[Federal Register Volume 75, Number 151 (Friday, August 6, 2010)]
[Notices]
[Pages 47655-47661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19373]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62620; File No. SR-NYSEArca-2010-71]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the ETFS White
Metals Basket Trust
July 30, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on July 22, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the self-regulatory organization. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade ETFS White Metals Basket
Shares of the ETFS White Metals Basket Trust pursuant to NYSE Arca
Equities Rule 8.201. The text of the proposed rule change is available
at the Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade ETFS White Metals Basket
Shares (``Shares'') of the ETFS White Metals Basket Trust (``Trust'')
under NYSE Arca Equities Rule 8.201. Under NYSE Arca Equities Rule
8.201, the Exchange may propose to list and/or trade pursuant to
unlisted trading privileges (``UTP'') ``Commodity-Based Trust Shares.''
\3\ The Commission has previously approved listing on the Exchange
under NYSE Arca Equities Rule 8.201 of other issues of Commodity-Based
Trust Shares. The Commission has approved listing on the Exchange of
ETFS Silver Trust \4\, ETFS Gold Trust \5\, ETFS Platinum Trust \6\ and
ETFS Palladium Trust (collectively, the ``ETFS Trusts'').\7\ In
addition, The Commission has approved listing on the Exchange of
streetTRACKS Gold Trust and iShares COMEX Gold Trust.\8\ Prior to their
listing on the Exchange, the Commission approved listing of the
streetTRACKS Gold Trust on the New York Stock Exchange (``NYSE'') and
listing of iShares COMEX Gold Trust on the American Stock Exchange LLC
(now known as ``NYSE Amex LLC'').\9\ In addition, the Commission has
approved trading of the streetTRACKS Gold Trust and iShares Silver
Trust on the Exchange pursuant to UTP.\10\ The Commission also has
approved listing of the iShares Silver Trust on the Exchange \11\ and,
previously, listing of the iShares Silver Trust on the American Stock
Exchange LLC.\12\
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\3\ 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.
\4\ Securities Exchange Act Release No. 59781 (April 17, 2009),
74 FR 18771 (April 24, 2009) (SR-NYSEArca-2009-28).
\5\ Securities Exchange Act Release No. 59895 (May 8, 2009), 74
FR 22993 (May 15, 2009) (SR-NYSEArca-2009-40).
\6\ Securities Exchange Act Release No. 61219 (December 22,
2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95).
\7\ Securities Exchange Act Release No. 61220 (December 22,
2009), 74 FR 68895 (December 29, 2009) (SR-NYSEArca-2009-94).
\8\ See Securities Exchange Act Release Nos. 56224 (August 8,
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76) (order
approving listing on the Exchange of the streetTRACKS Gold Trust);
56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) (SR-NYSEArca-
2007-43) (order approving listing on the Exchange of iShares COMEX
Gold Trust).
\9\ See Securities Exchange Act Release Nos. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order
approving listing of streetTRACKS Gold Trust on NYSE); 51058
(January 19, 2005), 70 FR 3749 (January 26, 2005) (SR-Amex-2004-38)
(order approving listing of iShares COMEX Gold Trust on the American
Stock Exchange LLC).
\10\ See Securities Exchange Act Release Nos. 53520 (March 20,
2006), 71 FR 14977 (March 24, 2006) (SR-PCX-2005-117) (order
approving trading on the Exchange pursuant to UTP of the iShares
Silver Trust); 51245 (February 23, 2005), 70 FR 10731 (March 4,
2005) (SR-PCX-2004-117) (order approving trading on the Exchange of
the streetTRACKS Gold Trust pursuant to UTP).
\11\ See Securities Exchange Act Release Nos. 58956 (November
14, 2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124)
(order approving listing on the Exchange of the iShares Silver
Trust).
\12\ See Securities Exchange Act Release No. 53521 (March 20,
2006), 71 FR 14967 (March 24, 2006) (SR-Amex-2005-72) (order
approving listing on the American Stock Exchange LLC of the iShares
Silver Trust).
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The Trust will issue Shares which represent units of fractional
undivided beneficial interest in and ownership of the Trust. The
investment objective of the Trust is for the Shares to reflect the
performance of the price of physical silver, platinum and palladium in
the proportions held by the Trust, less the expenses of the Trust's
operations.\13\
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\13\ See the registration statement for the Trust on Form S-1,
filed with the Commission on May 27, 2010 (No. 333-167166)
(``Registration Statement''). The descriptions of the Trust, the
Shares, the Bullion, and the regulation and operation of the
commodity markets contained herein are based on the Registration
Statement.
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ETFS Services USA LLC is the sponsor of the Trust (``Sponsor''),
The Bank of New York Mellon is the trustee of the Trust
(``Trustee''),\14\ and JPMorgan Chase Bank, N.A. is the custodian of
the Trust (``Custodian'').\15\
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\14\ The Trustee is generally responsible for the day-to-day
administration of the Trust, including keeping the Trust's
operational records. The Trustee's principal responsibilities
include (1) transferring the Trust's Bullion (silver, platinum and
palladium) as needed to pay the Sponsor's Fee in Bullion (Bullion
transfers are expected to occur approximately monthly in the
ordinary course), (2) valuing the Trust's Bullion and calculating
the NAV of the Trust and the NAV per Share, (3) receiving and
processing orders from Authorized Participants to create and redeem
Baskets and coordinating the processing of such orders with the
Custodian and DTC, (4) selling the Trust's Bullion as needed to pay
any extraordinary Trust expenses that are not assumed by the
Sponsor, (5) when appropriate, making distributions of cash or other
property to Shareholders, and (6) receiving and reviewing reports
from or on the Custodian's custody of and transactions in the
Trust's Bullion.
\15\ The Custodian is responsible for safekeeping for the Trust
Bullion deposited with it by Authorized Participants in connection
with the creation of Baskets. The Custodian is also responsible for
selecting the Zurich Sub-Custodians and its other subcustodians, if
any. The Custodian facilitates the transfer of Bullion in and out of
the Trust through the unallocated Bullion accounts it or a Bullion
clearing bank will maintain for each Authorized Participant and the
unallocated and allocated Bullion accounts it will maintain for the
Trust. The Custodian will hold at its London, England vault premises
that portion of the Trust's allocated Bullion to be held in London.
The Zurich Sub-Custodians will hold at their Zurich, Switzerland
vault premises that portion of the Trust's allocated platinum and
palladium to be held in Zurich on behalf of the Custodian. The
Custodian is responsible for allocating specific bars of physical
silver and specific plates or ingots of physical platinum and
palladium to the Trust's allocated Bullion account. The Custodian
will provide the Trustee with regular reports detailing the Bullion
transfers in and out of the Trust's unallocated and allocated
Bullion accounts and identifying the silver bars and the platinum
and palladium plates or ingots held in the Trust's allocated Bullion
account.
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[[Page 47656]]
The Exchange represents that the Shares satisfy the requirements of
NYSE Arca Equities Rule 8.201 and thereby qualify for listing on the
Exchange.\16\ The Shares will be book-entry only and individual
certificates will not be issued for the Shares.
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\16\ With respect to application of Rule 10A-3 (17 CFR 240.10A-
3) under the Securities Exchange of 1934 (``Act'') (15 U.S.C. 78a),
the Trust relies on the exemption contained in Rule 10A-3(c)(7).
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The NAV of the Trust is the aggregate value of the Trust's assets
less its liabilities (which include estimated accrued but unpaid fees
and expenses). In determining the NAV of the Trust, the Trustee will
value the prices of Bullion as determined by the relevant London
Fixes.\17\ Silver held by the Trust will be valued on the basis of the
price of an ounce of silver as set at approximately 12:00 noon London,
England time (London PM Fix) and performed in London by three market
making members of The London Bullion Market Association (``LBMA'').
Platinum held by the Trust will be valued on the basis of the price of
an ounce of platinum as set by the afternoon session of the twice daily
fix of the price of an ounce of platinum which starts at 2:00 p.m.
London, England time (London PM Fix) and is performed in London by the
four fixing members of The London Platinum and Palladium Market
(``LPPM''). Palladium held by the Trust will be valued on the basis of
the price of an ounce of palladium as set by the afternoon session of
the twice daily fix of the price of an ounce of palladium which starts
at 2:00 PM London, England time (London PM Fix) and is performed in
London by the four fixing members of the LPPM.\18\ The Trustee will
determine the NAV of the Trust on each day the NYSE Arca is open for
regular trading, as promptly as practicable after 4 p.m., Eastern Time
(``E.T.''). If no London PM Fixes are made for silver, platinum or
palladium on a particular evaluation day or has not been announced by 4
p.m. E.T. on a particular evaluation day, the next most recent London
price fix for such metal or metals will be used in the determination of
the NAV of the Trust, unless the Sponsor determines that such price is
inappropriate to use as basis for such determination.\19\ The Trustee
will also determine the NAV per Share, which equals the NAV of the
Trust, divided by the number of outstanding Shares.
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\17\ Terms relating to the Trust and the Shares referred to, but
not defined, herein are defined in the Registration Statement.
\18\ The operation of the London Fixes for silver, platinum and
palladium is described in the registration statements on Form S-1
for the ETFS Silver, Platinum and Palladium Trusts, respectively,
and in the Exchange's proposed rule changes pursuant to Rule 19b-4
under the Act in connection with Exchange listing of such Trusts.
See notes 4-7, supra.
\19\ See discussion under ``Operation of the Trust'', infra,
regarding procedures used when the Sponsor determines that the
Bullion price is inappropriate to use.
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Market Regulation
According to the Registration Statement, the global silver,
platinum and palladium markets are overseen and regulated by both
governmental and self-regulatory organizations. In addition, certain
trade associations have established rules and protocols for market
practices and participants. In the United Kingdom, responsibility for
the regulation of the financial market participants, including the
major participating members of the LBMA and the LPPM, falls under the
authority of the Financial Services Authority (FSA) as provided by the
Financial Services and Markets Act 2000 (FSM Act). Under this act, all
UK-based banks, together with other investment firms, are subject to a
range of requirements, including fitness and properness, capital
adequacy, liquidity, and systems and controls.
The FSA is responsible for regulating investment products,
including derivatives, and those who deal in investment products.
Regulation of spot, commercial forwards, and deposits of Bullion not
covered by the FSM Act is provided for by The London Code of Conduct
for Non-Investment Products, which was established by market
participants in conjunction with the Bank of England.
The Tokyo Commodity Exchange, Inc. (``TOCOM'') has authority to
perform financial and operational surveillance on its members' trading
activities, scrutinize positions held by members and large-scale
customers, and monitor the price movements of futures markets by
comparing them with cash and other derivative markets' prices. To act
as a Futures Commission Merchant Broker, a broker must obtain a license
from Japan's Ministry of Economy, Trade and Industry (METI), the
regulatory authority that oversees the operations of the TOCOM.\20\
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\20\ Additional information regarding operation of the silver,
platinum and palladium markets, and the regulation of these markets,
is described in the Registration Statement and in the Commission
notices of the Exchange's proposed rule changes regarding listing of
the ETFS Trusts. See Securities Exchange Act Release Nos. 59781
(April 17, 2009), 74 FR 18771 (April 24, 2009) (SR-NYSEArca-2009-28)
(notice and order granting accelerated approval regarding listing of
ETFS Silver Trust); 60970 (November 9, 2009), 74 FR 59319 (November
17, 2009) (SR-NYSEArca-2009-95) (notice regarding listing of ETFS
Platinum Trust); 60971 (November 9, 2009), 74 FR 59283 (November 17,
2009) (SR-NYSEArca-2009-94) (notice regarding listing of ETFS
Palladium Trust).
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Operation of the Trust
The Trust is a common law trust, formed under New York law pursuant
to the Trust Agreement. The Trust holds Bullion and is expected from
time to time to issue Baskets in exchange for deposits of Bullion and
to distribute Bullion in connection with redemptions of Baskets. The
investment objective of the Trust is for the Shares to reflect the
performance of the prices of physical silver, platinum and palladium in
the proportions held by the Trust, less the Trust's expenses.
According to the Registration Statement, the Trust is not
registered as an investment company under the Investment Company Act of
1940 and is not required to register under such act. The Trust will not
hold or trade in commodity futures contracts regulated by the Commodity
Exchange Act \21\ (``CEA''), as administered by the Commodity Futures
Trading Commission (``CFTC''). The Trust is not a commodity pool for
purposes of the CEA, and neither the Sponsor nor the Trustee is subject
to regulation as a commodity pool operator or a commodity trading
adviser in connection with the Shares.
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\21\ 7 U.S.C. 1 et seq.
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The Trust expects to create and redeem Shares from time to time but
only in Baskets of 50,000 each. The number of outstanding Shares is
expected to increase and decrease from time to time as a result of the
creation and redemption of Baskets. The creation and redemption of
Baskets requires the delivery to the Trust or the distribution by the
Trust of the amount of Bullion and any cash represented by the Baskets
being created or redeemed. The total amount of Bullion and any cash
required for the creation of Baskets will be based on the combined NAV
of the number of Baskets being created or redeemed. The initial amount
of Bullion required for deposit with the Trust to create Shares will be
50,000 ounces of silver, 500 ounces of platinum and 400 ounces of
palladium per Basket.\22\ The
[[Page 47657]]
number of ounces of Bullion required to create a Basket or to be
delivered upon a redemption of a Basket will gradually decrease over
time. This is because the Shares comprising a Basket will represent a
decreasing amount of Bullion due to the delivery or sale of the Trust's
Bullion to pay the Sponsor's Fee or the Trust's expenses not assumed by
the Sponsor.
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\22\ As of July 12, 2010, the value of a Basket was
approximately $1,835,525. The value of Bullion required for the
creation of a Basket was approximately $895,125 for silver ($17.90
per ounce times 50,000 ounces); $759,000 for platinum ($1,518.00 per
ounce times 500 ounces); and $181,400 for palladium ($453.50 per
ounce times 400 ounces). These values represent weightings for
silver, platinum and palladium in a Basket of approximately 49%,
41%, and 10%, respectively.
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The Trustee will determine the NAV of the Trust on each day that
the NYSE Arca is open for regular trading, as promptly as practicable
after 4:00 p.m., E.T. The NAV of the Trust is the aggregate value of
the Trust's assets less its estimated accrued but unpaid liabilities
(which include accrued expenses). In determining the Trust's NAV, the
Trustee will value the silver held by the Trust based on the London PM
Fix price for an ounce of silver or such other publicly available price
as the Sponsor may deem fairly represents the commercial value of the
Trust's silver, the platinum held by the Trust based on the London PM
Fix price for an ounce of platinum or such other publicly available
price as the Sponsor may deem fairly represents the commercial value of
the Trust's platinum and the palladium held by the Trust based on the
London PM Fix price for an ounce of palladium or such other publicly
available price as the Sponsor may deem fairly represents the
commercial value of the Trust's palladium. The Trustee will also
determine the NAV per Share. If on a day when the Trust's NAV is being
calculated the London PM Fix is not available or has not been announced
by 4:00 p.m., E.T. for any Bullion metal, the price from the next most
recent London Fix (AM or PM) for such Bullion metal will be used,
unless the Sponsor determines that such price is inappropriate to use.
Investors may obtain on a 24-hour basis silver, platinum and
palladium pricing information based on the spot price for an ounce of
each Bullion metal from various financial information service
providers. Current spot prices are also generally available with bid/
ask spreads from physical Bullion dealers. In addition, the Trust's Web
site (http://www.etfsecurities.com) will provide ongoing pricing
information for silver, platinum and palladium spot prices and the
Shares. Market prices for the Shares will be available from a variety
of sources including brokerage firms, information Web sites and other
information service providers. The NAV of the Trust will be published
by the Sponsor on each day that the NYSE Arca is open for regular
trading and will be posted on the Trust's Web site.
According to the Registration Statement, the most significant
silver, platinum and palladium futures exchanges are the COMEX and the
TOCOM. Trading on these exchanges is based on fixed delivery dates and
transaction sizes for the futures and options contracts traded. The
COMEX operates through a central clearance system. On June 6, 2003,
TOCOM adopted a similar clearance system.
Secondary Market Trading
According to the Registration Statement, while the Trust's
investment objective is for the Shares to reflect the performance of
prices of physical silver, platinum and palladium in the proportions
held by the Trust, less the expenses of the Trust, the Shares may trade
in the secondary market on the NYSE Arca at prices that are lower or
higher relative to their NAV per Share. The amount of the discount or
premium in the trading price relative to the NAV per Share may be
influenced by non-concurrent trading hours between the NYSE Arca and
COMEX, and the London and Zurich Bullion markets. While the Shares will
trade on the NYSE Arca until 8 p.m., E.T., liquidity in the global
silver, platinum and palladium markets will be reduced after the close
of the COMEX at 1:30 p.m., E.T. As a result, during this time, trading
spreads, and the resulting premium or discount, on the Shares may
widen.
Creation and Redemption of Shares
The Trust will create and redeem Shares from time to time, but only
in one or more Baskets of 50,000 Shares. The creation and redemption of
Baskets will only be made in exchange for the delivery to the Trust or
the distribution by the Trust of the amount of physical silver,
platinum and palladium and any cash represented by the Baskets being
created or redeemed, the amount of which will be based on the combined
NAV of the number of Shares included in the Baskets being created or
redeemed determined on the day the order to create or redeem Baskets is
properly received.
Authorized Participants are the only persons that may place orders
to create and redeem Baskets, as described in the Registration
Statement.
Creation Procedures
On any business day, an Authorized Participant may place an order
with the Trustee to create one or more Baskets. Creation and redemption
orders will be accepted on ``business days'' the NYSE Arca is open for
regular trading. Settlements of such orders requiring receipt or
delivery, or confirmation of receipt or delivery, of Bullion in the
United Kingdom, Zurich or another jurisdiction will occur on ``business
days'' when (1) banks in the United Kingdom, Zurich and such other
jurisdiction and (2) the London and Zurich Bullion markets are
regularly open for business. Purchase orders must be placed no later
than 3:59:59 p.m. E.T. on each business day the NYSE Arca is open for
regular trading. By placing a purchase order, an Authorized Participant
agrees to deposit Bullion with the Trust. The creation and redemption
of Baskets will only be made in exchange for the delivery to the Trust
or the distribution by the Trust of the amount of Bullion and any cash
represented by the Baskets being created or redeemed, the amount of
which will be based on the combined NAV of the number of Shares
included in the Baskets being created or redeemed determined on the day
the order to create or redeem Baskets is properly received.
Each Creation Basket Deposit, which is the total deposit required
to create a Basket, will be an amount of Bullion and cash, if any, that
is in the same proportion to the total assets of the Trust (net of
estimated accrued but unpaid fees, expenses and other liabilities) on
the date an order to purchase one or more Baskets is properly received
as the number of Shares comprising the number of Baskets to be created
in respect of the deposit bears to the total number of Shares
outstanding on the date such order is properly received. The Bullion
comprising a deposit shall be in a proportion equal to 50,000 ounces of
silver, 500 ounces of platinum and 400 ounces of palladium.\23\
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\23\ The proportion of Bullion comprising a deposit will remain
the same following inception of the Trust. The amount of silver,
platinum and palladium in the required deposit is determined by
dividing the number of ounces of each metal held by the Trust by the
number of Baskets outstanding, as adjusted for the amount of Bullion
constituting estimated accrued but unpaid fees and expenses of the
Trust.
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An Authorized Participant who places a purchase order is
responsible for crediting its Authorized Participant Unallocated
Account with the required Bullion deposit amount by the third business
day in London or Zurich, as
[[Page 47658]]
applicable, following the purchase order date. Upon receipt of the
Bullion deposit amount, the Custodian, after receiving appropriate
instructions from the Authorized Participant and the Trustee, will
transfer on the third business day following the purchase order date
the Bullion deposit amount from the Authorized Participant Unallocated
Account to the Trust Unallocated Account and the Trustee will direct
DTC to credit the number of Baskets ordered to the Authorized
Participant's DTC account. The expense and risk of delivery, ownership
and safekeeping of Bullion until such Bullion has been received by the
Trust is borne solely by the Authorized Participant.
Redemption Procedures
According to the Registration Statement, the procedures by which an
Authorized Participant can redeem one or more Baskets will mirror the
procedures for the creation of Baskets. On any business day, an
Authorized Participant may place an order with the Trustee to redeem
one or more Baskets. Redemption orders must be placed no later than
3:59:59 p.m. E.T. on each business day the NYSE Arca is open for
regular trading. A redemption order so received is effective on the
date it is received in satisfactory form by the Trustee. The redemption
procedures allow Authorized Participants to redeem Baskets and do not
entitle an individual Shareholder to redeem any Shares in an amount
less than a Basket, or to redeem Baskets other than through an
Authorized Participant.
By placing a redemption order, an Authorized Participant agrees to
deliver the Baskets to be redeemed through DTC's book-entry system to
the Trust not later than the third business day following the effective
date of the redemption order.
Determination of Redemption Distribution
The redemption distribution from the Trust will consist of a credit
to the redeeming Authorized Participant's Authorized Participant
Unallocated Account representing the amount of the Bullion held by the
Trust evidenced by the Shares being redeemed. Redemption distributions
will be subject to the deduction of any applicable tax or other
governmental charges which may be due.
Creation and Redemption Transaction Fee
To compensate the Trustee for services in processing the creation
and redemption of Baskets, an Authorized Participant will be required
to pay a transaction fee to the Trustee of $500 per order to create or
redeem Baskets. An order may include multiple Baskets. The transaction
fee may be reduced, increased or otherwise changed by the Trustee with
the consent of the Sponsor. The Trustee shall notify DTC of any
agreement to change the transaction fee and will not implement any
increase in the fee for the redemption of Baskets until 30 days after
the date of the notice.
Termination Events
The Trustee will terminate and liquidate the Trust if the aggregate
market capitalization of the Trust, based on the closing price for the
Shares, was less than $350 million (as adjusted for inflation) at any
time after the first anniversary after the Trust's formation and the
Trustee receives, within six months after the last of those trading
days, notice from the Sponsor of its decision to terminate the Trust.
The Trustee will terminate the Trust if the CFTC determines that the
Trust is a commodities pool under the CEA. The Trustee may also
terminate the Trust upon the agreement of the owners of beneficial
interests in the Shares (``Shareholders'') owning at least 75% of the
outstanding Shares.
The Trust has no fixed termination date.
Additional information regarding the Shares and the operation of
the Trust, including termination events, risks, and creation and
redemption procedures, are described in the Registration Statement.
Valuation of Bullion, Definition of Net Asset Value and Adjusted Net
Asset Value
On each day that the NYSE Arca is open for regular trading, as
promptly as practicable after 4 p.m., E.T. on such day (Evaluation
Time), the Trustee will evaluate the Bullion held by the Trust and
determine both the Adjusted Net Asset Value (``ANAV''), as defined
below, and the NAV of the Trust.
At the Evaluation Time, the Trustee will value the Trust's Bullion
on the basis of that day's London PM Fix for such metal or, if no
London PM Fix is made for a metal on such day or has not been announced
by the Evaluation Time, the next most recent London price fix for such
metal determined prior to the Evaluation Time will be used, unless the
Sponsor determines that such price is inappropriate as a basis for
evaluation. In the event the Sponsor determines that the London PM Fix
or such other publicly available price as the Sponsor may deem fairly
represents the commercial value of the Trust's Bullion metal is not an
appropriate basis for evaluation of the Trust's Bullion metal, it shall
identify an alternative basis for such evaluation to be employed by the
Trustee.
Once the value of the Bullion has been determined, the Trustee will
subtract all estimated accrued but unpaid fees (other than the fees
accruing for such day on which the valuation takes place computed by
reference to the value of the Trust or its assets), expenses and other
liabilities of the Trust from the total value of the Bullion and all
other assets of the Trust (other than any amounts credited to the
Trust's reserve account, if established). The resulting figure is the
ANAV of the Trust. The ANAV of the Trust is used to compute the
Sponsor's Fee.
Liquidity
Liquidity in the OTC market can vary from time to time during the
course of the 24-hour trading day. Fluctuations in liquidity are
reflected in adjustments to dealing spreads--the differential between a
dealer's ``buy'' and ``sell'' prices. The period of greatest liquidity
in the Bullion markets generally occurs at the time of day when trading
in the European time zones overlaps with trading in the United States,
which is when OTC market trading in London, New York, Zurich and other
centers coincides with futures and options trading on the COMEX. This
period lasts for approximately four hours each New York business day
morning.
Availability of Information Regarding Bullion Prices
Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of commodities such as silver, platinum
and palladium 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 Bullion market information available on public Web sites and
through professional and subscription services.
Investors may obtain on a 24-hour basis Bullion pricing information
based on the spot price for an ounce of Bullion from various financial
information service providers, such as Reuters and Bloomberg. Reuters
and Bloomberg provide at no charge on their Web sites delayed
information regarding the spot price of Bullion and last sale prices of
Bullion futures, as well as information about news and developments in
the Bullion market. Reuters and Bloomberg also offer a professional
service to subscribers for a fee that provides
[[Page 47659]]
information on Bullion prices directly from market participants. An
organization named EBS provides an electronic trading platform to
institutions such as bullion banks and dealers for the trading of spot
Bullion, as well as a feed of live streaming prices to Reuters and
Moneyline Telerate subscribers. Complete real-time data for Bullion
futures and options prices traded on COMEX are available by
subscription from Reuters and Bloomberg. COMEX also provides delayed
futures and options information on current and past trading sessions
and market news free of charge on its Web site. There are a variety of
other public Web sites providing information on Bullion, ranging from
those specializing in precious metals to sites maintained by major
newspapers, such as The Wall Street Journal. In addition, the London AM
Fix and London PM Fix are publicly available at no charge at [sic] or
http://www.thebulliondesk.com.
The Trust's Web site will provide an intraday indicative value
(``IIV'') per share for the Shares, updated at least every 15 seconds,
as calculated by the Exchange or a third party financial data provider,
during the Exchange's Core Trading Session (9:30 a.m. to 4 p.m., E.T.).
The IIV is calculated by multiplying the indicative spot price of
Bullion by the quantity of Bullion backing each Share as of the last
calculation date. The Trust's Web site will also provide the NAV of the
Trust as calculated each business day by the Sponsor. In addition, the
Web site for the Trust will contain the following information, on a per
Share basis, for the Trust: (a) The NAV as of the close of the prior
business day and the mid-point of the bid-ask price \24\ at the close
of trading in relation to such NAV (``Bid/Ask Price''), and a
calculation of the premium or discount of such price against such NAV;
and (b) data in chart format displaying the frequency distribution of
discounts and premiums of the Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters.
The Web site for the Trust will also provide the following information:
The Creation Basket Deposit, the Trust's prospectus, and as the two
most recent reports to stockholders. Finally, the Trust's Web site will
also provide the last sale price of the Shares as traded in the U.S.
market. The Exchange will provide on its Web site (http://www.nyx.com)
a link to the Trust's Web site. In addition, the Exchange will make
available over the Consolidated Tape quotation information, trading
volume, closing prices and NAV for the Shares from the previous day.
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\24\ The bid-ask price of the Trust is determined using the
highest bid and lowest offer on the Consolidated Tape as of the time
of calculation of the closing day NAV.
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Criteria for Initial and Continued Listing
The Trust will be subject to the criteria in NYSE Arca Equities
Rule 8.201(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. The minimum number of shares required to be
outstanding is comparable to requirements that have been applied to
previously listed shares of the streetTRACKS Gold Trust, the iShares
Silver Trust, the ETF Trusts and exchange-traded funds. The Exchange
believes that the anticipated minimum number of Shares outstanding at
the start of trading is sufficient to provide adequate market
liquidity.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Fund subject to the Exchange's existing rules
governing the trading of equity securities. Trading in the Shares on
the Exchange will occur in accordance with NYSE Arca Equities Rule
7.34(a). The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
Further, NYSE Arca Equities Rule 8.201 sets forth certain
restrictions on ETP Holders acting as registered Market Makers in the
Shares to facilitate surveillance. Pursuant to NYSE Arca Equities Rule
8.201(g), an ETP Holder acting as a registered Market Maker in the
Shares is required to provide the Exchange with information relating to
its trading in the applicable underlying Bullion, related futures or
options on futures, or any other related derivatives. Commentary .04 of
NYSE Arca Equities Rule 6.3 requires an ETP Holder acting as a
registered Market Maker, and its affiliates, in the Shares to
establish, maintain and enforce written policies and procedures
reasonably designed to prevent the misuse of any material nonpublic
information with 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, as well as a subsidiary or
affiliate of an ETP Holder that is in the securities business. A
subsidiary or affiliate of an ETP Holder that does business only in
commodities or futures contracts would not be subject to Exchange
jurisdiction, but the Exchange could obtain information regarding the
activities of such subsidiary or affiliate through surveillance sharing
agreements with regulatory organizations of which such subsidiary or
affiliate is a member.
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 Bullion
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.\25\ In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\26\
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\25\ The Exchange, pursuant to NYSE Arca Equities Rule 7.12, has
discretion to halt trading in the Shares if the London Fixes are not
determined for an extended time period based on extraordinary
circumstances or market conditions.
\26\ See NYSE Arca Equities Rule 7.12.
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (including Commodity-Based
Trust Shares) to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations. Also, pursuant to NYSE
Arca Equities Rule 8.201(g), the Exchange is able to obtain information
regarding trading in the Shares and the underlying Bullion, Bullion
futures contracts, options on Bullion futures, or any other Bullion
derivative, through ETP Holders acting as registered Market Makers, in
connection with such ETP
[[Page 47660]]
Holders' proprietary or customer trades through ETP Holders which they
effect on any relevant market. In addition, the Exchange may obtain
trading information via the Intermarket Surveillance Group (``ISG'')
from other exchanges who are members of the ISG.\27\ COMEX is an ISG
member.
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\27\ A list of ISG members is available at [sic]. The Exchange
notes that TOCOM is not an ISG member and the Exchange does not have
in place a comprehensive surveillance sharing agreement with such
market. In addition, the Exchange does not have access to
information regarding Bullion-related OTC transactions in spot,
forwards, options or other derivatives.
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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 Baskets (including noting that
Shares are not individually redeemable); (2) NYSE Arca Equities Rule
9.2(a), which imposes a duty of due diligence on its ETP Holders to
learn the essential facts relating to every customer prior to trading
the Shares; (3) 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 resulting premium or discount on the Shares may widen as a
result of reduced liquidity of Bullion trading during the Core and Late
Trading Sessions after the close of the major world Bullion 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 Trust. The Exchange
notes that investors purchasing Shares directly from the Trust (by
delivery of the Creation Basket Deposit) will receive a prospectus. ETP
Holders purchasing Shares from the Trust for resale to investors will
deliver a prospectus to such investors.
In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses described in the Registration
Statement. The Information Bulletin will also reference the fact that
there is no regulated source of last sale information regarding
physical Bullion, that the Commission has no jurisdiction over the
trading of Bullion as physical commodities, and that the CFTC has
regulatory jurisdiction over the trading of Bullion futures contracts
and options on Bullion futures contracts.
The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Act.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) \28\ of the Act, in general, and furthers the
objectives of Section 6(b)(5),\29\ in particular, because it is
designed to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments and perfect the
mechanisms of a free and open market and to protect investors and the
public interest. The Exchange believes that the proposed rule change
will facilitate the listing and trading of an additional type of
commodity-based product that will enhance competition among market
participants, to the benefit of investors and the marketplace.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
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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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-71 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2010-71. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 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. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2010-71 and should be submitted on or before August 27, 2010.
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\30\ 17 CFR 200.30-3(a)(12).
[[Page 47661]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19373 Filed 8-5-10; 8:45 am]
BILLING CODE 8010-01-P