Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend a Representation Regarding the VanEck Merk Gold Trust, 52224-52229 [2023-16712]
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52224
Federal Register / Vol. 88, No. 150 / Monday, August 7, 2023 / Notices
II. Docketed Proceeding(s)
1. Docket No(s).: CP2022–88; Filing
Title: USPS Notice of Amendment to
Priority Mail Express, Priority Mail,
First-Class Package Service & Parcel
Select Contract 16, Filed Under Seal;
Filing Acceptance Date: July 31, 2023;
Filing Authority: 39 CFR 3035.105;
Public Representative: Gregory S.
Stanton; Comments Due: August 8,
2023.
2. Docket No(s).: CP2023–104; Filing
Title: USPS Notice of Amendment to
Priority Mail, Parcel Select & Parcel
Return Service Contract 1, Filed Under
Seal; Filing Acceptance Date: July 28,
2023; Filing Authority: 39 CFR
3035.105; Public Representative:
Gregory S. Stanton; Comments Due:
August 8, 2023.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2023–16728 Filed 8–4–23; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98033; File No. SR–
NYSEARCA–2023–48]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend a
Representation Regarding the VanEck
Merk Gold Trust
August 1, 2023.
ddrumheller on DSK120RN23PROD with NOTICES1
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on July 19,
2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend a
representation regarding the VanEck
Merk Gold Trust. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has previously
approved a proposed rule change
relating to listing and trading on the
Exchange of shares of the Trust (the
‘‘Shares’’) under NYSE Arca Rule 8.201–
E (Commodity-Based Trust Shares).4
The Commission subsequently noticed
for immediate effectiveness a proposed
rule change to replace references to the
‘‘London Gold Fix’’ in the Prior Order
with the ‘‘LBMA Gold Price.’’ 5 Pursuant
to the Prior Notice, the Trust currently
uses the LBMA Gold Price as the
benchmark price for purposes of
calculating the net asset value (‘‘NAV’’)
of the Shares of the Trust.
The Exchange now proposes to amend
the representation in the Prior Notice to
replace references to the ‘‘LBMA Gold
Price’’ with the ‘‘Solactive Gold Spot
Index’’ (the ‘‘Index’’). Pursuant to this
proposed rule change, the Trust would
use the Solactive Gold Spot Index as the
benchmark price for purposes of
calculating the NAV of Shares of the
Trust.
According to the Trust’s current
registration statement on Form S–3,6
4 See Securities Exchange Act Release No. 71378
(January 23, 2014), 79 FR 4786 (January 29, 2014)
(SR–NYSEArca–2013–137) (Order Approving a
Proposed Rule Change, as Modified by Amendment
No. 1 Thereto, To List and Trade Shares of the Merk
Gold Trust Pursuant to NYSE Arca Equities Rule
8.201) (the ‘‘Prior Order’’).
5 See Securities Exchange Act Release No. 74544
(March 19, 2015), 80 FR 15840 (March 25, 2015)
(SR–NYSEArca–2015–19) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
Relating to the LBMA Gold Price as a Replacement
for the London Gold Fix for Certain Gold Related
Exchange Traded Products) (the ‘‘Prior Notice’’).
6 On May 12, 2023, the Trust filed Post-Effective
Amendment No. 1 to its registration statement on
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Solactive AG (‘‘Solactive’’ or the ‘‘Index
Calculator’’) owns, calculates, and
disseminates the Index. The Index is a
U.S. Dollar denominated index that
aims to provide a price fixing for the
gold spot price for London delivery gold
bullion quoted as U.S. Dollars per Troy
Ounce (‘‘XAU’’) and determined as of
the time trading closes on the New York
Stock Exchange (‘‘NYSE’’).7 The Index
calculates gold bullion fixing prices by
taking Time Weighted Average Prices
(‘‘TWAP’’) 8 of XAU trading prices
provided via ICE Data Services (‘‘IDS’’)
data feed.9
Specifically, according to the
Registration Statement, the Index uses a
TWAP calculation to determine an
average price that is time-weighted,
using prices of actual transactions
(‘‘Trade Ticks’’) for two specified time
periods around the scheduled close of
trading on the NYSE (generally, 4:00
p.m. Eastern Time) on each day that the
NYSE is open for trading.10 The TWAP
is derived for (1) the period ahead of the
fixing (‘‘Time Period 1’’), which consists
of the five minutes before the close of
trading, and (2) the period directly after
the fixing (‘‘Time Period 2’’), which
consists of the six seconds after the
close of trading. The TWAPs for Time
Period 1 and Time Period 2 are each
multiplied by their respective
weightings, with 90% weighting given
to Time Period 1 and 10% weighting
given to Time Period 2. When added
together, the two TWAPs result in a
Form S–3 (the ‘‘Registration Statement’’) (File No.
333–238022).
7 Solactive calculates the Index pursuant to the
Index Guideline publicly available at https://
www.solactive.com/wp-content/uploads/2023/02/
Solactive_Gold_Spot_Index_Methodology_
Guideline_20230206.pdf. Index data are publicly
available at https://www.solactive.com/indices/
?index=DE000SL0FW35.
8 TWAP is a widely used measure in the financial
industry to calculate the average price of a security
or traded asset over a specific time period. TWAP
is calculated by dividing the total trade value by the
total trading time, thereby providing an average
price that reflects market conditions over a defined
timeframe. The TWAP methodology helps mitigate
the impact of large trades on market prices by
providing an average price based on numerous
current market transactions and mitigates the effects
of erroneous or spurious pricing data points, which
effects can significantly lower the level of
confidence in single transaction data points at a
specific time. Different weightings can be selected
for the TWAP methodology to provide a check on
average prices derived before a local market closing,
for instance, by overweighting prices immediately
after the local market close.
9 Solactive receives real-time data via IDS’s ‘‘Spot
Gold (Also Loco London Gold)’’ data feed. The spot
gold prices utilized by the Index are those for gold
bullion deliverable in London. The Trust’s gold is
also valued on a loco London basis.
10 The NYSE’s trading hours and holidays
observed are available at: https://www.nyse.com/
markets/hours-calendars.
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52225
single price sum that is the Index
price.11
For any calculation day t, the Index
(Indext), is determined as described
above following the below mathematical
formula:
The sponsor of the Trust, Merk
Investments LLC (the ‘‘Sponsor’’),
believes that the Index will provide an
improved benchmark price for purposes
of determining the NAV of Shares of the
Trust. Specifically, the Sponsor believes
that replacing the LBMA Gold Price
with the Index for calculating the NAV
of the Shares may reduce the impact of
timing differences between the basis for
NAV calculation and market price for
the Shares, as well as promote market
liquidity, and would promote
consistency between the NAV
calculation and market price of the
Shares by shifting the gold spot price
determination to the end of the NYSE
trading day (including because a
significant amount of gold bullion
trading (loco London) occurs after the
close of London bullion trading). In
addition, the Sponsor does not expect
that the adoption of the Index will result
in any unexpected, abrupt, or radical
change in the value of the Trust’s gold
because both the LBMA Gold Price and
the Index report the price in U.S.
Dollars of a Troy Ounce of gold bullion
deliverable in London, just at different
times.
According to the Registration
Statement, the LBMA Gold Price is
calculated by the ICE Benchmark
Administration (the ‘‘IBA’’), which
determines a gold price fixing for the
London bullion market. Whereas the
LBMA Gold Price is calculated twice
daily (at 10:30 a.m. London Time and
3:00 p.m. London Time), the Index is
calculated once daily no later than 30
minutes after the close of trading at the
NYSE, which timing is more closely
aligned with the close of trading in the
Shares on a given trading day.12
Whereas the LBMA Gold Price is
determined through an auction process
involving a varying daily group of
participants (currently, representing a
subset of 16 direct participants) and is
conducted by the IBA,13 the Index is
calculated by Solactive based on
thousands of transaction prices for gold
bullion spot during Time Periods 1 and
2, as captured by IDS from identifiable
and IDS-accepted data contributors.14
As noted above, while both the LBMA
Gold Price and the Index price represent
actual transactions in London gold
bullion spot, they mainly differ in the
timing of the fixing window.
The LBMA Gold Price and the Index
are based on the same London delivery
gold spot, but at different times from a
larger 24-hour market trading period.
Both the LBMA Gold Price and the
Index establish gold bullion spot prices
loco London taken from the same
continuous stream of data for such
prices and differ only in that they reflect
different snapshots at different times.15
On the same day, the LBMA Gold Price
and the Index price may differ because
of changes in the conditions of the gold
spot market between the two different
fixing times. However, when such price
moves occur, use of the Index as a
benchmark would facilitate the
calculation of an NAV for Shares of the
Trust that is aligned with and accounts
for activity around the close of trading
in such Shares. The Sponsor thus
believes that using the Index rather than
the LBMA Gold Price as the benchmark
to calculate the NAV of the Shares could
provide a timelier value of the NAV
calculation and promote consistency
between the NAV and market price of
the Shares.16
The Sponsor believes that using the
Index, which is calculated based on
timing that better mirrors the trading
hours of the Shares, to calculate the
NAV of the Shares would be beneficial
for market makers and liquidity
providers for the Shares by allowing
them to manage their overnight risk
exposure more effectively. The Sponsor
has analyzed the daily trading volume
of the Shares between November 16,
2022 and May 30, 2023, as measured in
five minute increments. This analysis
revealed that, over the 133 trading days
11 The Sponsor believes that it is unlikely that, on
any given trading day for the Shares, there would
be no Trade Ticks recorded for XAU in either Time
Period 1 or Time Period 2, such that the Index
calculation could not be performed on such day.
Trade Ticks representing XAU are the closing prices
for London delivery gold bullion transactions
posted in a 24-hour, global, over-the-counter gold
bullion market, which is not subject to trading
suspensions, trading halts, or market closures.
Trade Ticks in Time Periods 1 and 2 thus reflect
a comprehensive view of the gold spot market for
London delivery gold that includes more market
participants than the LBMA Gold Price. In the
unlikely event that IDS is unable to publish pricing
information for XAU, for whatever reason, during
either Time Period 1 or Time Period 2 on a given
trading day, the last available Index calculation will
be used in accordance with Solactive’s published
and publicly available disruption policy.
12 The Trust currently utilizes the 3:00 p.m.
London Time LBMA Gold Price and only resorts to
the 10:30 a.m. London Time LBMA Gold Price if
the afternoon price is not available.
13 IBA operates the technology platform that
facilitates the electronic auction process to
determine the LBMA Gold Price.
14 Contributors to the data feed include national
central banks, large international banks that are
recognized gold bullion trading or custody banks,
and international bullion trading firms.
15 LBMA Gold Prices are reflected in the XAU
data feed utilized by the Index (although they are
reported outside of the Index’s Time Periods 1 and
2).
16 Shares of the Trust are only created and
redeemed in kind.
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Federal Register / Vol. 88, No. 150 / Monday, August 7, 2023 / Notices
during this period, Share trading
volume was on average 17.2% higher in
the five minutes before the close of
trading on the NYSE than during the
rest of the trading day. As expected, the
analysis revealed that Share trading
volume is also generally higher when
London and New York trading overlap,
but that there was a consistent and
significant increase in Share trading
volume immediately before the close of
trading on the NYSE. Increased trading
before market close generally reflects
hedging in the Shares by market makers
and other major market participants to
mitigate overnight market risk arising
from their exposure to the Shares. The
relative staleness of the LBMA Gold
Price at the time the Trust calculates its
NAV contributes to the uncertainty that
major market participants contend with
in managing their overnight market risk,
which could result in lower liquidity for
the Shares.
Market risk uncertainty is further
heightened on days when the London
gold bullion market is closed altogether,
but the Shares continue to trade on the
NYSE. Further, whereas the IBA
observes a U.K. banking holiday
schedule, the Shares of the Trust are
traded on the Exchange, which observes
a U.S. market calendar. As a result,
there are days on which the IBA does
not hold an auction because the U.K.
markets are closed, but the Shares
continue to trade on the Exchange. On
such days and on days when there is
significant movement in the market
between the calculation of the LBMA
Gold Price and the close of trading in
the Shares, the NAV of the Shares of the
Trust is not updated, while the market
pricing of Shares of the Trust will
generally continue to reflect activity in
the gold spot market represented by
XAU. In addition, in some cases, an
NAV based on a stale LBMA Gold Price
may give the perception of tracking
error when none exists.
Aligning the calculation of the NAV
of the Shares with the close of trading
in the Shares would also promote a
NAV calculation that takes into account
important liquidity events because the
close of NYSE trading is generally the
most liquid time of the trading day for
Shares of the Trust. Closing the timing
gap between the Trust’s benchmark
price determination and the close of
trading in the Shares and subsequent
NAV calculation could improve
liquidity in the Shares by enabling
market makers and liquidity providers
to better manage risk and help reduce
investor confusion stemming from any
erroneous perceived tracking error.
Moreover, market participants,
including market makers, are unlikely to
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be confused or otherwise negatively
impacted by the Trust’s use of the Index
instead of the LBMA Gold Price.
Instead, because market participants
already primarily rely on the gold spot
price represented by XAU to inform
their trading of Shares, the proposed
change to the Index would align with
current market participant expectations
on how to value the Trust’s gold.
The Sponsor believes that the Index is
a suitable replacement for the LBMA
Gold Price because it would provide a
reliable benchmark for purposes of
calculating the NAV of the Shares and
a better pricing mechanism in times of
market volatility. Specifically, the
Sponsor believes that the Index’s
methodology is reasonably designed to
be resistant to potential price
manipulation because the Index is based
on an average spot price that is timeweighted around the close of trading on
the NYSE. As described above, the
Index’s methodology aims to reflect a
closing price for XAU that would be
observed at the conclusion of a trading
day in Shares of the Trust. By using
TWAPs that account for the five
minutes leading up to and six seconds
immediately following the market close
rather than using a single Trade Tick at
the exact close, the Index’s methodology
is intended to minimize the impact of
any attempts to manipulate the fixing
price by submitting single time orders or
any erroneous orders that could result
in a NAV that does not fairly reflect the
value of the Trust’s gold.
In addition, the Index Provider is
registered as a benchmark administrator
under European Benchmarks Regulation
(‘‘BMR’’) with the German Federal
Financial Supervisory Authority and
adheres to the IOSCO Principles for
Financial Benchmarks (‘‘IOSCO
Principles’’).17 The BMR requires the
17 See https://www.iosco.org/library/pubdocs/pdf/
IOSCOPD415.pdf. The IOSCO Principles are
designed to enhance the integrity, the reliability
and the oversight of benchmarks by establishing
guidelines for benchmark administrators and other
relevant bodies in the areas of (1) governance: to
protect the integrity of the benchmark
determination process and to address conflicts of
interest; (2) quality of the benchmark: to promote
the quality and integrity of benchmark
determinations through the application of design
factors; (3) quality of the methodology: to promote
the quality and integrity of methodologies by setting
out minimum information that should be addressed
within a methodology; and (4) accountability
mechanisms: to establish complaints processes,
documentation requirements and audit reviews.
The IOSCO Principles provide a framework of
standards that might be met in different ways,
depending on the specificities of each benchmark.
In addition to a set of high-level principles, the
framework offers a subset of more detailed
principles for benchmarks having specific risks
arising from their reliance on submissions and/or
their ownership structure. The IOSCO Principles
also call for credible transition policies in case a
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Index Provider to have in place a
control framework that ensures its
benchmarks within scope of the BMR
are provided or published and made
available in accordance with the BMR.
The control framework provides a
description of the control activities and
further information on how the business
and the processes relate to the
requirements of the BMR. The Index
Provider has an Oversight Committee
that is responsible for the integrity of
the administration process and oversees
its control framework for the process of
determining and distributing the indices
and benchmarks. The Index Provider is
thus subject to a similar level of
regulatory scrutiny as the IBA is with
respect to the LBMA Gold Price,18 and,
while the Index itself is not a BMRcompliant benchmark, the Index
Provider applies the same processes and
procedures in calculating the Index as it
does to its BMR-compliant benchmarks,
including ensuring that the price
discovery process for the Index is
subject to surveillance by the Index
Provider and is auditable and
transparent in accordance with the
IOSCO Principles (as further discussed
below).
Further, the Index is derived from
data recorded during Time Periods 1
and 2—a total period of five minutes
and six seconds. Thus, the Index
calculation reflects several thousand
Trade Ticks of actual transactions from
hundreds of identifiable and IDSaccepted data contributors for a given
calculation day. The Sponsor believes
that the broad base of data underlying
the Index calculation reduces the
potential for price manipulation
affecting NAV calculation.
The Sponsor also believes that the
Index would provide enhanced
transparency to the calculation of the
NAV of the Shares. The Index will be
calculated and published by the Index
Calculator no later than 30 minutes
following the close of trading on the
NYSE on each business day,
disseminated to major financial data
providers, and made publicly available
via the Trust’s website. Solactive has
published publicly available guidelines
that outline the methodology for the
Index calculation, including the formula
by which the Index is calculated, such
that the calculation could be replicated
by anyone with access to the underlying
XAU market data. Underlying XAU
market data is commonly and broadly
benchmark may cease to exist due to market
structure change.
18 IBA is compliant with the UK benchmark
regulation (MAR 8.3), regulated by the FCA, and
has been formally assessed against the IOSCO
Principles.
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ddrumheller on DSK120RN23PROD with NOTICES1
available to a wide group of market
participants, including analysts,
advisers, traders, and investors at
broker-dealers, banks, trading platforms,
investment advisers and other financial
institutions and investors that trade in
gold bullion, as well as to the market
makers and authorized participants for
the Shares. The Sponsor believes that
the Index provides a benchmark that is
comprehensible and easily accessible to
a wide range of market participants,
thus promoting transparency into the
valuation process for Shares of the
Trust.19
Finally, the Sponsor believes that the
Index would provide a comprehensive
benchmark for purposes of determining
the NAV of the Shares of the Trust. The
Index calculation is based on XAU
market data from IDS, which is a major
provider of financial market data to
institutions including banks and other
asset managers for the pricing of
portfolio assets and the execution of
asset transactions. Various spot data,
including XAU, is available through
IDS’s data streaming service, which
covers 2,700 spot rates, with an average
of over 130 million updates per day for
all spots provided by IDS. IDS compiles
data from over 100 sources, including
market makers, execution venues, banks
and brokers from across the globe, and
every updating Trade Tick of spot
streaming data is available via IDS’s
Integrated Data Viewer service in a filebased format.
The Sponsor believes that data
aggregated by IDS provides a reliable
basis for the calculation of the Index
given the robust quality control and
filtering process IDS applies to XAU
Trade Ticks to exclude outliers and
erroneous pricing. IDS publishes a
‘‘Consolidated Feed Wires Protocol’’
applicable to XAU and other IDS data
feeds (the ‘‘Protocol’’). The Protocol
specifies the data series that are
associated with XAU.20 Data in these
series include millisecond time-stamped
trade prices of XAU submitted by
identifiable and IDS-accepted
contributors, and Solactive extracts
Trade Ticks from this data set to
19 By contrast, the LBMA Gold Price auction
process lacks an equivalent degree of transparency
because no direct participant in the daily electronic
auction or any other bullion market participant can
independently recreate how the auction resulted in
a particular price.
20 The data series set for XAU reports, among
other data: trade price; ask price; bid price; current
price; millisecond Unix time stamps of last trade/
quote update, last trade and last quote; contributor
code; city code; region code; high; low; open; and
change from yesterday. Solactive uses the trade
price data series to calculate the Index. IDS uses the
other data received to perform automated quality
control checks of each trade price submitted by a
contributor.
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calculate the Index. IDS’s automated
processes evaluate XAU trade price
contributions to determine the
authenticity of the contributor and the
validity of the trade price contribution
as representative of actual transaction
pricing based on contemporary and
historical XAU data fields. IDS data
evaluation and data integrity processes
are designed to filter out any invalid
Trade Ticks.
In addition, the Index Provider
verifies input data used in the
calculation of the Index to ensure the
continuous quality of such data,
including through automated
assessments at the individual data value
level as well as plausibility checks at
the aggregated index level. The Index
Provider also takes supplementary
quality control measures by performing
in-depth analyses of selected data
samples in longer intervals to facilitate
additional scrutiny of the data and
detection of conduct indicating
potential data manipulation. Finally, the
Index Provider maintains long-term
records of the input data used for each
Index determination in order to be able
to verify a determination
retrospectively.
The Exchange believes the Index will
serve as an appropriate replacement to
the LBMA Gold Price for purposes of
determining the NAV of Shares of the
Trust. The Index will be operated by a
regulated benchmark administrator and
its methodology is transparent,
replicable, and auditable. The Index
would provide a sound and reasonable
basis for the calculation of an NAV that
reflects the same gold bullion spot price
loco London as the LBMA Gold Price
(and thus would generally be very
similar to the LBMA Gold Price), but
that is more closely aligned with the
timing of trading in the Shares.
Accordingly, the Index is likely to
facilitate a fairer NAV calculation for
Shares of the Trust, particularly when
market conditions include significant
price moves in gold between when the
LBMA Gold Price is calculated versus
the New York trading close. The
Exchange also believes that the Index is
an appropriate replacement for the
LBMA Gold Price given the anticipated
benefits of aligning the timing of the
Index calculation with the daily close of
trading in the Shares of the Trust,
including promoting liquidity by
permitting market makers and other
liquidity providers to more efficiently
manage their risk and promoting
consistency with market participants
expectations’ on how to value the
Trust’s gold.
In connection with this proposed rule
change, the Sponsor will:
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52227
(1) issue a press release informing the
public of the date on which the Trust will
first use the Index to calculate its NAV;
(2) file the applicable press release with the
Commission by means of Form 8–K, which
will be available on the Trust’s website; and
(3) file an amendment to its registration
statement relating to the proposed change.21
Except for the change noted above, all
other representations made in the Prior
Order and Prior Notice remain
unchanged, and the Trust will continue
to comply with all initial and continued
listing requirements.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 22 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Index will
be calculated via a robust and
transparent methodology, based on
high-quality transaction data from a
major financial data provider. The
Exchange believes the Index will serve
as an appropriate replacement to the
LBMA Gold Price for purposes of
determining the NAV of the Shares and
will provide a sound and reasonable
basis for calculation of NAV that is more
closely aligned with U.S. trading hours,
which would protect investors and the
public interest by promoting liquidity
and price stability of Shares of the Trust
and reduce investor confusion arising
from any perceived tracking error based
on the timing of the LBMA Gold Price
fixing vis a vis the calculation of the
Shares’ NAV. Specifically, although the
LBMA Gold Price and Index price are
typically very similar and both reflect
gold bullion spot prices loco London,
the Index is likely to facilitate a fairer
NAV calculation for Shares of the Trust
in general and, particularly, on days
where there have been significant price
moves in gold between when the LBMA
Gold Price is calculated versus the New
York trading close and would allow the
calculation of an NAV on every day that
Shares of the Trust trade on the
21 The Sponsor further represents that it will
manage the Trust as described in the Prior Order
and Prior Notice and will not implement the
changes described herein until the amendment to
its registration statement and this proposed rule
change are effective and operative.
22 15 U.S.C. 78f(b)(5).
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ddrumheller on DSK120RN23PROD with NOTICES1
52228
Federal Register / Vol. 88, No. 150 / Monday, August 7, 2023 / Notices
Exchange. In addition, the Index, which
is calculated in alignment with the close
of trading in the Shares on each trading
day, provides a pricing mechanism
better equipped to respond to market
volatility and that includes liquidity at
the close of trading in the Shares in an
assessment of their NAV. Moreover,
because the Index would reflect the gold
spot price as represented by XAU,
market participants—who already
primarily refer to such price to inform
their trading in Shares of the Trust—
would not be impacted negatively by
the proposed change. Instead, because
market participants already primarily
rely on the gold spot price represented
by XAU to inform their trading of
Shares, the proposed change to the
Index could remove impediments to,
and perfect the mechanism of, a free and
open market by promoting consistency
with current market participant
expectations on how to value the Trust’s
gold.
The proposed rule change is also
designed to perfect the mechanism of a
free and open market price discovery
process and, in general, to protect
investors and the public interest
because the Index will be administered
and disseminated by Solactive, which is
unaffiliated with the Sponsor and the
Trust, and the Index will be transparent,
auditable, and operated by a regulated
benchmark administrator that adheres to
IOSCO Principles. The guidelines that
outline the methodology for the Index
calculation are publicly available,
including the formula by which the
Index is calculated, such that the
calculation could be reproduced by
anyone with access to the underlying
XAU market data, which is itself widely
available to market participants. XAU
data underlying the Index are submitted
by identifiable and IDS-accepted
contributors, and IDS evaluates XAU
trade price contributions to determine
the authenticity of the contributor and
the validity of the trade price
contribution as representative of actual
transaction pricing based on
contemporary and historical XAU data
fields, as well as to identify and filter
out any invalid Trade Ticks. In addition,
although the Index is not a BMRcompliant benchmark, the Index
Provider applies the same processes and
procedures to the Index as it does to its
BMR-compliant benchmarks;
accordingly, the Index is subject to
surveillance and other quality control
measures performed by the Index
Provider, including data analysis to aid
in the identification of conduct
indicating potential data manipulation
and maintenance of records allowing
VerDate Sep<11>2014
18:58 Aug 04, 2023
Jkt 259001
the Index Provider to verify historical
Index determinations. The Trust will
continue to be listed and traded on the
Exchange pursuant to the initial and
continued listing criteria set forth in
NYSE Arca Rule 8.201–E. Except for the
changes noted above, all other facts
presented and representations made in
Prior Order and Prior Notice remain
unchanged.23
As noted above, prior to
implementing the proposed change, the
Sponsor will (1) issue a press release
informing the public of the date the
Trust will first use the Index to calculate
the NAV of the Shares; (2) file the
applicable press release with the
Commission by means of Form 8–K,
which will be available on the Trust’s
website; and (3) file an amendment to
the Trust’s registration statement
relating to the proposed change. The
Exchange believes that such press
release and registration statement
amendment will protect investors and
the public interest by providing
notification to investors of the new gold
price benchmark prior to the use of the
Index by the Trust. The Exchange also
believes that the proposed change is
designed to protect investors and the
public interest because, except for the
change noted above with respect to the
Index as the new benchmark for the
calculation of the NAV for the Shares of
the Trust, all other representations made
in the Prior Order and Prior Notice
remain unchanged, and the Trust will
continue to comply with all initial and
continued listing requirements.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change is not designed to
address any competitive issue, but
rather would permit the Trust to update
the benchmark it uses for purposes of
calculating the NAV of Shares from the
LBMA Gold Price to the Index. The
Exchange does not believe this change
will impact intramarket or intermarket
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
23 See
PO 00000
notes 4 & 5, supra.
Frm 00121
Fmt 4703
Sfmt 4703
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 24 and
subparagraph (f)(6) of Rule 19b–4
thereunder.25
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act normally does not become operative
for 30 days after the date of its filing.
However, Rule 19b–4(f)(6)(iii) 26 permits
the Commission to designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has requested
that the Commission waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange believes that
waiver of the operative delay would be
consistent with the protection of
investors and the public interest
because the proposed rule change
would amend a representation to
replace references to the LBMA Gold
Price as the benchmark for NAV
calculation with references to the Index,
which, for reasons discussed above, the
Exchange believes is a suitable
replacement. Other than amending that
representation as specifically discussed
herein, all statements in the Prior Order
and Prior Notice remain unchanged, and
the Trust will continue to comply with
all initial and continued listing
requirements. For these reasons, and
because the proposal raises no novel
legal or regulatory issues, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.27
24 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange to give the
Commission written notice of its intent to file the
proposed rule change, along with a brief description
and text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
26 17 CFR 240.19b–4(f)(6)(iii).
27 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
25 17
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Federal Register / Vol. 88, No. 150 / Monday, August 7, 2023 / Notices
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
ddrumheller on DSK120RN23PROD with NOTICES1
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEARCA–2023–48 and should be
submitted on or before August 28, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–16712 Filed 8–4–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–2023–48 on the subject
line.
[Release No. 34–98032; File No. SR–ICEEU–
2023–013]
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–2023–48. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
August 1, 2023.
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
18:58 Aug 04, 2023
Jkt 259001
Self-Regulatory Organizations; ICE
Clear Europe Limited; Order Approving
Proposed Rule Change Relating to
Amendments to the Collateral and
Haircut Procedures
I. Introduction
On June 9, 2023, ICE Clear Europe
Limited (‘‘ICE Clear Europe’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Act’’),1 and
Rule 19b–4,2 a proposed rule change to
amend the ICE Clear Europe Collateral
and Haircut Procedures (the
‘‘Procedures’’). The proposed rule
change was published for comment in
the Federal Register on June 26, 2023.3
The Commission did not receive
comments regarding the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
II. Description of the Proposed Rule
Change
ICE Clear Europe is registered with
the Commission as a clearing agency for
the purpose of clearing security-based
swaps. In its role as a clearing agency
for security-based swaps, ICE Clear
Europe provides services to its Clearing
Members and Clearing Members transfer
assets to ICE Clear Europe.4 For
28 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Self-Regulatory Organizations; ICE Clear Europe
Limited; Notice of Filing of Proposed Rule Change
Relating to Amendments to the Collateral Haircut
Procedures, Exchange Act Release No. 97766 (June
20, 2023); 88 FR 41439 (June 26, 2023) (SR–ICEEU–
2023–013) (‘‘Notice’’).
4 Capitalized terms not otherwise defined herein
have the meanings assigned to them in the
Procedures or the ICE Clear Europe Clearing Rules.
1 15
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
52229
example, ICE Clear Europe’s Clearing
Members transfer to ICE Clear Europe
cash and other assets as collateral to
cover the exposures presented by the
positions that ICE Clear Europe clears.
ICE Clear Europe communicates such
collateral requirements as Initial Margin
and Guaranty Fund requirements.5 ICE
Clear Europe generally refers to the
assets that it accepts from Clearing
Members to cover their Initial Margin
and Guaranty Fund requirements as
Permitted Cover.6
The Procedures describe ICE Clear
Europe’s operational activities and
related governance processes with
respect to Permitted Cover. These
operational activities include, among
other things, enforcing basic eligibility
criteria that assets must satisfy to be
Permitted Cover, valuing Permitted
Cover, and applying haircuts to that
value.7
The proposed rule change relates to
the eligibility criteria that ICE Clear
Europe uses to determine whether to
accept a particular asset as Permitted
Cover. Section 2 of the Procedures sets
out the general criteria that all assets
must satisfy to be considered Permitted
Cover. Among other things, to be
considered Permitted Cover an asset
must be highly liquid with an active
sale or repurchase agreement market
with a diverse group of buyers and
sellers.
In addition to the general criteria
found in Section 2, which applies to all
assets submitted as Permitted Cover,
Appendix A to the Procedures provides
additional eligibility criteria for two
specific asset classes: financial
instruments and gold. To qualify as
5 ICE Clear Europe’s Clearing Rules note that
Initial Margin means ‘‘the Permitted Cover required
to be provided or actually provided . . . to the
Clearing House as collateral for the obligations of
a Clearing Member or Sponsored Principal in
respect of CDS Contracts . . . .’’ ICE Clear Europe
Clearing Rule 101. Guaranty fund contributions
serve to secure the obligations of a Clearing Member
to ICE Clear Europe and may be used to cover losses
sustained by ICE Clear Europe in the event of a
default of the Clearing Member. ICE Clear Europe
Clearing Rule 1103.
6 ICE Clear Europe Rule 101 defines ‘‘Permitted
Cover’’ as ‘‘. . . cash in Eligible Currencies and
other assets determined by the Clearing House as
permissible for Margin or Guaranty Fund
Contributions and includes, where the context so
requires, any such cash or assets transferred to the
Clearing House and any proceeds of realisation of
the same. A particular kind of currency or asset may
be determined by the Clearing House to be
Permitted Cover only in respect of Proprietary
Accounts, particular kinds of Customer Accounts,
Energy Contracts, Financials & Softs Contracts, F&O
Contracts, FX Contracts, CDS Contracts or certain
Sets of Contracts.’’
7 ICE Clear Europe uses these haircuts to reduce
the value of the Permitted Cover. Doing so helps
account for a potential decline in value that ICE
Clear Europe could face if it had to liquidate the
Permitted Cover in stressed market conditions.
E:\FR\FM\07AUN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 150 (Monday, August 7, 2023)]
[Rules and Regulations]
[Pages 52224-52229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16712]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98033; File No. SR-NYSEARCA-2023-48]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend a
Representation Regarding the VanEck Merk Gold Trust
August 1, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on July 19, 2023, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend a representation regarding the
VanEck Merk Gold Trust. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has previously approved a proposed rule change
relating to listing and trading on the Exchange of shares of the Trust
(the ``Shares'') under NYSE Arca Rule 8.201-E (Commodity-Based Trust
Shares).\4\ The Commission subsequently noticed for immediate
effectiveness a proposed rule change to replace references to the
``London Gold Fix'' in the Prior Order with the ``LBMA Gold Price.''
\5\ Pursuant to the Prior Notice, the Trust currently uses the LBMA
Gold Price as the benchmark price for purposes of calculating the net
asset value (``NAV'') of the Shares of the Trust.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 71378 (January 23,
2014), 79 FR 4786 (January 29, 2014) (SR-NYSEArca-2013-137) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To List and Trade Shares of the Merk Gold Trust Pursuant to
NYSE Arca Equities Rule 8.201) (the ``Prior Order'').
\5\ See Securities Exchange Act Release No. 74544 (March 19,
2015), 80 FR 15840 (March 25, 2015) (SR-NYSEArca-2015-19) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating
to the LBMA Gold Price as a Replacement for the London Gold Fix for
Certain Gold Related Exchange Traded Products) (the ``Prior
Notice'').
---------------------------------------------------------------------------
The Exchange now proposes to amend the representation in the Prior
Notice to replace references to the ``LBMA Gold Price'' with the
``Solactive Gold Spot Index'' (the ``Index''). Pursuant to this
proposed rule change, the Trust would use the Solactive Gold Spot Index
as the benchmark price for purposes of calculating the NAV of Shares of
the Trust.
According to the Trust's current registration statement on Form S-
3,\6\ Solactive AG (``Solactive'' or the ``Index Calculator'') owns,
calculates, and disseminates the Index. The Index is a U.S. Dollar
denominated index that aims to provide a price fixing for the gold spot
price for London delivery gold bullion quoted as U.S. Dollars per Troy
Ounce (``XAU'') and determined as of the time trading closes on the New
York Stock Exchange (``NYSE'').\7\ The Index calculates gold bullion
fixing prices by taking Time Weighted Average Prices (``TWAP'') \8\ of
XAU trading prices provided via ICE Data Services (``IDS'') data
feed.\9\
---------------------------------------------------------------------------
\6\ On May 12, 2023, the Trust filed Post-Effective Amendment
No. 1 to its registration statement on Form S-3 (the ``Registration
Statement'') (File No. 333-238022).
\7\ Solactive calculates the Index pursuant to the Index
Guideline publicly available at https://www.solactive.com/wp-content/uploads/2023/02/Solactive_Gold_Spot_Index_Methodology_Guideline_20230206.pdf. Index
data are publicly available at https://www.solactive.com/indices/?index=DE000SL0FW35.
\8\ TWAP is a widely used measure in the financial industry to
calculate the average price of a security or traded asset over a
specific time period. TWAP is calculated by dividing the total trade
value by the total trading time, thereby providing an average price
that reflects market conditions over a defined timeframe. The TWAP
methodology helps mitigate the impact of large trades on market
prices by providing an average price based on numerous current
market transactions and mitigates the effects of erroneous or
spurious pricing data points, which effects can significantly lower
the level of confidence in single transaction data points at a
specific time. Different weightings can be selected for the TWAP
methodology to provide a check on average prices derived before a
local market closing, for instance, by overweighting prices
immediately after the local market close.
\9\ Solactive receives real-time data via IDS's ``Spot Gold
(Also Loco London Gold)'' data feed. The spot gold prices utilized
by the Index are those for gold bullion deliverable in London. The
Trust's gold is also valued on a loco London basis.
---------------------------------------------------------------------------
Specifically, according to the Registration Statement, the Index
uses a TWAP calculation to determine an average price that is time-
weighted, using prices of actual transactions (``Trade Ticks'') for two
specified time periods around the scheduled close of trading on the
NYSE (generally, 4:00 p.m. Eastern Time) on each day that the NYSE is
open for trading.\10\ The TWAP is derived for (1) the period ahead of
the fixing (``Time Period 1''), which consists of the five minutes
before the close of trading, and (2) the period directly after the
fixing (``Time Period 2''), which consists of the six seconds after the
close of trading. The TWAPs for Time Period 1 and Time Period 2 are
each multiplied by their respective weightings, with 90% weighting
given to Time Period 1 and 10% weighting given to Time Period 2. When
added together, the two TWAPs result in a
[[Page 52225]]
single price sum that is the Index price.\11\
---------------------------------------------------------------------------
\10\ The NYSE's trading hours and holidays observed are
available at: https://www.nyse.com/markets/hours-calendars.
\11\ The Sponsor believes that it is unlikely that, on any given
trading day for the Shares, there would be no Trade Ticks recorded
for XAU in either Time Period 1 or Time Period 2, such that the
Index calculation could not be performed on such day. Trade Ticks
representing XAU are the closing prices for London delivery gold
bullion transactions posted in a 24-hour, global, over-the-counter
gold bullion market, which is not subject to trading suspensions,
trading halts, or market closures. Trade Ticks in Time Periods 1 and
2 thus reflect a comprehensive view of the gold spot market for
London delivery gold that includes more market participants than the
LBMA Gold Price. In the unlikely event that IDS is unable to publish
pricing information for XAU, for whatever reason, during either Time
Period 1 or Time Period 2 on a given trading day, the last available
Index calculation will be used in accordance with Solactive's
published and publicly available disruption policy.
---------------------------------------------------------------------------
For any calculation day t, the Index (Indext), is
determined as described above following the below mathematical formula:
[GRAPHIC] [TIFF OMITTED] TN07AU23.714
The sponsor of the Trust, Merk Investments LLC (the ``Sponsor''),
believes that the Index will provide an improved benchmark price for
purposes of determining the NAV of Shares of the Trust. Specifically,
the Sponsor believes that replacing the LBMA Gold Price with the Index
for calculating the NAV of the Shares may reduce the impact of timing
differences between the basis for NAV calculation and market price for
the Shares, as well as promote market liquidity, and would promote
consistency between the NAV calculation and market price of the Shares
by shifting the gold spot price determination to the end of the NYSE
trading day (including because a significant amount of gold bullion
trading (loco London) occurs after the close of London bullion
trading). In addition, the Sponsor does not expect that the adoption of
the Index will result in any unexpected, abrupt, or radical change in
the value of the Trust's gold because both the LBMA Gold Price and the
Index report the price in U.S. Dollars of a Troy Ounce of gold bullion
deliverable in London, just at different times.
According to the Registration Statement, the LBMA Gold Price is
calculated by the ICE Benchmark Administration (the ``IBA''), which
determines a gold price fixing for the London bullion market. Whereas
the LBMA Gold Price is calculated twice daily (at 10:30 a.m. London
Time and 3:00 p.m. London Time), the Index is calculated once daily no
later than 30 minutes after the close of trading at the NYSE, which
timing is more closely aligned with the close of trading in the Shares
on a given trading day.\12\ Whereas the LBMA Gold Price is determined
through an auction process involving a varying daily group of
participants (currently, representing a subset of 16 direct
participants) and is conducted by the IBA,\13\ the Index is calculated
by Solactive based on thousands of transaction prices for gold bullion
spot during Time Periods 1 and 2, as captured by IDS from identifiable
and IDS-accepted data contributors.\14\ As noted above, while both the
LBMA Gold Price and the Index price represent actual transactions in
London gold bullion spot, they mainly differ in the timing of the
fixing window.
---------------------------------------------------------------------------
\12\ The Trust currently utilizes the 3:00 p.m. London Time LBMA
Gold Price and only resorts to the 10:30 a.m. London Time LBMA Gold
Price if the afternoon price is not available.
\13\ IBA operates the technology platform that facilitates the
electronic auction process to determine the LBMA Gold Price.
\14\ Contributors to the data feed include national central
banks, large international banks that are recognized gold bullion
trading or custody banks, and international bullion trading firms.
---------------------------------------------------------------------------
The LBMA Gold Price and the Index are based on the same London
delivery gold spot, but at different times from a larger 24-hour market
trading period. Both the LBMA Gold Price and the Index establish gold
bullion spot prices loco London taken from the same continuous stream
of data for such prices and differ only in that they reflect different
snapshots at different times.\15\ On the same day, the LBMA Gold Price
and the Index price may differ because of changes in the conditions of
the gold spot market between the two different fixing times. However,
when such price moves occur, use of the Index as a benchmark would
facilitate the calculation of an NAV for Shares of the Trust that is
aligned with and accounts for activity around the close of trading in
such Shares. The Sponsor thus believes that using the Index rather than
the LBMA Gold Price as the benchmark to calculate the NAV of the Shares
could provide a timelier value of the NAV calculation and promote
consistency between the NAV and market price of the Shares.\16\
---------------------------------------------------------------------------
\15\ LBMA Gold Prices are reflected in the XAU data feed
utilized by the Index (although they are reported outside of the
Index's Time Periods 1 and 2).
\16\ Shares of the Trust are only created and redeemed in kind.
---------------------------------------------------------------------------
The Sponsor believes that using the Index, which is calculated
based on timing that better mirrors the trading hours of the Shares, to
calculate the NAV of the Shares would be beneficial for market makers
and liquidity providers for the Shares by allowing them to manage their
overnight risk exposure more effectively. The Sponsor has analyzed the
daily trading volume of the Shares between November 16, 2022 and May
30, 2023, as measured in five minute increments. This analysis revealed
that, over the 133 trading days
[[Page 52226]]
during this period, Share trading volume was on average 17.2% higher in
the five minutes before the close of trading on the NYSE than during
the rest of the trading day. As expected, the analysis revealed that
Share trading volume is also generally higher when London and New York
trading overlap, but that there was a consistent and significant
increase in Share trading volume immediately before the close of
trading on the NYSE. Increased trading before market close generally
reflects hedging in the Shares by market makers and other major market
participants to mitigate overnight market risk arising from their
exposure to the Shares. The relative staleness of the LBMA Gold Price
at the time the Trust calculates its NAV contributes to the uncertainty
that major market participants contend with in managing their overnight
market risk, which could result in lower liquidity for the Shares.
Market risk uncertainty is further heightened on days when the
London gold bullion market is closed altogether, but the Shares
continue to trade on the NYSE. Further, whereas the IBA observes a U.K.
banking holiday schedule, the Shares of the Trust are traded on the
Exchange, which observes a U.S. market calendar. As a result, there are
days on which the IBA does not hold an auction because the U.K. markets
are closed, but the Shares continue to trade on the Exchange. On such
days and on days when there is significant movement in the market
between the calculation of the LBMA Gold Price and the close of trading
in the Shares, the NAV of the Shares of the Trust is not updated, while
the market pricing of Shares of the Trust will generally continue to
reflect activity in the gold spot market represented by XAU. In
addition, in some cases, an NAV based on a stale LBMA Gold Price may
give the perception of tracking error when none exists.
Aligning the calculation of the NAV of the Shares with the close of
trading in the Shares would also promote a NAV calculation that takes
into account important liquidity events because the close of NYSE
trading is generally the most liquid time of the trading day for Shares
of the Trust. Closing the timing gap between the Trust's benchmark
price determination and the close of trading in the Shares and
subsequent NAV calculation could improve liquidity in the Shares by
enabling market makers and liquidity providers to better manage risk
and help reduce investor confusion stemming from any erroneous
perceived tracking error. Moreover, market participants, including
market makers, are unlikely to be confused or otherwise negatively
impacted by the Trust's use of the Index instead of the LBMA Gold
Price. Instead, because market participants already primarily rely on
the gold spot price represented by XAU to inform their trading of
Shares, the proposed change to the Index would align with current
market participant expectations on how to value the Trust's gold.
The Sponsor believes that the Index is a suitable replacement for
the LBMA Gold Price because it would provide a reliable benchmark for
purposes of calculating the NAV of the Shares and a better pricing
mechanism in times of market volatility. Specifically, the Sponsor
believes that the Index's methodology is reasonably designed to be
resistant to potential price manipulation because the Index is based on
an average spot price that is time-weighted around the close of trading
on the NYSE. As described above, the Index's methodology aims to
reflect a closing price for XAU that would be observed at the
conclusion of a trading day in Shares of the Trust. By using TWAPs that
account for the five minutes leading up to and six seconds immediately
following the market close rather than using a single Trade Tick at the
exact close, the Index's methodology is intended to minimize the impact
of any attempts to manipulate the fixing price by submitting single
time orders or any erroneous orders that could result in a NAV that
does not fairly reflect the value of the Trust's gold.
In addition, the Index Provider is registered as a benchmark
administrator under European Benchmarks Regulation (``BMR'') with the
German Federal Financial Supervisory Authority and adheres to the IOSCO
Principles for Financial Benchmarks (``IOSCO Principles'').\17\ The BMR
requires the Index Provider to have in place a control framework that
ensures its benchmarks within scope of the BMR are provided or
published and made available in accordance with the BMR. The control
framework provides a description of the control activities and further
information on how the business and the processes relate to the
requirements of the BMR. The Index Provider has an Oversight Committee
that is responsible for the integrity of the administration process and
oversees its control framework for the process of determining and
distributing the indices and benchmarks. The Index Provider is thus
subject to a similar level of regulatory scrutiny as the IBA is with
respect to the LBMA Gold Price,\18\ and, while the Index itself is not
a BMR-compliant benchmark, the Index Provider applies the same
processes and procedures in calculating the Index as it does to its
BMR-compliant benchmarks, including ensuring that the price discovery
process for the Index is subject to surveillance by the Index Provider
and is auditable and transparent in accordance with the IOSCO
Principles (as further discussed below).
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\17\ See https://www.iosco.org/library/pubdocs/pdf/IOSCOPD415.pdf. The IOSCO Principles are designed to enhance the
integrity, the reliability and the oversight of benchmarks by
establishing guidelines for benchmark administrators and other
relevant bodies in the areas of (1) governance: to protect the
integrity of the benchmark determination process and to address
conflicts of interest; (2) quality of the benchmark: to promote the
quality and integrity of benchmark determinations through the
application of design factors; (3) quality of the methodology: to
promote the quality and integrity of methodologies by setting out
minimum information that should be addressed within a methodology;
and (4) accountability mechanisms: to establish complaints
processes, documentation requirements and audit reviews. The IOSCO
Principles provide a framework of standards that might be met in
different ways, depending on the specificities of each benchmark. In
addition to a set of high-level principles, the framework offers a
subset of more detailed principles for benchmarks having specific
risks arising from their reliance on submissions and/or their
ownership structure. The IOSCO Principles also call for credible
transition policies in case a benchmark may cease to exist due to
market structure change.
\18\ IBA is compliant with the UK benchmark regulation (MAR
8.3), regulated by the FCA, and has been formally assessed against
the IOSCO Principles.
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Further, the Index is derived from data recorded during Time
Periods 1 and 2--a total period of five minutes and six seconds. Thus,
the Index calculation reflects several thousand Trade Ticks of actual
transactions from hundreds of identifiable and IDS-accepted data
contributors for a given calculation day. The Sponsor believes that the
broad base of data underlying the Index calculation reduces the
potential for price manipulation affecting NAV calculation.
The Sponsor also believes that the Index would provide enhanced
transparency to the calculation of the NAV of the Shares. The Index
will be calculated and published by the Index Calculator no later than
30 minutes following the close of trading on the NYSE on each business
day, disseminated to major financial data providers, and made publicly
available via the Trust's website. Solactive has published publicly
available guidelines that outline the methodology for the Index
calculation, including the formula by which the Index is calculated,
such that the calculation could be replicated by anyone with access to
the underlying XAU market data. Underlying XAU market data is commonly
and broadly
[[Page 52227]]
available to a wide group of market participants, including analysts,
advisers, traders, and investors at broker-dealers, banks, trading
platforms, investment advisers and other financial institutions and
investors that trade in gold bullion, as well as to the market makers
and authorized participants for the Shares. The Sponsor believes that
the Index provides a benchmark that is comprehensible and easily
accessible to a wide range of market participants, thus promoting
transparency into the valuation process for Shares of the Trust.\19\
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\19\ By contrast, the LBMA Gold Price auction process lacks an
equivalent degree of transparency because no direct participant in
the daily electronic auction or any other bullion market participant
can independently recreate how the auction resulted in a particular
price.
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Finally, the Sponsor believes that the Index would provide a
comprehensive benchmark for purposes of determining the NAV of the
Shares of the Trust. The Index calculation is based on XAU market data
from IDS, which is a major provider of financial market data to
institutions including banks and other asset managers for the pricing
of portfolio assets and the execution of asset transactions. Various
spot data, including XAU, is available through IDS's data streaming
service, which covers 2,700 spot rates, with an average of over 130
million updates per day for all spots provided by IDS. IDS compiles
data from over 100 sources, including market makers, execution venues,
banks and brokers from across the globe, and every updating Trade Tick
of spot streaming data is available via IDS's Integrated Data Viewer
service in a file-based format.
The Sponsor believes that data aggregated by IDS provides a
reliable basis for the calculation of the Index given the robust
quality control and filtering process IDS applies to XAU Trade Ticks to
exclude outliers and erroneous pricing. IDS publishes a ``Consolidated
Feed Wires Protocol'' applicable to XAU and other IDS data feeds (the
``Protocol''). The Protocol specifies the data series that are
associated with XAU.\20\ Data in these series include millisecond time-
stamped trade prices of XAU submitted by identifiable and IDS-accepted
contributors, and Solactive extracts Trade Ticks from this data set to
calculate the Index. IDS's automated processes evaluate XAU trade price
contributions to determine the authenticity of the contributor and the
validity of the trade price contribution as representative of actual
transaction pricing based on contemporary and historical XAU data
fields. IDS data evaluation and data integrity processes are designed
to filter out any invalid Trade Ticks.
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\20\ The data series set for XAU reports, among other data:
trade price; ask price; bid price; current price; millisecond Unix
time stamps of last trade/quote update, last trade and last quote;
contributor code; city code; region code; high; low; open; and
change from yesterday. Solactive uses the trade price data series to
calculate the Index. IDS uses the other data received to perform
automated quality control checks of each trade price submitted by a
contributor.
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In addition, the Index Provider verifies input data used in the
calculation of the Index to ensure the continuous quality of such data,
including through automated assessments at the individual data value
level as well as plausibility checks at the aggregated index level. The
Index Provider also takes supplementary quality control measures by
performing in-depth analyses of selected data samples in longer
intervals to facilitate additional scrutiny of the data and detection
of conduct indicating potential data manipulation. Finally, the Index
Provider maintains long-term records of the input data used for each
Index determination in order to be able to verify a determination
retrospectively.
The Exchange believes the Index will serve as an appropriate
replacement to the LBMA Gold Price for purposes of determining the NAV
of Shares of the Trust. The Index will be operated by a regulated
benchmark administrator and its methodology is transparent, replicable,
and auditable. The Index would provide a sound and reasonable basis for
the calculation of an NAV that reflects the same gold bullion spot
price loco London as the LBMA Gold Price (and thus would generally be
very similar to the LBMA Gold Price), but that is more closely aligned
with the timing of trading in the Shares. Accordingly, the Index is
likely to facilitate a fairer NAV calculation for Shares of the Trust,
particularly when market conditions include significant price moves in
gold between when the LBMA Gold Price is calculated versus the New York
trading close. The Exchange also believes that the Index is an
appropriate replacement for the LBMA Gold Price given the anticipated
benefits of aligning the timing of the Index calculation with the daily
close of trading in the Shares of the Trust, including promoting
liquidity by permitting market makers and other liquidity providers to
more efficiently manage their risk and promoting consistency with
market participants expectations' on how to value the Trust's gold.
In connection with this proposed rule change, the Sponsor will:
(1) issue a press release informing the public of the date on
which the Trust will first use the Index to calculate its NAV;
(2) file the applicable press release with the Commission by
means of Form 8-K, which will be available on the Trust's website;
and
(3) file an amendment to its registration statement relating to
the proposed change.\21\
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\21\ The Sponsor further represents that it will manage the
Trust as described in the Prior Order and Prior Notice and will not
implement the changes described herein until the amendment to its
registration statement and this proposed rule change are effective
and operative.
Except for the change noted above, all other representations made
in the Prior Order and Prior Notice remain unchanged, and the Trust
will continue to comply with all initial and continued listing
requirements.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \22\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\22\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Index will be calculated via a robust and transparent methodology,
based on high-quality transaction data from a major financial data
provider. The Exchange believes the Index will serve as an appropriate
replacement to the LBMA Gold Price for purposes of determining the NAV
of the Shares and will provide a sound and reasonable basis for
calculation of NAV that is more closely aligned with U.S. trading
hours, which would protect investors and the public interest by
promoting liquidity and price stability of Shares of the Trust and
reduce investor confusion arising from any perceived tracking error
based on the timing of the LBMA Gold Price fixing vis a vis the
calculation of the Shares' NAV. Specifically, although the LBMA Gold
Price and Index price are typically very similar and both reflect gold
bullion spot prices loco London, the Index is likely to facilitate a
fairer NAV calculation for Shares of the Trust in general and,
particularly, on days where there have been significant price moves in
gold between when the LBMA Gold Price is calculated versus the New York
trading close and would allow the calculation of an NAV on every day
that Shares of the Trust trade on the
[[Page 52228]]
Exchange. In addition, the Index, which is calculated in alignment with
the close of trading in the Shares on each trading day, provides a
pricing mechanism better equipped to respond to market volatility and
that includes liquidity at the close of trading in the Shares in an
assessment of their NAV. Moreover, because the Index would reflect the
gold spot price as represented by XAU, market participants--who already
primarily refer to such price to inform their trading in Shares of the
Trust--would not be impacted negatively by the proposed change.
Instead, because market participants already primarily rely on the gold
spot price represented by XAU to inform their trading of Shares, the
proposed change to the Index could remove impediments to, and perfect
the mechanism of, a free and open market by promoting consistency with
current market participant expectations on how to value the Trust's
gold.
The proposed rule change is also designed to perfect the mechanism
of a free and open market price discovery process and, in general, to
protect investors and the public interest because the Index will be
administered and disseminated by Solactive, which is unaffiliated with
the Sponsor and the Trust, and the Index will be transparent,
auditable, and operated by a regulated benchmark administrator that
adheres to IOSCO Principles. The guidelines that outline the
methodology for the Index calculation are publicly available, including
the formula by which the Index is calculated, such that the calculation
could be reproduced by anyone with access to the underlying XAU market
data, which is itself widely available to market participants. XAU data
underlying the Index are submitted by identifiable and IDS-accepted
contributors, and IDS evaluates XAU trade price contributions to
determine the authenticity of the contributor and the validity of the
trade price contribution as representative of actual transaction
pricing based on contemporary and historical XAU data fields, as well
as to identify and filter out any invalid Trade Ticks. In addition,
although the Index is not a BMR-compliant benchmark, the Index Provider
applies the same processes and procedures to the Index as it does to
its BMR-compliant benchmarks; accordingly, the Index is subject to
surveillance and other quality control measures performed by the Index
Provider, including data analysis to aid in the identification of
conduct indicating potential data manipulation and maintenance of
records allowing the Index Provider to verify historical Index
determinations. The Trust will continue to be listed and traded on the
Exchange pursuant to the initial and continued listing criteria set
forth in NYSE Arca Rule 8.201-E. Except for the changes noted above,
all other facts presented and representations made in Prior Order and
Prior Notice remain unchanged.\23\
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\23\ See notes 4 & 5, supra.
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As noted above, prior to implementing the proposed change, the
Sponsor will (1) issue a press release informing the public of the date
the Trust will first use the Index to calculate the NAV of the Shares;
(2) file the applicable press release with the Commission by means of
Form 8-K, which will be available on the Trust's website; and (3) file
an amendment to the Trust's registration statement relating to the
proposed change. The Exchange believes that such press release and
registration statement amendment will protect investors and the public
interest by providing notification to investors of the new gold price
benchmark prior to the use of the Index by the Trust. The Exchange also
believes that the proposed change is designed to protect investors and
the public interest because, except for the change noted above with
respect to the Index as the new benchmark for the calculation of the
NAV for the Shares of the Trust, all other representations made in the
Prior Order and Prior Notice remain unchanged, and the Trust will
continue to comply with all initial and continued listing requirements.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed change is not
designed to address any competitive issue, but rather would permit the
Trust to update the benchmark it uses for purposes of calculating the
NAV of Shares from the LBMA Gold Price to the Index. The Exchange does
not believe this change will impact intramarket or intermarket
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \24\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\25\
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\24\ 15 U.S.C. 78s(b)(3)(A)(iii).
\25\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \26\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
believes that waiver of the operative delay would be consistent with
the protection of investors and the public interest because the
proposed rule change would amend a representation to replace references
to the LBMA Gold Price as the benchmark for NAV calculation with
references to the Index, which, for reasons discussed above, the
Exchange believes is a suitable replacement. Other than amending that
representation as specifically discussed herein, all statements in the
Prior Order and Prior Notice remain unchanged, and the Trust will
continue to comply with all initial and continued listing requirements.
For these reasons, and because the proposal raises no novel legal or
regulatory issues, the Commission believes that waiver of the 30-day
operative delay is consistent with the protection of investors and the
public interest. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\27\
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\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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[[Page 52229]]
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEARCA-2023-48 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-2023-48. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEARCA-2023-48 and should
be submitted on or before August 28, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-16712 Filed 8-4-23; 8:45 am]
BILLING CODE 8011-01-P
