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


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SECURITIES AND EXCHANGE COMMISSION

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


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change To List and Trade Shares of the Franklin Responsibly 
Sourced Gold ETF Under NYSE Arca Rule 8.201-E (Commodity-Based Trust 
Shares)

December 6, 2021.

I. Introduction

    On August 23, 2021, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
Franklin Responsibly Sourced Gold ETF (``Fund''), a series of the 
Franklin Templeton Holdings Trust (``Trust''), under NYSE Arca Rule 
8.201-E. The proposed rule change was published for comment in the 
Federal Register on September 8, 2021.\3\ On September 29, 2021, 
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to approve or disapprove the proposed rule change.\5\ 
The Commission has received no comments on the proposed rule change. 
The Commission is publishing this order to institute proceedings 
pursuant to Section 19(b)(2)(B) of the Act \6\ to determine whether to 
approve or disapprove the proposed rule change.
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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. 92840 (September 1, 
2021), 86 FR 50385 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 93179, 86 FR 55033 
(October 5, 2021). The Commission designated December 7, 2021, as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change \7\
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    \7\ Additional information regarding the Fund, the Trust and the 
Shares, including investment strategies, creation and redemption 
procedures, and portfolio holdings can be found in the Notice, supra 
note 3.
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    The Exchange proposes to list and trade Shares of the Fund \8\ 
under NYSE Arca Rule 8.201-E, which governs the listing and trading of 
Commodity-Based Trust Shares \9\ on the Exchange. The Sponsor of the 
Fund is Franklin Holdings, LLC, a Delaware limited liability company. 
BNY Mellon Asset Servicing, a division of The Bank of New York Mellon 
(``BNYM''), serves as the Fund's administrator (``Administrator'') and 
transfer agent (the ``Transfer Agent''). Delaware Trust Company, a 
subsidiary of the Corporation Service Company serves as trustee of the 
Trust (``Trustee''). J.P. Morgan Chase Bank, N.A., London branch is the 
custodian of the Fund's Gold Bullion (as defined in the Registration 
Statement) (the ``Gold Custodian'').\10\ BNYM will serve as the 
custodian of the Fund's cash, if any (the ``Cash Custodian'').
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    \8\ On April 22, 2021, the Trust submitted to the Commission on 
a confidential basis its draft registration statement on Form S-1 
under the Securities Act of 1933 (``Registration Statement''). The 
Registration Statement is not yet effective, and the Exchange will 
not commence trading in Shares until the Registration Statement 
becomes effective.
    \9\ Commodity-Based Trust Shares are securities issued by a 
trust that represent investors' discrete identifiable and undivided 
beneficial ownership interest in the commodities deposited into the 
Trust. The Exchange represents that the Shares will satisfy the 
requirements of NYSE Arca Rule 8.201-E and thereby qualify for 
listing on the Exchange and that the Trust relies on the exemption 
contained in Rule 10A-3(c)(7) regarding the application of Rule 10A-
3 (17 CFR 240.10A-3) under the Act.
    \10\ The Gold Custodian is responsible for safekeeping the 
Fund's gold pursuant to the Allocated Gold Account Agreement and the 
Unallocated Gold Account Agreement. The Gold Custodian will 
facilitate the transfer of gold in and out of the Fund through (i) 
the unallocated gold accounts it may maintain for each Authorized 
Participant (as defined below) or unallocated gold accounts that may 
be maintained for an Authorized Participant by another London 
Precious Metals Clearing Limited clearing bank, and (ii) the 
unallocated and allocated gold accounts it will maintain for the 
Fund. The Gold Custodian is responsible for allocating specific bars 
of gold to the Fund Allocated Account. As used herein, ``Fund 
Allocated Account'' means the allocated gold account of the Trust 
established with the Gold Custodian on behalf of the Fund by the 
Allocated Gold Account Agreement, to be used to hold gold that is 
transferred from the Fund Unallocated Account to be held by the Fund 
in allocated form; the ``Fund Unallocated Account'' means the 
unallocated gold account of the Trust established with the Gold 
Custodian on behalf of the Fund by the Unallocated Gold Account 
Agreement, to be used to facilitate the transfer of gold in and out 
of the Fund. The Gold Custodian will provide the Fund with regular 
reports detailing the gold transfers into and out of the Fund 
Unallocated Account and the Fund Allocated Account and identifying 
the gold bars held in the Fund Allocated Account.
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Exchange's Description of the Operation of the Trust and Fund

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

[[Page 70556]]

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

Operation of the Gold Market

    The global gold trading market consists of OTC transactions in 
spot, forwards, and options and other derivatives, together with 
exchange-traded futures and options.
    The OTC gold market includes spot, forward, and option and other 
derivative transactions conducted on a principal-to-principal basis. 
While this is a global, nearly 24-hour per day market, its main centers 
are London, New York, and Zurich.
    According to the Registration Statement, most OTC market trades are 
cleared through London. The LBMA plays an important role in setting OTC 
gold trading industry standards. A London Good Delivery Bar (as 
described below), which is acceptable for delivery in settlement of any 
OTC transaction, will be acceptable for delivery to the Fund, as 
discussed below.
    The most significant gold futures exchange is COMEX, operated by 
Commodities Exchange, Inc., a subsidiary of New York Mercantile 
Exchange, Inc., and a subsidiary of the Chicago Mercantile Exchange 
Group (the ``CME Group''). Other commodity exchanges include the Tokyo 
Commodity Exchange (``TOCOM''), the Multi Commodity Exchange of India 
(``MCX''), the Shanghai Futures Exchange, the Shanghai Gold Exchange, 
ICE Futures US (the ``ICE''), and the Dubai Gold & Commodities 
Exchange. The CME Group and ICE are members of the Intermarket 
Surveillance Group (``ISG'').

The London Gold Bullion Market

    According to the Registration Statement, most trading in physical 
gold is conducted on the OTC market and is predominantly cleared 
through London. In addition to coordinating market activities, the LBMA 
acts as the principal point of contact between the market and its 
regulators. A primary function of the LBMA is its involvement in the 
promotion of refining standards by maintenance of the ``London Good 
Delivery Lists,'' which are the lists of LBMA accredited melters and 
assayers of gold. The LBMA also coordinates market clearing and 
vaulting, promotes good trading practices and develops standard 
documentation.
    The term ``loco London'' refers to gold bars physically held in 
London that meet the specifications for weight, dimensions, fineness 
(or purity), identifying marks (including the assay stamp of an LBMA 
acceptable refiner), and appearance set forth in the good delivery 
rules promulgated by the LBMA from time to time. Gold bars meeting 
these requirements are known as ``London Good Delivery Bars.''
    The unit of trade in London is the troy ounce, whose conversion 
between grams is: 1,000 grams = 32.1507465 troy ounces and 1 troy ounce 
= 31.1034768 grams. A London Good Delivery Bar is acceptable for 
delivery in settlement of a transaction on the OTC market. Typically 
referred to as 400-ounce bars, a London Good Delivery Bar must contain 
between 350 and 430 fine troy ounces of gold, with a minimum fineness 
(or purity) of 995 parts per 1,000 (99.5%), be of good appearance and 
be easy to handle and stack. The fine gold content of a gold bar is 
calculated by multiplying the gross weight of the bar (expressed in 
units of 0.025 troy ounces) by the fineness of the bar.

Creation and Redemption of Shares

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

[[Page 70557]]

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

Net Asset Value

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

Availability of Information Regarding Gold

    Currently, the Consolidated Tape Plan does not provide for 
dissemination of the spot price of a commodity such as gold over the 
Consolidated Tape. However, there will be disseminated over the 
Consolidated Tape the last sale price for the Shares, as is the case 
for all equity securities traded on the Exchange (including exchange-
traded funds). In addition, there is a considerable amount of 
information about gold and gold markets available on public websites 
and through professional and subscription services.
    Investors may obtain gold pricing information on a 24-hour basis 
based on the spot price for an ounce of gold from various financial 
information service providers, such as Reuters and Bloomberg.
    Reuters and Bloomberg, for example, provide at no charge on their 
websites delayed information regarding the spot price of gold and last 
sale prices of gold futures, as well as information about news and 
developments in the gold market. Reuters and Bloomberg also offer a 
professional service to subscribers for a fee that provides information 
on gold prices directly from market participants. Complete real-time 
data for gold futures and options prices traded on the COMEX are 
available by subscription from Reuters and Bloomberg. There are a 
variety of other public websites providing information on gold, ranging 
from those specializing in precious metals to sites maintained by major 
newspapers. In addition, the LBMA Gold Price is publicly available at 
no charge at www.lbma.org.uk.

Availability of Information

    The intraday indicative value (``IIV'') per Share for the Shares 
will be disseminated by one or more major market data vendors. The IIV 
will be calculated based on the amount of gold held by the Fund and a 
price of gold derived from updated bids and offers indicative of the 
spot price of gold.\11\
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    \11\ The IIV on a per Share basis disseminated during the 
Exchange's Core Trading Session, as defined in NYSE Arca Rule 7.34-
E, should not be viewed as a real-time update of the NAV, which is 
calculated once a day.
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    The Fund's website will contain the following information, on a per 
Share basis: (a) The Official Closing Price \12\ and a calculation of 
the premium or discount of such Official Closing Price against the 
Fund's NAV; and (b) data in chart format displaying the frequency 
distribution of discounts and premiums of the Official Closing Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. The website for the Fund will also provide 
its prospectus. In addition, information regarding market price and 
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other 
electronic services. Information regarding the previous day's closing 
price and trading volume information for the Shares will be published 
daily in the financial section of newspapers.
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    \12\ The term ``Official Closing Price'' is defined in NYSE Arca 
Rule 1.1(ll) as the reference price to determine the closing price 
in a security for purposes of Rule 7-E Equities Trading, and the 
procedures for determining the Official Closing Price are set forth 
in that rule.
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Criteria for Initial and Continued Listing

    The Fund will be subject to the criteria in NYSE Arca Rule 8.201-
E(e) for initial and continued listing of the Shares.
    A minimum of 100,000 Shares will be required to be outstanding at 
the start of trading, which is equivalent to 1,384 fine ounces of gold 
or approximately $2,500,000 as of July 22, 2021. The Exchange believes 
that the anticipated minimum number of Shares outstanding at the start 
of trading is sufficient to provide adequate market liquidity.

Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Fund subject to the Exchange's existing rules 
governing the trading of equity securities. Trading in the Shares on 
the Exchange will occur in accordance with NYSE Arca Rule 7.34-E(a). 
The Exchange has appropriate rules to facilitate transactions in the 
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-E 
Commentary .03, the minimum price variation (``MPV'') for quoting and 
entry of orders in equity securities traded on the NYSE Arca 
Marketplace is $0.01, with the exception of securities that are priced 
less than $1.00, for which the MPV for order entry is $0.0001.
    Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on 
ETP Holders acting as registered Market Makers in the Shares to 
facilitate surveillance. Under NYSE Arca Rule 8.201-E(g), an ETP Holder 
acting as a registered Market Maker in the Shares is required to 
provide the Exchange with information relating to its trading in the 
underlying gold, any related futures or options on futures, or any 
other related derivatives.

[[Page 70558]]

Commentary .04 of NYSE Arca Rule 11.3-E requires an ETP Holder acting 
as a registered Market Maker, and its affiliates, in the Shares to 
establish, maintain and enforce written policies and procedures 
reasonably designed to prevent the misuse of any material nonpublic 
information with respect to such products, any components of the 
related products, any physical asset or commodity underlying the 
product, applicable currencies, underlying indexes, related futures or 
options on futures, and any related derivative instruments (including 
the Shares).
    As a general matter, the Exchange has regulatory jurisdiction over 
its ETP Holders and their associated persons, which include any person 
or entity controlling an ETP Holder. To the extent the Exchange may be 
found to lack jurisdiction over a subsidiary or affiliate of an ETP 
Holder that does business only in commodities or futures contracts, the 
Exchange could obtain information regarding the activities of such 
subsidiary or affiliate through surveillance sharing agreements with 
regulatory organizations of which such subsidiary or affiliate is a 
member.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which conditions in the underlying gold 
market have caused disruptions and/or lack of trading, or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\13\ The Exchange will halt trading in the Shares if the 
NAV of the Fund is not calculated or disseminated daily. The Exchange 
may halt trading during the day in which an interruption occurs to the 
dissemination of the IIV, as described above. If the interruption to 
the dissemination of the IIV persists past the trading day in which it 
occurs, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.
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    \13\ 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 Inc. (``FINRA''), on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\14\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
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    \14\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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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.\15\
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    \15\ 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 gold through ETP Holders acting as registered Market Makers, 
in connection with such ETP Holders' proprietary or customer trades 
through ETP Holders which they effect on any relevant market.
    In addition, the Exchange also has a general policy prohibiting the 
improper distribution of material, non-public information by its 
employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings or reference assets, or (c) the applicability of Exchange 
listing rules specified in this rule filing shall constitute continued 
listing requirements for listing the Shares of the Fund on the 
Exchange.
    The Trust has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).

Information Bulletin

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

[[Page 70559]]

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

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

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \16\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposal. Institution of proceedings does not 
indicate that the Commission has reached any conclusions with respect 
to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\17\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal's consistency with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of a national 
securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \18\
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    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(5).
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
[SRO] that proposed the rule change.'' \19\ The description of a 
proposed rule change, its purpose and operation, its effect, and a 
legal analysis of its consistency with applicable requirements must all 
be sufficiently detailed and specific to support an affirmative 
Commission finding,\20\ and any failure of an SRO to provide this 
information may result in the Commission not having a sufficient basis 
to make an affirmative finding that a proposed rule change is 
consistent with the Act and the applicable rules and regulations.\21\
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    \19\ 17 CFR 201.700(b)(3).
    \20\ See id.
    \21\ See id.
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    The Commission is concerned that certain aspects of the proposal 
are not sufficiently described and that the Exchange has not met its 
burden to demonstrate that the proposed rule change is consistent with 
the Act and the rules and regulations issued thereunder. For example, 
with respect to creation and redemption of Shares, the Exchange states 
that the Gold Custodian will transfer the Creation Unit Gold Delivery 
Amount from the Fund Unallocated Account to the Fund Allocated Account 
by allocating to the Fund Allocated Account specific bars of gold which 
the Gold Custodian holds, or instructing a sub-custodian to allocate 
specific bars of gold held by or for the sub-custodian.\22\ However, 
the Exchange does not explain how this process will take place or 
provide sufficient details on how the costs involved will be allocated.
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    \22\ See Notice, supra note 3, 86 FR at 50388.
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    Furthermore, the Commission is concerned that the Exchange does not 
adequately explain how other aspects of the proposal are designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and to protect investors and the 
public interest, as required by Section 6(b)(5) of the Act. The 
Exchange states that the Administrator will value the gold held by the 
Fund using the LBMA Gold Price PM as published by the IBA.\23\ This 
suggests that currently there is no price difference between 
responsibly sourced gold and non-responsibly sourced gold, but the 
Exchange does not provide sufficient evidence for the Commission to 
conclude that the price of responsibly sourced gold in the OTC spot 
market for gold is not different than for non-responsibly sourced gold.
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    \23\ Id.
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    For these reasons, the Commission believes it is appropriate to 
institute proceedings pursuant to Section 19(b)(2)(B) of the Act \24\ 
to determine whether the proposal should be approved or disapproved.
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    \24\ 15 U.S.C. 78s(b)(2)(B).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposed rule change 
is consistent with Section 6(b)(5) or any other provision of the Act, 
or the rules and regulations thereunder. Although there do not appear 
to be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\25\
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    \25\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by January 3, 2022. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
January 14, 2022.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal in addition to any 
other comments they may wish to submit about the proposed rule change. 
In this regard, the Commission seeks commenters' views regarding the 
Exchange's proposal to list and trade the Shares is adequately designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, and to protect investors and 
the public interest, consistent with the Act.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2021-73 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2021-73. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use

[[Page 70560]]

only one method. The Commission will post all comments on the 
Commission's internet website (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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2021-73 and should be submitted 
by January 3, 2022. Rebuttal comments should be submitted by January 
14, 2022.
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    \26\ 17 CFR 200.30-3(a)(57).

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


