[Federal Register Volume 75, Number 178 (Wednesday, September 15, 2010)]
[Notices]
[Pages 56156-56158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22948]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62875; File No. SR-NYSEArca-2010-71]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change To List and Trade Shares of the ETFS
White Metals Basket Trust
September 9, 2010.
I. Introduction
On July 22, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the ETFS White Metals Basket
Trust (``Trust'') pursuant to NYSE Arca Equities Rule 8.201. The
proposed rule change was published for comment in the Federal Register
on August 6, 2010.\3\ The Commission received no comments on the
proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62620 (July 30,
2010), 75 FR 47655 (``Notice'').
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II. Description of the Proposal
The Exchange proposes to list and trade Shares pursuant to NYSE
Arca Equities Rule 8.201, which governs the listing and trading of
Commodity-Based Trust Shares. ETFS Services USA LLC is the sponsor of
the Trust (``Sponsor''), The Bank of New York Mellon is the trustee of
the Trust (``Trustee''), and JPMorgan Chase Bank, N.A. is the custodian
of the Trust (``Custodian'').
The Shares 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.\4\
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\4\ See the registration statement for the Trust on Form S-1,
filed with the Commission on May 27, 2010 (No. 333-167166)
(``Registration Statement'').
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The Exchange deems the Shares to be equity securities, which
subjects trading in the Shares to the Exchange's existing rules
governing the trading of equity securities, and has represented that
trading in the Shares on the Exchange will occur in accordance with
NYSE Arca Equities Rule 7.34(a). The Exchange has also represented that
it has appropriate rules to facilitate
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transactions in the Shares during all trading sessions.
Additional information regarding the Trust, the Shares, the Trust's
investment objectives, strategies, policies, and restrictions, fees and
expenses, creation and redemption of Shares, the Bullion markets,
availability of information, trading rules and halts, and surveillance
procedures, among other things, can be found in the Notice and in the
Registration Statement.\5\
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\5\ See supra notes 3 and 4.
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III. Discussion and Commission's Findings
After careful consideration, the Commission finds that the proposed
rule change to list and trade the Shares of the Fund is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\6\ In particular, the
Commission finds that the proposed rule change is consistent with the
requirements of Section 6(b)(5) of the Act,\7\ which requires, among
other things, that the Exchange's rules be designed to prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, foster cooperation and coordination with
persons engaged in facilitating transactions in securities, remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and in general to protect investors and the
public interest.
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\6\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Act,\8\ which sets forth Congress's finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be disseminated through the
facilities of the Consolidated Tape Association. In addition, the
Trust's website will provide an intraday indicative value (``IIV'') per
Share,\9\ 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 Trust's
website also will provide the following information: (1) The net asset
value (``NAV'') of the Trust, on a per Share basis, as calculated each
business day by the Sponsor and the mid-point of the bid-ask price \10\
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; (2) 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;
(3) the Creation Basket Deposit; (4) the Trust's prospectus, and the
two most recent reports to stockholders; and (5) the last sale price of
the Shares as traded in the US market. Further, the Exchange will make
available over the Consolidated Tape trading volume, closing prices and
NAV for the Shares from the previous day. There is a considerable
amount of Bullion market information available on public websites and
through professional and subscription services. For example, 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 websites 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 information on Bullion prices directly from
market participants. Meanwhile, other public websites provide
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 http://www.thebulliondesk.com.
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\8\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\9\ 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.
\10\ 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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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Exchange states that it will obtain a representation from
the Trust that the NAV will be calculated daily and made available to
all market participants at the same time.\11\ Following the initial 12-
month period following commencement of trading, the Exchange will
consider the suspension of trading in Shares or removing Shares from
listing if, among other things: (1) The value of the Bullion is no
longer calculated or available on at least a 15-second delayed basis
from a source unaffiliated with the sponsor, Trust, custodian or the
Exchange; (2) the Exchange stops providing a hyperlink on its website
to any such unaffiliated commodity value; or (3) the IIV is no longer
made available on at least a 15-second delayed basis.\12\ Under NYSE
Arca Equities Rule 7.34(a)(5), if the Exchange becomes aware that the
NAV is not being disseminated to all market participants at the same
time, it must halt trading on the NYSE Marketplace until such time as
the NAV is available to all market participants. With respect to
trading halts, the Exchange may consider all relevant factors in
exercising its discretion to halt or suspend trading in the Shares.
These may include: (1) The extent to which conditions in the underlying
Bullion markets have caused disruptions and/or lack of trading; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. In addition,
trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\13\
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\11\ See e-mail from Timothy J. Malinowski, Senior Director,
NYSE Euronext, to Christopher W. Chow, Special Counsel, and Daniel
T. Gien, Staff Attorney, Commission, dated August 31, 2010.
\12\ See NYSE Arca Equities Rules 8.201(e)(2)(iv), (v).
\13\ See NYSE Arca Equities Rule 7.12.
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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 in Commodity-Based Trust Shares to establish,
maintain and enforce written policies and procedures reasonably
designed to prevent the misuse of any material nonpublic information
with
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respect to such products, any components of the related products, any
physical asset or commodity underlying the product, applicable
currencies, underlying indexes, related futures or options on futures,
and any related derivative instruments.
In support of this proposal, the Exchange has made representations,
including the following:
(1) The Shares will be subject to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.201.
(2) The Exchange's surveillance 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.\14\ In addition, the Exchange may obtain trading
information via the Intermarket Surveillance Group (``ISG'') from other
exchanges who are members of the ISG.\15\
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\14\ Pursuant to NYSE Arca Equities Rule 8.201(g), the Exchange
is able to obtain information regarding trading in the Bullion,
Bullion futures contracts, options on Bullion futures, or any other
Bullion derivative, by ETP Holders acting as registered Market
Makers.
\15\ The Exchange notes that the New York Mercantile Exchange,
of which the COMEX is a division, is an ISG member; however, the
Tokyo Commodity Exchange, Inc. (``TOCOM'') is not an ISG member and
the Exchange does not have in place a comprehensive surveillance
sharing agreement with such market.
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(3) 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.
This approval order is based on the Exchange's representations.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-NYSEArca-2010-71) be, and it
hereby is, approved.
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\16\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-22948 Filed 9-14-10; 8:45 am]
BILLING CODE 8010-01-P