance of the price of gold bullion, less the expenses 
of the Fund's operations. Shares of the Fund will represent units of 
fractional undivided beneficial interest in and ownership of the net 
assets of the Fund.
    The Fund seeks to predominantly hold responsibly sourced gold 
bullion, defined as London Good Delivery gold bullion bars produced 
after January 2012 in accordance with London Bullion Market 
Association's (``LBMA'') Responsible Gold Guidance (the ``Guidance''). 
From time to time, in certain circumstances a portion of the Fund's 
assets may include pre-2012 LBMA gold bullion (i.e., London Good 
Delivery gold bars produced prior to January 2012 which was not subject 
to the Guidance), including, for example, due to availability 
constraints. In those circumstances, the Gold Custodian will seek to 
replace any pre-2012 LBMA gold bullion in the Fund Allocated Account 
with LBMA good delivery bars produced after January 2012 as soon as is 
practicable.

[[Page 70556]]

    The Guidance is a mandatory governance framework for the 
responsible sourcing of gold applicable to LBMA approved good delivery 
refiners that is designed to promote the integrity of the global supply 
chain for the wholesale gold markets. Among other things, the Guidance 
includes measures to address environmental issues, avoid materials from 
conflict-afflicted areas, and combat money laundering, financing of 
terrorism, and human rights abuses, including child labor. The Guidance 
requires each LBMA good delivery refinery to undergo a comprehensive 
audit, at least annually, in order to confirm compliance with the 
LBMA's minimum requirements related to the responsible sourcing of gold 
and to publicly report results (audits are made available on the LBMA 
website). The audits, among other aspects, focus on the refiner's 
management systems and controls, and whether they are robust and 
appropriate to addressing the refiner's risk profile. Additional 
information regarding the LBMA's efforts to promote ethical sourcing of 
gold and a copy of the current version of the Guidance is available at 
https://www.lbma.org.uk/responsible-sourcing.
    The Fund will not trade in gold futures, options, or swap contracts 
on any futures exchange or over-the-counter (``OTC''). The Fund will 
not hold or trade in commodity futures contracts, ``commodity 
interests,'' or any other instruments regulated by the Commodity 
Exchange Act. The Fund's Cash Custodian may hold cash proceeds from 
gold sales and other cash received by the Fund.
    The Shares are intended to constitute a simple and cost-efficient 
means of gaining investment benefits similar to those of holding gold 
bullion directly, by providing investors an opportunity to participate 
in the responsibly sourced gold market through an investment in the 
Shares, instead of the traditional means of purchasing, storing and 
insuring gold.

Operation of the Gold Market

    The global gold trading market consists of OTC transactions in 
spot, forwards, and options and other derivatives, together with 
exchange-traded futures and options.
    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 Registration Statement, 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 delivery in settlement of any 
OTC transaction, will be acceptable for delivery to the Fund, as 
discussed below.
    The most significant gold futures exchange 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, the Shanghai Gold 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 Registration Statement, most trading in physical 
gold is conducted on the OTC market and is predominantly cleared 
through London. In addition to coordinating market activities, the LBMA 
acts as the principal point of contact between the market and its 
regulators. A primary function of the LBMA is its involvement in the 
promotion of refining standards by maintenance of the ``London Good 
Delivery Lists,'' which are the lists of LBMA accredited melters and 
assayers of gold. The LBMA also coordinates market clearing and 
vaulting, promotes good trading practices and develops standard 
documentation.
    The term ``loco London'' refers to gold bars physically held in 
London that meet the specifications for weight, dimensions, fineness 
(or purity), identifying marks (including the assay stamp of an LBMA 
acceptable refiner), and appearance set forth in the good delivery 
rules promulgated by the LBMA from time to time. Gold bars meeting 
these requirements are known as ``London Good Delivery Bars.''
    The unit of trade in London is the troy ounce, whose conversion 
between grams is: 1,000 grams = 32.1507465 troy ounces and 1 troy ounce 
= 31.1034768 grams. A London Good Delivery Bar is acceptable for 
delivery in settlement of a transaction on the OTC market. Typically 
referred to as 400-ounce bars, a London Good Delivery Bar must contain 
between 350 and 430 fine troy ounces of gold, 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.

Creation and Redemption of Shares

    According to the Registration Statement, the Fund will create and 
redeem Shares on a continuous basis in one or more Creation Units. A 
Creation Unit equals a block of 50,000 Shares. The Fund will issue 
Shares in Creation Units to certain authorized participants 
(``Authorized Participants'') on an ongoing basis. Each Authorized 
Participant must be a registered broker-dealer or other securities 
market participant such as a bank or other financial institution which 
is not required to register as a broker-dealer to engage in securities 
transactions, a participant in The Depository Trust Company (``DTC''), 
and have entered into an agreement with the Administrator (the 
``Participant Agreement''), and has established an unallocated gold 
account with the Gold Custodian or another London Precious Metals 
Clearing Limited clearing bank.
    Creation Units may be created or redeemed only by Authorized 
Participants. The creation and redemption of Creation Units is only 
made in exchange for the delivery to the Fund or the distribution by 
the Fund of the amount of gold represented by the Creation Units being 
created or redeemed. The amount of gold required to be delivered to the 
Fund in connection with any creation, or paid out upon redemption, is 
based on the combined NAV of the number of Shares included in the 
Creation Units being created or redeemed as determined on the day the 
order to create or redeem Creation Units is properly received and 
accepted. Orders must be placed by 3:59:59 p.m. New York time. The day 
on which the Administrator receives a valid purchase or redemption 
order is the order date. Creation Units may only be issued or redeemed 
on a day that the Exchange is open for regular trading.
    According to the Registration Statement, the total deposit required 
to create each Creation Unit, or a Creation Unit Gold Delivery Amount, 
is an amount of gold and cash, if any, that is in the same proportion 
to the total assets of the Fund (net of estimated accrued expenses and 
other liabilities) on the date the order to purchase is properly 
received as the number of Shares to be created under the purchase order 
is in proportion to the total number of Shares outstanding on the date 
the order is received. An Authorized Participant who places a purchase 
order is

[[Page 70557]]

responsible for transferring the Creation Unit Gold Delivery Amount to 
the Fund Unallocated Account. Upon receipt, the Administrator will 
direct DTC to credit the number of Creation Units ordered to the 
Authorized Participant's DTC account. The Gold Custodian will transfer 
the Creation Unit Gold Delivery Amount from the Fund Unallocated 
Account to the Fund Allocated Account by allocating to the Fund 
Allocated Account specific bars of gold which the Gold Custodian holds, 
or instructing a sub-custodian to allocate specific bars of gold held 
by or for the sub-custodian.
    The redemption distribution from the Fund consists of a credit to 
the redeeming Authorized Participant's unallocated account in the 
amount of the Creation Unit Gold Delivery Amount. The Creation Unit 
Gold Delivery Amount for redemptions is the number of ounces of gold 
held by the Fund to be paid out upon redemption of a Creation Unit. The 
Gold Custodian will transfer the redemption amount from the Fund 
Allocated Account to the Fund Unallocated Account and, thereafter, to 
the redeeming Authorized Participant's unallocated account.

Net Asset Value

    To determine the Fund's NAV, the Administrator will value the gold 
held by the Fund on the basis of the LBMA Gold Price PM, as published 
by the ICE Benchmark Administration Limited (the ``IBA''). IBA operates 
electronic auctions for spot, unallocated loco London gold, providing a 
market-based platform for buyers and sellers to trade. The auctions are 
run at 10:30 a.m. and 3:00 p.m. London time for gold. The final auction 
prices are published to the market as the LBMA Gold Price AM and the 
LBMA Gold Price PM, respectively.
    The Administrator will calculate the NAV on each day the Exchange 
is open for regular trading, at the earlier LBMA Gold Price PM for the 
day or 12:00 p.m. New York time. If no LBMA Gold Price (AM or PM) is 
made on a particular evaluation day or if the LBMA Gold Price PM has 
not been announced by 12:00 p.m. New York time on a particular 
evaluation day, the next most recent LBMA Gold Price AM or PM will be 
used in the determination of the NAV, unless the Sponsor determines 
that such price is inappropriate to use as the basis for such 
determination.
    Once the value of the gold has been determined, the Administrator 
will subtract all estimated accrued expenses and other liabilities of 
the Fund from the total value of the gold and all other assets of the 
Fund. The resulting figure is the NAV. The Administrator will determine 
the NAV per Share by dividing the NAV of the Fund by the number of 
Shares outstanding as of the close of trading on the Exchange.

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 Fund and a 
price of gold derived from updated bids and offers indicative of the 
spot price of gold.\11\
---------------------------------------------------------------------------

    \11\ The IIV on a per Share basis disseminated during the 
Exchange's Core Trading Session, as defined in NYSE Arca Rule 7.34-
E, should not be viewed as a real-time update of the NAV, which is 
calculated once a day.
---------------------------------------------------------------------------

    The Fund's website will contain the following information, on a per 
Share basis: (a) The Official Closing Price \12\ and a calculation of 
the premium or discount of such Official Closing Price against the 
Fund's NAV; and (b) data in chart format displaying the frequency 
distribution of discounts and premiums of the Official Closing Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. The website for the Fund will also provide 
its prospectus. 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.
---------------------------------------------------------------------------

    \12\ The term ``Official Closing Price'' is defined in NYSE Arca 
Rule 1.1(ll) as the reference price to determine the closing price 
in a security for purposes of Rule 7-E Equities Trading, and the 
procedures for determining the Official Closing Price are set forth 
in that rule.
---------------------------------------------------------------------------

Criteria for Initial and Continued Listing

    The Fund 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 100,000 Shares will be required to be outstanding at 
the start of trading, which is equivalent to 1,384 fine ounces of gold 
or approximately $2,500,000 as of July 22, 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 Fund subject to the Exchange's existing rules 
governing the trading of equity securities. Trading in the Shares on 
the Exchange will occur in accordance with NYSE Arca 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.

[[Page 70558]]

Commentary .04 of NYSE Arca Rule 11.3-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.\13\ The Exchange will halt trading in the Shares if the 
NAV of the Fund 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.
---------------------------------------------------------------------------

    \13\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

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 Inc. (``FINRA''), on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\14\ 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.
---------------------------------------------------------------------------

    \14\ 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.
---------------------------------------------------------------------------

    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 
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.\15\
---------------------------------------------------------------------------

    \15\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    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 Fund on the 
Exchange.
    The Trust has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund 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 Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).

Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The procedures for 
purchases and redemptions of Shares in Creation Units (including noting 
that Shares are not individually redeemable); (2) NYSE Arca Rule 9.2-
E(a), which imposes a duty of due diligence on its ETP Holders to learn 
the essential facts relating to every customer prior to trading the 
Shares; (3) how information regarding the IIV is disseminated; (4) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; (5) the possibility that trading spreads 
and the premium or discount on the Shares may widen as a result of 
reduced liquidity of gold trading during the Core and Late Trading 
Sessions after the close of the major world gold markets; and (6) 
trading information. For example, the Information Bulletin will advise 
ETP Holders, prior to the commencement of trading, of the prospectus 
delivery requirements applicable to the Fund. The Exchange notes that 
investors purchasing Shares directly from the Fund will receive a 
prospectus. ETP Holders purchasing Shares from the Fund for resale to 
investors will deliver a prospectus to such investors.
    In addition, the Information Bulletin will reference that the Fund 
is subject to various fees and expenses as will be described in the 
Registration Statement. The Information Bulletin will also reference 
the fact that there is no regulated source of last sale information 
regarding physical gold, that the Commission has no jurisdiction over 
the trading of gold as a physical commodity, and that the CFTC has 
regulatory

[[Page 70559]]

jurisdiction over the trading of gold futures contracts and options on 
gold futures contracts.
    The Information Bulletin will also discuss any relief, if granted, 
by the Commission or the staff from any rules under the Act.

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2021-73 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \16\ 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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\17\ 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.'' \18\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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.'' \19\ 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,\20\ 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.\21\
---------------------------------------------------------------------------

    \19\ 17 CFR 201.700(b)(3).
    \20\ See id.
    \21\ See id.
---------------------------------------------------------------------------

    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 states 
that the Gold Custodian will transfer the Creation Unit Gold Delivery 
Amount from the Fund Unallocated Account to the Fund Allocated Account 
by allocating to the Fund Allocated Account specific bars of gold which 
the Gold Custodian holds, or instructing a sub-custodian to allocate 
specific bars of gold held by or for the sub-custodian.\22\ However, 
the Exchange does not explain how this process will take place or 
provide sufficient details on how the costs involved will be allocated.
---------------------------------------------------------------------------

    \22\ See Notice, supra note 3, 86 FR at 50388.
---------------------------------------------------------------------------

    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. The 
Exchange states that the Administrator will value the gold held by the 
Fund using the LBMA Gold Price PM as published by the IBA.\23\ This 
suggests that currently there is no price difference between 
responsibly sourced gold and non-responsibly sourced gold, but the 
Exchange does not provide sufficient evidence for the Commission to 
conclude that the price of responsibly sourced gold in the OTC spot 
market for gold is not different than for non-responsibly sourced gold.
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

    For these reasons, the Commission believes it is appropriate to 
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \24\ 
to determine whether the proposal should be approved or disapproved.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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.\25\
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    \25\ 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).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by January 3, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
January 14, 2022.
    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-2021-73 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-2021-73. 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

[[Page 70560]]

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-2021-73 and should be submitted 
by January 3, 2022. Rebuttal comments should be submitted by January 
14, 2022.
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26712 Filed 12-9-21; 8:45 am]
BILLING CODE 8011-01-P
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