[Federal Register Volume 82, Number 244 (Thursday, December 21, 2017)]
[Notices]
[Pages 60640-60647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27463]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82334; File No. SR-NYSEArca-2017-111]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 and Order Approving on an Accelerated Basis a 
Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade 
Shares of the GraniteShares Silver Trust Under NYSE Arca Rule 8.201-E

December 15, 2017

I. Introduction

    On September 12, 2017, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares of the 
GraniteShares Silver Trust under NYSE Arca Rule 8.201-E. The proposed 
rule change was published for comment in the Federal Register on 
September 29, 2017.\3\ On October 24, 2017, the Exchange filed 
Amendment No. 1 to the proposed rule change, which superseded the 
proposed rule change as originally filed. On November 16, 2017, the 
Exchange filed Amendment No. 2 to the proposed rule change, which 
superseded the proposed rule change as modified by Amendment No. 1.\4\ 
The Commission has not received any comments on the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
Amendment No. 2 from interested persons, and is approving the proposed 
rule change, as modified by Amendment No. 2, on an accelerated basis.
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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. 81699 (Sept. 25, 
2017), 82 FR 45634.
    \4\ In Amendment No. 2, the Exchange: (1) Clarified the 
permitted investments of the Trust (as defined herein); (2) 
supplemented its description of the duties of the Trust Custodian 
(as defined herein); (3) provided information about silver futures 
and spot trades; (4) supplemented its description of the process of 
Share (as defined herein) redemptions; (5) supplemented its 
description of how the Trust's net asset value (``NAV'') will be 
calculated; (6) increased the minimum number of Shares that the 
Exchange will require to be outstanding at the commencement of 
trading; (7) expanded the circumstances in which the Exchange would 
or might halt trading in the Shares; (8) specified that the Shares 
would trade in all of the Exchange's trading sessions; (9) 
represented that silver futures trade on significant exchanges, 
including COMEX, which is (a) operated by Commodities Exchange, 
Inc., a subsidiary of NYMEX (as defined herein) and (b) regulated by 
the CFTC (as defined herein); (10) represented that NYMEX is a 
member of ISG (as defined herein); and (11) made certain technical 
corrections. Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nysearca-2017-111/nysearca2017111-2693352-161501.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 2

    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 shares (``Shares'') of the 
GraniteShares Silver Trust (the ``Trust''), under NYSE Arca Rule 8.201-
E.\5\ Under NYSE Arca Rule 8.201-E, the Exchange may propose to list 
and/or trade pursuant to unlisted trading privileges (``UTP'') 
Commodity-Based Trust Shares.\6\
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    \5\ On September 8, 2017, the Trust submitted to the Commission 
its draft registration statement on Form S-1 (the ``Registration 
Statement'') under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act''). The Jumpstart Our Business Startups Act, 
enacted on April 5, 2012, added Section 6(e) to the Securities Act. 
Section 6(e) of the Securities Act provides that an ``emerging 
growth company'' may confidentially submit to the Commission a draft 
registration statement for confidential, non-public review by the 
Commission staff prior to public filing, provided that the initial 
confidential submission and all amendments thereto shall be publicly 
filed not later than 21 days before the date on which the issuer 
conducts a road show, as such term is defined in Securities Act Rule 
433(h)(4). An emerging growth company is defined in Section 2(a)(19) 
of the Securities Act as an issuer with less than $1,000,000,000 
total annual gross revenues during its most recently completed 
fiscal year. The Trust meets the definition of an emerging growth 
company and consequently has submitted its Form S-1 Registration 
Statement on a confidential basis with the Commission.
    \6\ Commodity-Based Trust Shares are securities issued by a 
trust that represents investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust.
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    The Trust will not be registered as an investment company under the 
Investment Company Act of 1940, as amended,\7\ and is not required to 
register under such act. The Trust is not a commodity pool for purposes 
of the Commodity Exchange Act, as amended.\8\
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    \7\ 15 U.S.C. 80a-1.
    \8\ 17 U.S.C. 1.
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    The Sponsor of the Trust is GraniteShares LLC, a Delaware limited 
liability company. The Bank of New York Mellon is the trustee of the 
Trust (the ``Trustee'') \9\ and ICBC Standard Bank PLC is the custodian 
of the Trust (the ``Custodian'').\10\
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    \9\ The Trustee is responsible for the day-to-day administration 
of the Trust. The responsibilities of the Trustee include (1) 
processing orders for the creation and redemption of Baskets; (2) 
coordinating with the Custodian the receipt and delivery of silver 
transferred to, or by, the Trust in connection with each issuance 
and redemption of Baskets; (3) calculating the net asset value of 
the Trust on each business day; and (4) selling the Trust's silver 
as needed to cover the Trust's expenses. The Trust does not have a 
Board of Directors or persons acting in a similar capacity.
    \10\ The Custodian is responsible for safekeeping the silver 
owned by the Trust. The Custodian is appointed by the Trustee and is 
responsible to the Trustee under the Trust's silver custody 
agreements. The Custodian will facilitate the transfer of silver in 
and out of the Trust through the unallocated silver accounts it may 
maintain for each Authorized Participant or unallocated silver 
accounts that may be maintained for an Authorized Participant by 
another silver-clearing bank approved by the London Bullion Market 
Association (``LBMA''), and through the loco London account 
maintained for the Trust by the Custodian on an unallocated basis 
pursuant to the Trust unallocated account agreement (the ``Trust 
Unallocated Account''). The Custodian is responsible for allocating 
specific bars of silver to the loco London account maintained for 
the Trust by the Custodian on an allocated basis pursuant to the 
Trust agreement (the ``Trust Allocated Account''). The Custodian 
will provide the Trustee with regular reports detailing the silver 
transfers in and out of the Trust Unallocated Account with the 
Custodian and identifying the silver bars held in the Trust 
Allocated Account.
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    The Commission has previously approved listing on the Exchange 
under NYSE Arca Rule 8.201-E of other precious metals and silver-based 
commodity trusts, including the iShares

[[Page 60641]]

Silver Trust,\11\ the ETFS Silver Trust,\12\ and the Sprott Physical 
Silver Trust.\13\
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    \11\ See Securities Exchange Act Release No. 58956 (November 14, 
2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124).
    \12\ See Securities Exchange Act Release No. 59781 (April 17, 
2009), 74 FR 18771 (April 24, 2009) (SR-NYSEArca-2009-28).
    \13\ See Securities Exchange Act Release No. 63043 (October 5, 
2010), 75 FR 62615 (October 12, 2010) (SR-NYSEArca-2010-84).
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    The Exchange represents that the Shares satisfy the requirements of 
NYSE Arca Rule 8.201-E and thereby qualify for listing on the 
Exchange.\14\
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    \14\ With respect to the application of Rule 10A-3 (17 CFR 
240.10A-3) under the Act, the Trust relies on the exemption 
contained in Rule 10A-3(c)(7).
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Operation of the Trust \15\
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    \15\ The description of the operation of the Trust, the Shares 
and the silver market contained herein are based, in part, on the 
Registration Statement. See note 5, supra.
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    The investment objective of the Trust will be for the Shares to 
reflect the performance of the price of silver, less the expenses and 
liabilities of the Trust. The Trust will issue Shares which represent 
units of fractional undivided beneficial interest in and ownership of 
the Trust.
    The Trust will not hold or trade in any instrument or asset on any 
futures exchange or over the counter (``OTC'') other than physical 
silver bullion. The Trust will take delivery of physical silver bullion 
that complies with the silver delivery rules of the London Bullion 
Market Association (``LBMA'').
    The Shares are intended to constitute a simple and cost-effective 
means of making an investment similar to an investment in silver. 
Although the Shares are not the exact equivalent of an investment in 
silver, they provide investors with an alternative that allows a level 
of participation in the silver market through the securities market.
Operation of the Silver Market
    The global trade in silver consists of OTC transactions in spot, 
forwards, and options and other derivatives, together with exchange 
traded futures and options.
    The OTC silver market includes spot, forward, and option and other 
derivative transactions conducted on a principal-to-principal basis. 
While this is a global, nearly 24-hour per day market, its main centers 
are London (the biggest venue), New York and Zurich. The most 
significant silver futures exchanges are the COMEX, operated by 
Commodities Exchange, Inc., a subsidiary of the New York Mercantile 
Exchange, Inc. (``NYMEX''), and the Tokyo Commodity Exchange.\16\ U.S. 
futures exchanges are registered with the Commodities Futures Trading 
Commission (``CFTC'') and seek to provide a neutral, regulated 
marketplace for the trading of derivatives contracts for commodities, 
such as futures, options and certain swaps. The silver contract market 
is of significant size and liquidity.
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    \16\ The NYMEX is a member of the Intermarket Surveillance Group 
(``ISG'').
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    According to the LBMA, the trade association that acts as the 
coordinator for activities conducted on behalf of its members and other 
participants in the London bullion market, members of the LBMA act as 
OTC market makers and it is believed that most OTC market trades are 
cleared through London. The LBMA plays an important role in setting OTC 
silver trading industry standards. Members of the London bullion market 
typically trade with each other and with their clients on a principal-
to-principal basis. All risks, including those of credit, are between 
the two parties to a transaction. This is known as an OTC market, as 
opposed to an exchange-traded environment. Unlike a futures exchange, 
where trading is based around standard contract units, settlement dates 
and delivery specifications, the OTC market allows flexibility. It also 
provides confidentiality, as transactions are conducted solely between 
the two principals involved.
    The basis for settlement and delivery of a spot trade is payment 
(generally in U.S. dollars) two business days after the trade date 
against delivery. Delivery of the silver can either be by physical 
delivery or through the clearing systems to an unallocated account. The 
unit of trade in London is the troy ounce, whose conversion between 
grams is: 1,000 grams is equivalent to 32.1507465 troy ounces, and one 
troy ounce is equivalent to 31.1034768 grams.
    A good delivery silver bar is acceptable for delivery in settlement 
of a transaction on the OTC market (a ``London Good Delivery Bar''). A 
London Good Delivery Bar must contain between 750 troy ounces and 1,100 
troy ounces of silver with a minimum fineness (or purity) of 999.0 
parts per 1,000. A London Good Delivery Bar must also bear the stamp of 
one of the refiners who are on the LBMA-approved list. Unless otherwise 
specified, the silver spot price always refers to that of a London Good 
Delivery Bar.
Creation and Redemption of Shares
    The Trust will create and redeem Shares on a continuous basis in 
one or more blocks of 50,000 Shares (a block of 50,000 Shares is called 
a ``Basket''). As described below, the Trust will issue Shares in 
Baskets to certain authorized participants (``Authorized 
Participants'') on an ongoing basis. Baskets of Shares will only be 
issued or redeemed in exchange for an amount of silver represented by 
the aggregate number of Shares issued or redeemed. No Shares will be 
issued unless the Custodian has allocated to the Trust's account the 
corresponding amount of silver. Initially, a Basket will require 
delivery of 50,000 ounces of silver. The amount of silver necessary for 
the creation of a Basket, or to be received upon redemption of a 
Basket, will decrease over the life of the Trust, due to the payment or 
accrual of fees and other expenses or liabilities payable by the Trust.
    Baskets may be created or redeemed only by Authorized Participants. 
Orders must be placed by 3:59 p.m. Eastern Time (``E.T.''). The day on 
which a Trust receives a valid purchase or redemption order is the 
order date.
    Each Authorized Participant must be a registered broker-dealer, a 
participant in Depository Trust Corporation (``DTC''), have entered 
into an agreement with the Trustee (the ``Authorized Participant 
Agreement'') and have established a silver unallocated account with the 
Custodian or another LBMA-approved silver clearing bank. The Authorized 
Participant Agreement provides the procedures for the creation and 
redemption of Baskets and for the delivery of silver in connection with 
such creations or redemptions.
    According to the Registration Statement, Authorized Participants, 
acting on authority of the registered holder of Shares or on their own 
account, may surrender Baskets of Shares in exchange for the 
corresponding amount of silver (measured in ounces) announced by the 
Trustee (the ``Basket Amount''). Upon surrender of such Shares and 
payment of the Trustee's applicable fee and of any expenses, taxes or 
charges (such as stamp taxes or stock transfer taxes or fees), the 
Trustee will deliver to the order of the redeeming Authorized 
Participant the amount of silver corresponding to the redeemed Baskets. 
Shares can only be surrendered for redemption in Baskets of 50,000 
Shares each.
    Before surrendering Baskets of Shares for redemption, an Authorized 
Participant must deliver to the Trustee a written request indicating 
the number of Baskets it intends to redeem. The date the Trustee 
receives that order

[[Page 60642]]

determines the Basket Amount to be received in exchange. However, 
orders received by the Trustee after 3:59 p.m. E.T. on a business day 
or on a business day when the LBMA Silver Price or other applicable 
benchmark price is not announced, will not be accepted.
    The redemption distribution from the Trust will consist of a credit 
to the redeeming Authorized Participant's unallocated account 
representing the amount of the silver held by the Trust evidenced by 
the Shares being redeemed as of the date of the redemption order.
Net Asset Value
    The NAV of the Trust will be calculated by subtracting the Trust's 
expenses and liabilities on any day from the value of the silver owned 
by the Trust on that day; the NAV per Share will be obtained by 
dividing the NAV of the Trust on a given day by the number of Shares 
outstanding on that day. On each day on which the Exchange is open for 
regular trading, the Trustee will determine the NAV as promptly as 
practicable after 4:00 p.m. E.T. The Trustee will value the Trust's 
silver based on the most recently announced LBMA Silver Price. If there 
is no LBMA Silver Price on that day, the Trustee will value the Trust's 
silver based on the most recently announced LBMA Silver Price. If the 
Sponsor determines that such price is inappropriate to use, the Sponsor 
will identify an alternate basis for evaluation to be employed by the 
Trustee by consulting other public sources of pricing information. For 
instance, the Sponsor could use the spot silver price published by the 
LMEprecious platform, a trading platform developed and operated by the 
London Metal Exchange.
    Authorized Participants will offer Shares in the secondary market 
at an offering price that will vary, depending on, among other factors, 
the price of silver and the trading price of the Shares on the Exchange 
at the time of offer. Authorized Participants will not receive from the 
Trust, the Sponsor, the Trustee or any of their affiliates any fee or 
other compensation in connection with the offering of the Shares.
Secondary Market Trading
    While the Trust seeks to reflect generally the performance of the 
price of silver less the Trust's expenses and liabilities, Shares may 
trade at, above or below their NAV. The NAV of Shares will fluctuate 
with changes in the market value of the Trust's assets. The trading 
prices of Shares will fluctuate in accordance with changes in their NAV 
as well as market supply and demand. The amount of the discount or 
premium in the trading price relative to the NAV may be influenced by 
non-concurrent trading hours between the major silver markets and the 
Exchange. While the Shares trade on the Exchange until 8:00 p.m. E.T., 
liquidity in the market for silver may be reduced after the close of 
the major world silver markets, including London, Zurich and COMEX. As 
a result, during this time, trading spreads, and the resulting premium 
or discount, on Shares may widen.
Availability of Information Regarding Silver
    Currently, the Consolidated Tape Plan does not provide for 
dissemination of the spot price of a commodity such as silver 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 silver 
price and market information available on public websites and through 
professional and subscription services.
    Investors may obtain silver pricing information on a 24-hour basis 
based on the spot price for an ounce of silver from various financial 
information service providers, such as Reuters and Bloomberg. In 
addition, ICAP's EBS platform also provides an electronic trading 
platform to institutions such as bullion banks and dealers for the 
trading of spot silver, as well as a feed of live streaming prices to 
market data subscribers.\17\
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    \17\ See http://www.icap.com.
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    Reuters and Bloomberg provide at no charge on their websites 
delayed information regarding the spot price of silver and last sale 
prices of silver futures, as well as information about news and 
developments in the silver market. Reuters and Bloomberg also offer a 
professional service to subscribers for a fee that provides information 
on silver prices directly from market participants.
    Complete real-time data for silver futures and options prices 
traded on the COMEX are available by subscription from Reuters and 
Bloomberg. The NYMEX also provides delayed futures and options 
information on current and past trading sessions and market news free 
of charge on its website. There are a variety of other public websites 
providing information on silver, ranging from those specializing in 
precious metals to sites maintained by major newspapers, such as The 
Wall Street Journal. Current silver spot prices are also generally 
available with bid/ask spreads from silver bullion dealers.\18\
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    \18\ The silver spot price is indicative only, constructed using 
a variety of sources to compile a spot price that is intended to 
represent a theoretical quote that might be obtained from a market 
maker from time to time.
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Availability of Information
    The intraday indicative value (``IIV'') per Share for the Shares 
will be disseminated by one or more major market data vendors at least 
every 15 seconds during the Core Trading Session. The IIV will be 
calculated based on the amount of silver held by the Trust and a price 
of silver derived from updated bids and offers indicative of the spot 
price of silver.\19\
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    \19\ The IIV on a per Share basis disseminated during the Core 
Trading Session should not be viewed as a real-time update of the 
NAV, which is calculated once a day.
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    The website for the Trust (www.graniteshares.com) will contain the 
following information, on a per Share basis, for the Trust: (a) The 
mid-point of the bid-ask price \20\ at the close of trading (``Bid/Ask 
Price''), and a calculation of the premium or discount of such price 
against such NAV; and (b) data in chart format displaying the frequency 
distribution of discounts and premiums of the Bid/Ask Price against the 
NAV, within appropriate ranges, for each of the four previous calendar 
quarters. The website for the Trust will also provide the Trust's 
prospectus. Finally, the Trust's website will provide the prior day's 
closing price of the Shares as traded in the U.S. market. In addition, 
information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
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    \20\ The bid-ask price of the Shares will be determined using 
the highest bid and lowest offer on the Consolidated Tape as of the 
time of calculation of the closing day NAV.
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Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
    A minimum of two Baskets or 100,000 Shares will be required to be 
outstanding at the start of trading, which is equivalent to 100,000 
ounces of silver. The Exchange believes that the anticipated minimum 
number of Shares outstanding at the start of trading is sufficient to 
provide adequate market liquidity.

[[Page 60643]]

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Trading in the Shares 
on the Exchange will occur during all three trading sessions in 
accordance with NYSE Arca Rule 7.34-E(a). The Exchange has appropriate 
rules to facilitate transactions in the Shares during all trading 
sessions. As provided in NYSE Arca Rule 7.6-E, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for quoting and order entry is $0.0001.
    Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on 
ETP Holders \21\ acting as registered Market Makers in the Shares to 
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder 
acting as a registered Market Maker in the Shares is required to 
provide the Exchange with information relating to its trading in the 
underlying silver, related futures or options on futures, or any other 
related derivatives. Commentary .04 of NYSE Arca Rule 11.3 requires an 
ETP Holder acting as a registered Market Maker in the Shares and its 
affiliates 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).
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    \21\ An ``ETP Holder'' means a sole proprietorship, partnership, 
corporation, limited liability company or other organization in good 
standing that is a registered broker-dealer and has been issued an 
Equity Trading Permit by the Exchange. See NYSE Arca Rule 1.1(n) and 
(o).
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    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. 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 silver 
market have caused disruptions and/or lack of trading, or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\22\ The Exchange will halt trading in the Shares if the 
NAV of the Trust is not calculated or disseminated daily or if not made 
available to all participants at the same time. The Exchange may halt 
trading during the day in which an interruption occurs to the 
dissemination of the IIV, as described above. If the interruption to 
the dissemination of the IIV persists past the trading day in which it 
occurs, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption. The Exchange will also 
consider halting trading on a business day when the LBMA Silver Price 
or other applicable benchmark price is not announced.
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    \22\ See NYSE Arca Rule 7.12-E.
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\23\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
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    \23\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\24\
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    \24\ For a list of the current members of ISG, see 
www.isgportal.org.
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    Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able 
to obtain information regarding trading in the Shares and the 
underlying silver, silver futures contracts, options on silver futures, 
or any other silver derivative, through ETP Holders acting as 
registered Market Makers, in connection with such ETP Holders' 
proprietary or customer trades through ETP Holders which they effect on 
any relevant market.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
of the Trust on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Trust to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
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.

[[Page 60644]]

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 Rule 9.2-E(a), which imposes a duty of due diligence on its 
ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (3) how information regarding the IIV is 
disseminated; (4) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; (5) the possibility that 
trading spreads and the resulting premium or discount on the Shares may 
widen as a result of reduced liquidity of silver trading during the 
Core and Late Trading Sessions after the close of the major world 
silver 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 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 as will be described in the 
Registration Statement. The Information Bulletin will also reference 
the fact that there is no regulated source of last sale information 
regarding physical silver, that the Commission has no jurisdiction over 
the trading of silver as a physical commodity, and that the CFTC has 
regulatory jurisdiction over the trading of silver futures contracts 
and options on silver 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 basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \25\ 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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    \25\ 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 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.201-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The Exchange may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. The most 
significant silver futures exchange in the U.S. is the COMEX, operated 
by Commodities Exchange, Inc., a subsidiary of the NYMEX, which is an 
ISG member. U.S. futures exchanges are registered with the CFTC and 
seek to provide a neutral, regulated marketplace for the trading of 
derivatives contracts for commodities, such as futures, options and 
certain swaps. The silver contract market is of significant size and 
liquidity.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that there is a considerable amount of silver price and silver market 
information available on public websites and through professional and 
subscription services. Investors may obtain silver pricing information 
on a 24-hour basis based on the spot price for an ounce of silver from 
various financial information service providers. ICAP's EBS platform 
also provides an electronic trading platform to institutions such as 
bullion banks and dealers for the trading of spot silver, as well as a 
feed of live streaming prices to market data subscribers.
    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 website. The IIV relating to the Shares will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session. The Trust's website will also 
provide the Trust's prospectus, as well as the two most recent reports 
to stockholders. In addition, information regarding market price and 
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other 
electronic services. Information regarding the previous day's closing 
price and trading volume information for the Shares will be published 
daily in the financial section of newspapers.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding silver pricing.

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 Exchange believes the 
proposed rule change will enhance competition by accommodating Exchange 
trading of an additional exchange-traded product relating to physical 
silver.

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. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposed rule change, as modified by Amendment No. 2, to list and trade 
the Shares is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\26\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Exchange Act,\27\ 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, to 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. The 
Commission notes that the Exchange

[[Page 60645]]

has represented that it will be able to share surveillance information 
with a significant, regulated market for trading futures on silver.\28\ 
The Commission also notes that it previously approved the listing and 
trading on the Exchange of other silver-based commodity trusts.\29\
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    \26\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ Specifically, according to the Exchange, COMEX is operated 
by Commodities Exchange, Inc., a subsidiary of the NYMEX, and is 
regulated by the CFTC. The Exchange also states that the NYMEX is a 
member of the ISG, which will allow the Exchange to obtain 
surveillance information. See Amendment No. 2, supra note 4, at 6, 
14.
    \29\ See, e.g., Securities Exchange Act Release Nos. 59781 (Apr. 
17, 2009), 74 FR 18771 (Apr. 24, 2009) (SR-NYSEArca-2009-28) 
(approving the listing and trading of the ETFS Silver Trust); and 
63043 (Oct. 5, 2010), 75 FR 62615 (Oct. 12, 2010) (SR-NYSEArca-2010-
84) (approving the listing and trading of the Sprott Physical Silver 
Trust).
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    The Commission also finds that the proposal is consistent with 
Section 11A(a)(1)(C)(iii) of the Act,\30\ which sets forth Congress' 
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. The last-sale price of the Shares will be disseminated over 
the Consolidated Tape. In addition, information regarding market price 
and trading volume of the Shares will be continually available on a 
real-time basis throughout the day on brokers' computer screens and 
other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission believes that the proposed rule change is reasonably 
designed to promote fair disclosure of information that may be 
necessary to price the Shares appropriately. NYSE Arca Rule 8.201-
E(e)(2)(v) requires that an IIV (which is referred to in the rule as 
the ``Indicative Trust Value'') be made available at least every 15 
seconds. The IIV will be calculated based on the amount of silver held 
by the Trust and a price of silver derived from updated bids and offers 
indicative of the spot price of silver.\31\ The Exchange states that 
the IIV relating to the Shares will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Core Trading Session.\32\ According to the Exchange, there is a 
considerable amount of information about silver markets available on 
public websites and through professional and subscription services. 
Investors may obtain silver pricing information on a 24-hour basis 
based on the spot price for an ounce of silver from various financial 
information service providers, such as Reuters and Bloomberg.\33\
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    \31\ See Amendment No. 2, supra note 4, at 10.
    \32\ See id.
    \33\ See Amendment No. 2, supra note 4, at 9. The Exchange 
states that Reuters and Bloomberg, for example, provide at no charge 
on their websites delayed information regarding the spot price of 
silver and last sale prices of silver futures, as well as 
information about news and developments in the silver market. 
Reuters and Bloomberg also offer a professional service to 
subscribers for a fee that provides information on silver prices 
directly from market participants. ICAP's EBS platform provides an 
electronic trading platform to institutions such as bullion banks 
and dealers for the trading of spot silver, as well as a feed of 
live streaming prices to market data subscribers. Complete real-time 
data for silver futures and options prices traded on the COMEX are 
available by subscription from Reuters and Bloomberg. NYMEX also 
provides delayed futures and options information on current and past 
trading sessions and market news free of charge on its website. 
There are a variety of other public websites providing information 
on silver, ranging from those specializing in precious metals to 
sites maintained by major newspapers. See id.
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    Additionally, 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 website.\34\ The Trust also will publish the 
following information on its website: (1) The mid-point of the bid-ask 
price at the close of trading, and a calculation of the premium or 
discount of such price against the 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 Trust's prospectus, as 
well as the two most recent reports to stockholders; and (4) the prior 
day's closing price of the Shares as traded in the U.S. market.\35\
---------------------------------------------------------------------------

    \34\ See id. at 15.
    \35\ See id. at 10 and 15.
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    The Commission also believes that the proposal is reasonably 
designed to prevent trading when a reasonable degree of transparency 
cannot be assured. 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 silver 
market have caused disruptions 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.\36\ The 
Exchange will halt trading in the Shares if the NAV of the Trust is not 
calculated or disseminated daily or if not made available to all 
participants at the same time.\37\ The Exchange may halt trading during 
the day in which an interruption occurs to the dissemination of the 
IIV; if the interruption to the dissemination of the IIV persists past 
the trading day in which it occurs, the Exchange will halt trading no 
later than the beginning of the trading day following the 
interruption.\38\
---------------------------------------------------------------------------

    \36\ See id. at 12, n.20 and accompanying text.
    \37\ See id. at 12.
    \38\ See id.
---------------------------------------------------------------------------

    Additionally, the Commission notes that market makers in the Shares 
would be subject to the requirements of NYSE Arca Rule 8.201-E(g), 
which allow the Exchange to ensure that they do not use their positions 
to violate the requirements of Exchange rules or applicable federal 
securities laws.\39\
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    \39\ Commentary .04 of NYSE Arca Rule 11.3 requires that an ETP 
Holder acting as a registered market maker in the Shares, and its 
affiliates, 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.
---------------------------------------------------------------------------

    In support of this proposal, the Exchange has made the following 
additional representations:
    (1) The Shares will be listed and traded on the Exchange pursuant 
to the initial and continued listing criteria in NYSE Arca Rule 8.201-
E.\40\
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    \40\ See Amendment No. 2, supra note 4, at 14.
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    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\41\
---------------------------------------------------------------------------

    \41\ See id. at 11.
---------------------------------------------------------------------------

    (3) The Exchange deems the Shares to be equity securities.\42\
---------------------------------------------------------------------------

    \42\ See id. The Commission notes that, as a result, trading of 
the Shares will be subject to the Exchange's existing rules 
governing the trading of equity securities.
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    (4) The Exchange has a general policy prohibiting the distribution 
of material, non-public information by its employees.\43\
---------------------------------------------------------------------------

    \43\ See id. at 13.
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    (5) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and that these procedures are adequate to 
properly

[[Page 60646]]

monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.\44\
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    \44\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement. See id. at 12, n.21.
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    (6) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\45\
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    \45\ See id. at 12-13.
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    (7) 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 Rule 9.2-E(a), which imposes a duty of due diligence on its 
ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (3) how information regarding the IIV is 
disseminated; (4) 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 silver trading during the Core and Late 
Trading Sessions after the close of the major world silver markets; and 
(6) trading information.\46\
---------------------------------------------------------------------------

    \46\ See id. at 13.
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    (8) All statements and representations made in the Exchange's 
filing regarding (a) the description of the portfolio or reference 
assets, (b) limitations on portfolio holdings or reference assets, or 
(c) the applicability of Exchange listing rules specified in this rule 
filing shall constitute continued listing requirements for listing the 
Shares of the Trust on the Exchange.\47\
---------------------------------------------------------------------------

    \47\ See id.
---------------------------------------------------------------------------

    (9) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Trust to comply with the continued 
listing requirements and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor \48\ for compliance with 
the continued listing requirements. If the Trust is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under the NYSE Arca Rule 5.5-E(m).\49\
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    \48\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
    \49\ See Amendment No. 2, supra note 4, at 13.
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    This approval order is based on all of the Exchange's 
representations--including those set forth above and in Amendment No. 
2--and the Exchange's description of the Trust.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 2, is consistent with Section 
6(b)(5) of the Act \50\ and the rules and regulations thereunder 
applicable to a national securities exchange.
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    \50\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 2 to the proposed rule change. 
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 email to [email protected]. Please include 
File Number SR-NYSEArca-2017-111 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-2017-111. 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 (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of this filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2017-111 and should be 
submitted on or before January 11, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 2, prior to the 30th day after the 
date of publication of notice of Amendment No. 2 in the Federal 
Register. Amendment No. 2 supplements the proposal by providing 
additional information regarding the Trust and the silver futures 
market, and by expanding the circumstances in which the Exchange would 
or might halt trading in the Shares. These changes assisted the 
Commission in evaluating the Shares' susceptibility to manipulation, 
and in determining that the listing and trading of the Shares is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\51\ to approve the proposed rule change, 
as modified by Amendment No. 2, on an accelerated basis.
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    \51\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\52\

[[Page 60647]]

that the proposed rule change (SR-NYSEArca-2017-111), as modified by 
Amendment No. 2, be, and it hereby is, approved on an accelerated 
basis.
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    \52\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\53\
---------------------------------------------------------------------------

    \53\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-27463 Filed 12-20-17; 8:45 am]
BILLING CODE 8011-01-P


