[Federal Register Volume 82, Number 225 (Friday, November 24, 2017)]
[Notices]
[Pages 55898-55905]
[FR Doc No: 2017-25347]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82116; File No. SR-NYSEArca-2017-131]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the Sprott Physical
Gold and Silver Trust Under NYSE Arca Rule 8.201-E

November 17, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on November 9, 2017, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following
under NYSE Arca Rule 8.201-E: Sprott Physical Gold and Silver Trust
(``Trust''). The proposed change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    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.'' \4\ The Exchange proposes to list and
trade shares of the Trust pursuant to NYSE Arca Rule 8.201-E, defined
herein and in the Proxy Circular (defined below) as ``Units.'' The
Units will be issued in connection with a plan of arrangement under the
Alberta Business Corporations Act (``Arrangement'') involving Sprott
Inc. (``Sprott''), the Trust, Central Fund of Canada Limited (``CFCL'')
and its shareholders, The Central Group Alberta Ltd. (``CGAL'') and its
shareholders and 2070140 Alberta Ltd. (``2070140'') as described in
``Description of the Arrangement'' below.
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    \4\ 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.
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    Sprott Asset Management LP will be the sponsor and manager of the
Trust (``Manager'').\5\ RBC Investor Services Trust (``RBC'') will be
the trustee and valuation agent of the Trust (``Trustee'' or
``Valuation Agent,'' as the case may be) \6\ and the custodian of the
Trust's assets other than physical gold and silver bullion (``Non-Gold
and Silver Custodian'').\7\ The Trust will appoint a

custodian for the Trust's physical gold and silver bullion (``Gold and
Silver Custodian'').\8\ The TSX Trust Company will be the transfer
agent of the Trust (``Transfer Agent'').
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    \5\ The Manager is a limited partnership formed and organized
under the laws of the Province of Ontario, Canada, and acts as
manager of the Trust pursuant to the trust agreement and the
management agreement. The Manager will be responsible for the day-
to-day activities and administration of the Trust. The Manager will
manage and direct the business and affairs of the Trust. Additional
details regarding the Manager are set forth in the Proxy Circular.
The Manager has adopted a policy pursuant to which any entity or
account that is: (a) Managed; or (b) for whom investment decisions
are made, directly or indirectly, by a person that is involved in
the decision-making process of, or has non-public information about,
follow-on offerings of the Trust is prohibited from investing in the
Trust, and no such decision-making person is permitted to invest in
the Trust for that decision-making person's benefit, directly or
indirectly.
    \6\ RBC is a trust company existing under the laws of Canada.
RBC is affiliated with a broker-dealer. RBC will represent to the
Exchange that it has put in place and will maintain the appropriate
information barriers and controls between itself and the broker-
dealer affiliate so that the broker-dealer affiliate will not have
access to information concerning the composition and/or changes to
the Trust's holdings that are not available on the Trust's Web site.
The Trustee will hold title to the Trust's assets on behalf of the
unitholders of the Trust (``Unitholders'') and will have exclusive
authority over the assets and affairs of the Trust. The Trustee has
a fiduciary responsibility to act in the best interest of the
Unitholders. Additional details regarding the Trustee are set forth
in the Proxy Circular.
    \7\ According to the Proxy Circular, the Non-Gold and Silver
Custodian will be responsible for the safekeeping of all of the
assets of the Trust delivered to it and will act as the custodian of
such assets. The Manager, in accordance with applicable law and with
the consent of the Trustee, will have the authority to change the
custodial arrangement including, but not limited to, the appointment
of a replacement custodian and/or additional custodians. Additional
details regarding the Non-Gold and Silver Custodian are set forth in
the Proxy Circular.
    \8\ According to the Proxy Circular, the Trust's physical gold
and silver bullion will be fully allocated and stored with the Gold
and Silver Custodian or a sub-custodian of the Gold and Silver
Custodian. The Gold and Silver Custodian will be responsible for and
will bear all risk of the loss of, and damage to, the Trust's
physical gold and silver bullion that is in its or its sub-
custodian's custody, subject to certain limitations based on events
beyond the Gold and Silver Custodian's control. The Manager, with
the consent of the Trustee, may determine to change the custodial
arrangements of the Trust. Additional details regarding the Gold and
Silver Custodian are set forth in the Proxy Circular.
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    The Commission has previously approved listing on the Exchange
under NYSE Arca Rules 5.2-E(j)(5) and 8.201-E of other precious metals
and gold-based commodity trusts, including: Merk Gold Trust; \9\ ETFS
Gold Trust; \10\ ETFS Platinum Trust; \11\ ETFS Palladium Trust; \12\
APMEX Physical-1 oz. Gold Redeemable Trust; \13\ Sprott Gold Trust;
\14\ iShares Silver Trust; \15\ iShares COMEX Gold Trust; \16\ and Long
Dollar Gold Trust.\17\ Prior to their listing on the Exchange, the
Commission approved listing of the streetTRACKS Gold Trust on the New
York Stock Exchange \18\ and listing of iShares COMEX Gold Trust and
iShares Silver Trust on the American Stock Exchange LLC.\19\ In
addition, the Commission has approved trading of the streetTRACKS Gold
Trust and iShares Silver Trust on the Exchange pursuant to UTP.\20\
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    \9\ See, Securities Exchange Act Release No. 71378 (January 23,
2014), 79 FR 4786 (January 29, 2014) (SR-NYSEArca-2013-137).
    \10\ See, Securities Exchange Act Release No. 59895 (May 8,
2009), 74 FR 22993 (May 15, 2009) (SR-NYSEArca-2009-40).
    \11\ See, Securities Exchange Act Release No. 61219 (December
22, 2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95).
    \12\ See, Securities Exchange Act Release No. 61220 (December
22, 2009), 74 FR 68895 (December 29, 2009) (SR-NYSEArca-2009-94).
    \13\ See, Securities Exchange Act Release No 66930 (May 7,
2012), 77 FR 27817 (May 11, 2012) (SR-NYSEArca-2012-18).
    \14\ See, Securities Exchange Act Release No. 61496 (February 4,
2010), 75 FR 6758 (February 10, 2010) (SR-NYSEArca-2009-113).
    \15\ See, Securities Exchange Act Release No. 58956 (November
14, 2008), 73 FR 71074 (November 24, 2008) (SR-NYSEArca-2008-124)
(approving listing on the Exchange of the iShares Silver Trust).
    \16\ See, Securities Exchange Act Release No.56224 (August 8,
2007), 72 FR 45850 (August 15, 2007) (SR-NYSEArca-2007-76)
(approving listing on the Exchange of the streetTRACKS Gold Trust);
Securities Exchange Act Release No. 56041 (July 11, 2007), 72 FR
39114 (July 17, 2007) (SR-NYSEArca-2007-43) (order approving listing
on the Exchange of iShares COMEX Gold Trust).
    \17\ See, Securities Exchange Act Release No. 79518 (December 9,
2016), 81 FR 90876 (December 15, 2016) (SR-NYSEArca-2016-84) (order
approving listing and trading of shares of the Long Dollar Gold
Trust).
    \18\ See, Securities Exchange Act Release No. 50603 (October 28,
2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order
approving listing of streetTRACKS Gold Trust on NYSE).
    \19\ See, Securities Exchange Act Release Nos. 51058 (January
19, 2005), 70 FR 3749 (January 26, 2005) (SR-Amex-2004-38) (order
approving listing of iShares COMEX Gold Trust on the American Stock
Exchange LLC); 53521 (March 20, 2006), 71 FR 14967 (March 24, 2006)
(SR-Amex-2005-72) (approving listing on the American Stock Exchange
LLC of the iShares Silver Trust).
    \20\ See, Securities Exchange Act Release Nos. 53520 (March 20,
2006), 71 FR 14977 (March 24, 2006) (SR-PCX-2005-117) (approving
trading on the Exchange pursuant to UTP of the iShares Silver
Trust); 51245 (February 23, 2005), 70 FR 10731 (March 4, 2005) (SR-
PCX-2004-117) (approving trading on the Exchange of the streetTRACKS
Gold Trust pursuant to UTP).
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    The Exchange represents that the Units satisfy the requirements of
NYSE Arca Rule 8.201-E and thereby qualify for listing on the
Exchange.\21\
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    \21\ With respect to application of Rule 10A-3 (17 CFR 240.10A-
3) under the Exchange Act, the Trust relies on the exemption
contained in Rule 10A-3(c)(7).
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Description of the Arrangement
    CFCL is a passive, non-operating, specialized investment holding
company organized under the laws of the Province of Alberta, which buys
and holds almost entirely pure refined gold and silver bullion,
primarily in international bar form. The issued and outstanding share
capital of CFCL consists of common shares (``CFCL Common Shares'') and
Class A non-voting shares (``CFCL Class A Shares''). The CFCL Class A
Shares are listed for trading on the Toronto Stock Exchange (``TSX'')
under the symbols ``CEF.A'' (Cdn.$) and ``CEF.U'' (U.S.$), and on the
NYSE American under the symbol ``CEF.'' CFCL is a ``foreign private
issuer,'' as defined in Rule 3b-4 under the Exchange Act.
    According to the Manager, under the Arrangement, the Trust will
acquire all the assets and assume all the liabilities of CFCL (other
than CFCL's administration agreement), in exchange for that number of
fully paid and non-assessable Units as is equal to the aggregate number
of CFCL Class A Shares and CFCL Common Shares issued and outstanding
immediately prior to the effective time of the Arrangement. The CFCL
Common Shares and the common shares of 2070140 will be acquired by
Sprott in exchange for, among other things, cash consideration of $105
million Canadian dollars and 6,997,379 common shares of Sprott. CFCL
will then promptly redeem and cancel the outstanding CFCL Class A
Shares and the CFCL Common Shares and distribute to the former holders
thereof one Unit for each such share held.
    The Court of Queen's Bench Alberta (Calgary) will pass upon the
substantive and procedural fairness of the terms and conditions of the
Arrangement to holders of CFCL Class A Shares and CFCL Common Shares
and as such, the distribution of Units to the holders of the CFCL Class
A Shares will be exempt from registration under the Securities Act of
1933, as amended (``Securities Act'') pursuant to Section 3(a)(10)
thereof, which exempts the issuance of any securities issued in
exchange for one or more bona fide outstanding securities from the
general requirement of registration where the terms and conditions of
the issuance and exchange of such securities have been approved by a
court of competent jurisdiction, after a hearing upon the fairness of
the terms and conditions of such issuance and exchange at which all
persons to whom it is proposed to issue the securities have the right
to appear and receive timely notice thereof.
    The CFCL Class A Shares are registered under Section 12(b) of the
Exchange Act, based upon a listing of the CFCL Class A Shares on the
NYSE American. Pursuant to Rule 12g-3(a) under the Exchange Act, the
Units will ``succeed'' to the Section 12(b) Exchange Act registration
of the CFCL Class A Shares upon completion of the Arrangement. In order
to change the Section 12(b) registration of the Units from one based
upon a listing on the NYSE American to one based upon a listing on the
NYSE Arca, the Trust will file a separate initial registration
statement on Form 8-A under the Exchange Act to register the Units
under the Exchange Act based upon a listing of the Units on the NYSE
Arca.
    After completion of the Arrangement, the Trust will furnish current
reports to the Commission on Form 6-K in accordance with Rules 13a-1
and/or 13a-3 under the Exchange Act. The Trust will also file with the
Commission annual reports on Form 40-F under the Canada/U.S.
Multijurisdictional Disclosure System. Information included in such
filings (and which will be made available to Unitholders) will include
(i) annual information form, (ii) annual financial statements, (iii)
annual management report on fund performance (``MRFP''), (iv) quarterly
financial statements, (v) quarterly MRFP and (vi) report of independent
review committee.
    Approval of holders of two-thirds of the issued and outstanding
CFCL Class A Shares and of the issued and outstanding CFCL Common
Shares each

voting as a separate class, as well as a majority of uninterested (in
the transaction) holders of the issued and outstanding CFCL Class A
Shares and of the issued and outstanding CFCL Common Shares, each
voting as a separate class, will be required to effect the
Arrangement.\22\
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    \22\ In connection therewith, CFCL prepared and mailed a proxy
circular, dated October 26, 2017 (``Proxy Circular''), soliciting
such approval at the meeting of such holders to be held on November
30, 2017, unless adjourned or postponed. The Proxy Circular was
furnished by CFCL to the Commission (File No. 001-09038) on November
8, 2017, under cover of Form 6-K. The descriptions of the Trust and
the Units contained herein are based, in part, on the Proxy
Circular.
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Operation of the Trust
    According to the Proxy Circular, the investment objective of the
Trust is to participate in the Arrangement and to subsequently invest
and hold substantially all of its assets in physical gold and silver
bullion.\23\ The Trust is authorized to issue an unlimited number of
Units in an unlimited number of classes and series of a class. Each
Unit of a class or series of a class represents an undivided ownership
interest in the net assets of the Trust attributable to that class or
series of a class of Units.
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    \23\ The Trust will obtain exemptive relief from the Canadian
securities regulatory authorities for relief from certain
requirements of National Instrument 81-102--Investment Funds,
legislation which governs mutual funds and non-redeemable investment
funds in each of the provinces and territories of Canada
(``Exemptive Relief''), to permit: (i) The Trust to invest up to
100% of its assets in physical gold or silver bullion; (ii) the
appointment of the Gold and Silver Custodian as custodian of the
Trust's physical gold or silver bullion assets, if required; (iii)
purchases of Units on the Exchange and the TSX and redemption
requests to be submitted directly to the registrar and Transfer
Agent of the Trust; (iv) the redemption of Units and payment upon
redemption of Units all as described under ``Redemption for Physical
Gold and Silver'' and ``Redemption of Units for Cash''; and (v) the
Trust to establish a record date for distributions in accordance
with the policies of the TSX and the Exchange.
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    The Trust will seek to provide a secure, convenient and exchange-
traded investment alternative for investors interested in holding
physical gold and silver bullion without the inconvenience that is
typical of a direct investment in physical gold and silver bullion. The
Trust will invest primarily in long-term holdings of unencumbered,
fully allocated, physical gold and silver bullion and will not
speculate with regard to short-term changes in gold and silver prices.
Pursuant to the trust agreement, the Manager has full authority and
exclusive power to manage and direct the business and affairs of the
Trust, subject to the Trust's investment and operating
restrictions.\24\ According to the Manager, the Trust will not invest
in gold or silver certificates (other than legacy gold and silver
certificates previously held by CFCL which historically represent less
than 1% of CFCL's assets, and which will be sold for cash as soon as
practicable following the completion of the Arrangement) or other
financial instruments that represent gold or silver or that may be
exchanged for gold or silver and will not purchase, sell or hold
derivatives. The Trust does not anticipate making regular cash
distributions to Unitholders.
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    \24\ The Trust's investment and operating restrictions provide
that the Trust will invest in and hold a minimum of 90% of the total
net assets of the Trust in physical gold and silver bullion in
``London Good Delivery'' bar (as defined in ``Operation of the Gold
and Silver Markets'' below) form and hold no more than 10% of the
total net assets of the Trust, at the discretion of the Manager, in
physical gold and silver bullion (in London Good Delivery bar form
or otherwise), gold or silver coins, debt obligations of or
guaranteed by the Government of Canada or a province of Canada or by
the Government of the United States or a state thereof, short-term
commercial paper obligations of a corporation or other person whose
short-term commercial paper is rated R-1 (or its equivalent, or
higher) by Dominion Bond Rating Service Limited or its successors or
assigns or F1 (or its equivalent, or higher) by Fitch Ratings or its
successors or assigns or A-1 (or its equivalent, or higher) by
Standard & Poor's or its successors or assigns or P-1 (or its
equivalent, or higher) by Moody's Investor Service or its successors
or assigns, interest-bearing accounts and short-term certificates of
deposit issued or guaranteed by a Canadian chartered bank or trust
company, money market mutual funds, short-term government debt or
short-term investment grade corporate debt, cash or other short-term
debt obligations approved by the Manager from time to time (for the
purpose of this paragraph, the term ``short-term'' means having a
date of maturity or call for payment not more than 182 days from the
date on which the investment is made), except during the 60-day
period following the closing of additional offerings or prior to the
distribution of the assets of the Trust. Pursuant to the Exemptive
Relief, the Trust will be permitted to invest up to 100% of its net
assets, taken at market value of the time of purchase, in physical
gold and silver bullion.
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    According to the Proxy Circular, the Trust is neither an investment
company registered or required to be registered under the Investment
Company Act of 1940, as amended,\25\ nor a commodity pool for purposes
of the Commodity Exchange Act (``CEA''),\26\ and neither the Manager
nor the Trustee is subject to regulation as a commodity pool operator
or a commodity trading adviser in connection with the operation of the
Trust.
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    \25\ 15 U.S.C. 80a-1.
    \26\ 17 U.S.C. 1.
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Operation of the Gold and Silver Markets
    According to the Proxy Circular, the global trade in gold and
silver consists of over-the-counter (``OTC''), transactions in spot,
forwards and options and other derivatives, together with exchange-
traded futures and options. The participants in the world gold market
may be classified in the following sectors: The Mining and producer
sector; the banking sector; the official sector; the investment sector;
and the manufacturing sector. The participants in the world silver
industry may be classified by the following sectors: The mining and
producer sector; the banking sector; the investment sector; the
fabrication and manufacturing sector; and the official sector.
    According to the Proxy Circular, the OTC gold market and OTC silver
market include spot, forward and option and other derivative
transactions conducted on a principal-to-principal basis. While the OTC
gold market and the OTC silver market are global, nearly 24-hour per
day markets, the main centers for both OTC markets are London, New York
and Zurich. Thirteen members of the London Bullion Market Association
(``LBMA''), the London-based trade association that acts as the
coordinator for activities conducted on behalf of its members and other
participants in the London bullion market, act as OTC market makers for
both the OTC gold market and the OTC silver market, and most OTC market
trades for both markets are cleared through London.\27\ The LBMA plays
an important role in setting OTC gold and OTC silver trading industry
standards. The LBMA's ``London Good Delivery Lists'' identify approved
refiners of gold and silver.
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    \27\ Following the enactment of the Financial Markets Act 2012,
the Prudential Regulation Authority of the Bank of England is
responsible for regulating most of the financial firms that are
active in the bullion market, and the Financial Conduct Authority is
responsible for consumer and competition issues.
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    According to the Proxy Circular, in the OTC gold market and the OTC
silver market, gold and silver 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 for Gold and Silver Bars'' published by the
LBMA are ``London Good Delivery'' bars. A gold London Good Delivery bar
must contain between 350 and 430 fine troy ounces of gold with a
minimum fineness of 995 parts per 1,000. A silver London Good Delivery
bar must contain between 750 ounces and 1,100 ounces of silver with a
minimum fineness of 999 parts per 1,000.
    According to the Proxy Circular, the most significant gold and
silver futures exchanges are the COMEX, operated by

Commodities Exchange, Inc. (``COMEX''), a subsidiary of New York
Mercantile Exchange, Inc. (``NYMEX''), and a subsidiary of CME Group
Inc. (``CME Group''),\28\ and the Tokyo Commodity Exchange.
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    \28\ CME Group is a member of the Intermarket Surveillance Group
(``ISG''). See note 35, infra.
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Initial Distribution and Redemption of Units
    According to the Proxy Circular, 252,156,003 Units are expected to
be issued in connection with the Arrangement (subject to adjustment in
connection with the exercise of dissent rights). Each outstanding Unit
represents an equal, fractional, undivided ownership interest in the
net assets of the Trust attributable to the Units. The Trust will not
issue additional Units of the class offered in the Arrangement
following the completion of the Arrangement except: (i) If the net
proceeds per Unit to be received by the Trust are not less than 100% of
the most recently calculated net asset value (``NAV'') per Unit
immediately prior to, or upon, the determination of the pricing of such
issuance; or (ii) by way of distribution of Units in connection with an
income distribution. According to the Manager, the Trust does not
intend to issue new Units, or redeem existing Units, on a day-to-day
basis.
    Units may be redeemed at the option of the Unitholder on a monthly
basis for physical gold and silver bullion or cash, as described below.
Redemption for Physical Gold and Silver
    According to the Manager, subject to the terms of the trust
agreement, a Unitholder may redeem Units for physical gold and silver
bullion, provided the redemption request is for the Minimum Bullion
Redemption Amount. ``Minimum Bullion Redemption Amount'' means 100,000
Units, provided that if 100,000 Units is not at least equivalent to the
aggregate value of (i) one London Good Delivery bar of gold, (ii) the
Proportionate Silver Amount (as defined below) and (iii) applicable
expenses, the Minimum Bullion Redemption Amount shall be such number of
Units as are at least equivalent to the aggregate value of (i) one
London Good Delivery bar of gold, (ii) the Proportionate Silver Amount
and (iii) applicable expenses. ``Proportionate Silver Amount'' means
such number of London Good Delivery bars of silver with an aggregate
value (as at the valuation time on the applicable redemption date in
the month during which the redemption request is processed) that is
proportionate to the aggregate value of one London Good Delivery bar of
gold based on the proportionate value of physical gold and silver
bullion held by the Trust (as at the valuation time on the applicable
redemption date in the month during which the redemption request is
processed). Units redeemed for physical gold and silver bullion will
have a redemption value equal to the aggregate value of the NAV per
Unit of the redeemed Units on the last day of the month on which the
Exchange is open for trading in the month during which the redemption
request is processed (less applicable expenses described below)
(``Redemption Amount'').
    The amount of physical gold and silver bullion a redeeming
Unitholder is entitled to receive will be determined by the Manager,
who will allocate the Redemption Amount to physical gold and silver
bullion in direct proportion to the value of physical gold and silver
bullion held by the Trust at the time of redemption (``Bullion
Redemption Amount''). The quantity of each particular metal delivered
to a redeeming Unitholder will be dependent on the applicable Bullion
Redemption Amount and the number and individual weight of London Good
Delivery bars of that metal that are held by the Trust on the
redemption date. A redeeming Unitholder may not receive physical gold
and silver bullion in the proportions then held by the Trust and, if
the Trust does not have a London Good Delivery bar of a particular
metal in inventory of a value equal to or less than the applicable
Bullion Redemption Amount, the redeeming Unitholder will not receive
any of that metal. The ability of a Unitholder to redeem Units for
physical gold and silver bullion may be limited by the number of London
Good Delivery bars held by the Trust at the time of redemption. Any
Bullion Redemption Amount in excess of the value of the London Good
Delivery bar or an integral multiple thereof of the particular metal to
be delivered to the redeeming Unitholder will be paid in cash, as such
excess amount will not be combined with any excess amounts in respect
of the other metal for the purpose of delivering additional physical
gold and silver bullion.
    A Unitholder that owns a sufficient number of Units who desires to
exercise redemption privileges for physical gold and silver bullion
must do so by instructing his, her or its broker, who must be a direct
or indirect participant of CDS Clearing and Depository Services Inc. or
The Depository Trust Company, to deliver to the Transfer Agent on
behalf of the Unitholder a written notice (``Bullion Redemption
Notice'') of the Unitholder's intention to redeem Units for physical
gold and silver bullion. Pursuant to the Exemptive Relief, the Transfer
Agent will be permitted to directly accept redemption requests. A
Bullion Redemption Notice must be received by the Transfer Agent no
later than 4:00 p.m., Eastern Time (``E.T.''), on the 15th day of the
month in which the Bullion Redemption Notice will be processed or, if
such day is not a business day, then on the immediately following day
that is a business day. Any Bullion Redemption Notice received after
such time will be processed in the next month.
    A Unitholder redeeming Units for physical gold and silver bullion
will receive the physical gold and silver bullion from the Gold and
Silver Custodian. Physical gold and silver bullion received by a
Unitholder as a result of a redemption of Units will be delivered by
armored transportation service carrier pursuant to delivery
instructions provided by the Unitholder to the Manager, provided that
the delivery instructions are acceptable to the armored transportation
service carrier. The armored transportation service carrier will be
engaged by or on behalf of, and the costs in connection therewith, will
be borne by the redeeming Unitholder. Such physical gold and silver
bullion can be delivered: (i) To an account established by the
Unitholder at an institution located in North America authorized to
accept and hold London Good Delivery bars; (ii) in the United States,
to any physical address (subject to approval by the armored
transportation service carrier); (iii) in Canada, to any business
address (subject to approval by the armored transportation service
carrier); and (iv) outside of the United States and Canada, to any
address approved by the armored transportation service carrier.
Physical gold and silver bullion delivered to an institution located in
North America authorized to accept and hold London Good Delivery bars
will likely retain its London Good Delivery status while in the custody
of such institution; physical gold and silver bullion delivered
pursuant to a Unitholder's delivery instruction to a destination other
an institution located in North America authorized to accept and hold
London Good Delivery bars will no longer be deemed London Good Delivery
once received by the Unitholder. Costs associated with the redemption
of Units and the delivery of physical gold and silver bullion will be
borne by the redeeming Unitholder.

    The armored transportation service carrier will receive physical
gold and silver bullion in connection with a redemption of Units
approximately 10 business days after the end of the month in which the
Bullion Redemption Notice is processed. Once the physical gold and
silver bullion representing the redeemed Units has been placed with the
armored transportation service carrier, the Gold and Silver Custodian
will no longer bear the risk of loss of, and damage to, such physical
gold and silver bullion. In the event of a loss after the physical gold
and silver bullion has been placed with the armored transportation
service carrier, the Unitholder will not have recourse against the
Trust or the Gold and Silver Custodian.
Redemption of Units for Cash
    According to the Proxy Circular, Unitholders whose Units are
redeemed for cash will be entitled to receive a redemption price per
Unit equal to 95% of the lesser of: (i) The volume-weighted average
trading price of the Units traded on the Exchange or, if trading has
been suspended on the Exchange, the trading price of the shares traded
on the TSX,\29\ for the last five days on which the respective exchange
is open for trading for the month in which the redemption request is
processed; and (ii) the NAV of the redeemed Units as of 4:00 p.m.,
E.T., on the last day of such month on which the Exchange is open for
trading. Pursuant to the Exemptive Relief, the redemption price will be
permitted to be less than 100% of the NAV per Unit. Cash redemption
proceeds will be transferred to a redeeming Unitholder approximately
three business days after the end of the month in which such redemption
request is processed by the Trust.
---------------------------------------------------------------------------

    \29\ The Exchange can receive information regarding transactions
on TSX through the Investment Industry Regulatory Organization of
Canada, which is a member of the ISG. See note 35, infra.
---------------------------------------------------------------------------

    To redeem Units for cash, a Unitholder must instruct the
Unitholder's broker to deliver a notice to redeem Units for cash
(``Cash Redemption Notice'') to the Transfer Agent. The Transfer Agent
will be permitted to directly accept redemption requests. A Cash
Redemption Notice must be received by the Transfer Agent no later than
4:00 p.m., E.T., on the 15th day of the month in which the Cash
Redemption Notice will be processed or, if such day is not a business
day, then on the immediately following day that is a business day. Any
Cash Redemption Notice received after such time will be processed in
the next month.
Net Asset Value
    According to the Proxy Circular, the Valuation Agent will calculate
the NAV for each class of Units as of 4:00 p.m., E.T., on each business
day. The NAV as of the valuation time on each business day will be the
amount obtained by deducting from the aggregate fair market value of
the assets of the Trust as of such date an amount equal to the fair
value of the liabilities of the Trust (excluding all liabilities
represented by outstanding Units, if any) as of such date.\30\ The NAV
per Unit will be determined by dividing the NAV of the Trust on a date
by the total number of Units then outstanding on such date. The fair
market value of the assets of the Trust will be determined as follows:
---------------------------------------------------------------------------

    \30\ According to the Manager, the Trust is a mutual fund under
applicable Canadian securities legislation and must calculate its
NAV pursuant to Part 14 of National Instrument 81-106--Investment
Fund Continuous Disclosure (``NI 81-106''), a rule applicable to
Canadian investment funds and administered by Canadian securities
regulatory authorities. Pursuant to Subsection 14.2(1) of NI 81-106,
the Trust must subtract the ``fair value'' of its liabilities from
the fair value of its assets when calculating its NAV. Subsection
14.2(1.2) of NI 81-106 defines fair value as (a) the market value
based on reported prices and quotations in an active market; or (b)
if the market value is not available, or the Manager believes that
it is unreliable, a value that is fair and reasonable in all the
relevant circumstances, and requires the Manager to establish and
maintain appropriate written policies and procedures for determining
fair value of the Trust's assets and liabilities and to consistently
follow those policies and procedures.
---------------------------------------------------------------------------

    (i) The value of physical gold and silver bullion will be its
market value based on the price provided by a widely recognized pricing
service as directed by the Manager and, if such service is not
available, such physical gold and silver bullion will be valued at
prices provided by another pricing service as determined by the
Manager, in consultation with the Valuation Agent;
    (ii) the value of any cash on hand or on deposit, bills, demand
notes, accounts receivable, prepaid expenses, and interest accrued and
not yet received, will be deemed to be the full amount thereof unless
the Manager determines that any such deposit, bill, demand note,
account receivable, prepaid expense or interest is not worth the full
amount thereof, in which event the value thereof will be deemed to be
such value as the Manager determines to be the fair value thereof;
    (iii) short-term investments including notes and money market
instruments will be valued at cost plus accrued interest;
    (iv) the value of any security or other property for which no price
quotations are available or, in the opinion of the Manager (which may
delegate such responsibility to the Valuation Agent under the valuation
services agreement), to which the above valuation principles cannot or
should not be applied, will be the fair value thereof determined from
time to time in such manner as the Manager (or the Valuation Agent, as
the case may be) will from time to time provide; and
    (v) the value of all assets and liabilities of the Trust valued in
terms of a currency other than the currency used to calculate the NAV
will be converted to the currency used to calculate the NAV by applying
the rate of exchange obtained from the best available sources to the
Valuation Agent as agreed upon by the Manager including, but not
limited to, the Trustee or any of its affiliates.
Secondary Market Trading
    According to the Proxy Circular, Units may trade in the market at a
premium or discount to the NAV per Unit. 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 COMEX and the Exchange and the
TSX. According to the Proxy Circular, while the Units will trade on the
Exchange and the TSX until 4:00 p.m., E.T., liquidity in the global
gold and silver markets will be reduced after the close of the COMEX at
1:30 p.m., E.T. As a result, during this time, trading spreads, and the
resulting premium or discount to the NAV, may widen.
Availability of Information Regarding Gold and Silver
    Currently, the Consolidated Tape Plan does not provide for
dissemination of the spot price of a commodity, such as gold or silver,
over the Consolidated Tape. However, there will be disseminated over
the Consolidated Tape the quotation and last sale price for the Units,
as is the case for all equity securities traded on the Exchange. In
addition, there is a considerable amount of gold and silver price and
gold and silver market information available on public Web sites and
through professional and subscription services.
    Investors may obtain on a 24-hour basis gold or silver pricing
information based on the spot price for an ounce of gold or silver from
various financial information service providers, such as Reuters and
Bloomberg. Reuters and Bloomberg provide at no charge on their Web
sites delayed information regarding the spot price of gold and silver
and last sale prices of gold and silver futures, as well as information
about news and developments in the gold and silver market. Reuters and
Bloomberg also

offer a professional service to subscribers for a fee that provides
information on gold and silver prices directly from market
participants. ICAP plc provides an electronic trading platform called
EBS for the trading of spot gold and silver, as well as a feed of real-
time streaming prices, delivered as record-based digital data from the
EBS platform to its customer's market data platform via Bloomberg or
Reuters.
    Complete real-time data for gold and 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 Web site. There are a variety of other public Web
sites providing information on gold and silver, ranging from those
specializing in precious metals to sites maintained by major
newspapers. In addition, the LBMA Gold Price and the LBMA Silver Price
are publicly available at no charge at www.lbma.org.uk.
Availability of Information
    The intra-day indicative value (``IIV'') per Unit will be
disseminated by one or more major market data vendors. The IIV will be
calculated based on the amount of gold and silver held by the Trust and
a price of gold and silver derived from updated bids and offers
indicative of the spot prices of gold and silver.\31\
---------------------------------------------------------------------------

    \31\ The IIV on a per Unit basis disseminated during the NYSE
Arca Core Trading Session should not be viewed as a real-time update
of the NAV, which will be calculated once a day.
---------------------------------------------------------------------------

    The IIV will be widely disseminated on a per Unit basis every 15
seconds during the NYSE Arca Core Trading Session by one or more major
market data vendors. In addition, the IIV will be available through on-
line information services.
    The Web site for the Trust, which will be publicly accessible at no
charge, will contain the following information: (a) The mid-point of
the bid/ask price \32\ at the close of trading in relation to the NAV
as of the time the NAV is calculated (``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 (or
for the life of the Trust, if shorter). The Trust Web site will provide
the last sale price of the Units as traded in the U.S. market, as well
as a breakdown, provided on a daily basis, of the holdings of the Trust
by metal type. The Web site for the Trust will also provide the
information described in the penultimate paragraph of ``Description of
the Arrangement'' above.
---------------------------------------------------------------------------

    \32\ The bid/ask price of the Trust is determined using the
highest bid and lowest offer on the Consolidated Tape as of the time
of calculation of the closing day NAV.
---------------------------------------------------------------------------

    The Trust's daily (or as determined by the Manager in accordance
with the trust agreement) NAV will be posted on the Trust's Web site as
soon as practicable. In addition, the Exchange will make available over
the Consolidated Tape quotation information, trading volume, closing
prices and NAV per Unit from the previous day.
Criteria for Initial and Continued Listing
    The Trust will be subject to the criteria in NYSE Arca Rule 8.201-
E, including 8.201-E(e), for initial and continued listing of the
Units.
    A minimum of 100,000 Units will be required to be outstanding at
the start of trading. The Exchange believes that the anticipated
minimum number of Units outstanding at the start of trading is
sufficient to provide adequate market liquidity.
Trading Rules
    The Exchange deems the Units to be equity securities, thus
rendering trading in the Units subject to the Exchange's existing rules
governing the trading of equity securities. Trading in the Units 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 Units
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 order entry is $0.0001.
    Further, NYSE Arca Rule 8.201-E sets forth certain restrictions on
Equity Trading Permit Holders (``ETP Holders'') acting as registered
Market Makers in the Units to facilitate surveillance. Pursuant to NYSE
Arca Rule 8.201-E(g), an ETP Holder acting as a registered Market Maker
in the Units is required to provide the Exchange with information
relating to its trading in the underlying gold and silver and related
futures or options on futures or any other related derivatives.
Commentary .04 of NYSE Arca Rule 6.3-E requires an ETP Holder acting as
a registered Market Maker, and its affiliates, in the Units 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 Units).
    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 Units. Trading on the Exchange in the Units may be
halted because of market conditions or for reasons that, in the view of
the Exchange, make trading in the Units inadvisable. These may include:
(1) The extent to which conditions in the underlying gold or 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 Units will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule.\33\
---------------------------------------------------------------------------

    \33\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange will halt trading in the Units if the NAV of the Trust
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. 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. In addition, if the Exchange becomes aware that the NAV
with respect to the Units is not disseminated to all market
participants at the same time, it will halt trading in the Units until
such time as the NAV is available to all market participants.

Surveillance
    The Exchange represents that trading in the Units 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.\34\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Units in all trading sessions and to deter and detect violations of
Exchange rules and federal securities laws applicable to trading on the
Exchange.
---------------------------------------------------------------------------

    \34\ 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.
---------------------------------------------------------------------------

    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 Units 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 Units from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Units from markets and other entities that are members
of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement (``CSSA'').\35\
---------------------------------------------------------------------------

    \35\ For the list of current members of ISG, see https://www.isgportal.org/home.html.
---------------------------------------------------------------------------

    Also, pursuant to NYSE Arca Rule 8.201-E(g), the Exchange is able
to obtain information regarding trading in the Units and the underlying
gold and silver and related futures or options on futures or any other
related derivatives 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.
    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, (b) limitations on portfolio
holdings or reference assets and (c) the applicability of Exchange
listing rules specified in this rule filing shall constitute continued
listing requirements for listing the Units on the Exchange.
    The Manager will represent 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 Exchange 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 Units.
Specifically, the Information Bulletin will discuss the following: (1)
Redemptions of Units; (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 Units; (3) how
information regarding the IIV is disseminated; and (4) trading
information.
    In addition, the Information Bulletin will reference that the Trust
is subject to various fees and expenses as described in the Proxy
Circular. The Information Bulletin will disclose that information about
the Units of the Trust is publicly available on the Trust's Web site.
    The Information Bulletin will also discuss any relief, if granted,
by the Commission or the staff from any rules under the Exchange Act.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \36\ 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Units 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 Units in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws. The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Units with other markets
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 Units from such markets. In addition, the Exchange may obtain
information regarding trading in the Units from markets that are
members of ISG or with which the Exchange has in place a CSSA,
including COMEX. Also, pursuant to NYSE Arca Rule 8.201-E(g), the
Exchange is able to obtain information regarding trading in the Units
and the underlying gold and silver 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.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest.
There is a considerable amount of gold and silver price and gold and
silver market information available on public Web sites and through
professional and subscription services. Investors may obtain on a 24-
hour basis gold or silver pricing information based on the spot price
for an ounce of gold or silver from various financial information
service providers. Complete real-time data for gold and silver futures
and options prices traded on the COMEX are available by subscription
from Reuters and Bloomberg. In addition, the LBMA Gold Price and LBMA
Silver Price are publicly available at no charge at www.lbma.org.uk.
The Trust's daily (or as determined by the Manager in accordance with
the trust agreement) NAV will be posted on the Trust's Web site as soon
as practicable. The Trust's Web site will provide an IIV per Unit, as
calculated by a third party financial data provider during the
Exchange's Core Trading Session.

    Quotation and last-sale information regarding the Units will be
disseminated through the facilities of the Consolidated Tape
Association. The IIV will be widely disseminated on a per Unit basis
every 15 seconds during the NYSE Arca Core Trading Session by one or
more major market data vendors. In addition, the IIV will be available
through on-line information services. The Exchange represents that the
Exchange may halt trading during the day in which an interruption to
the dissemination of the IIV occurs. If the interruption to the
dissemination of the IIV persists past the trading day in which it
occurred, the Exchange will halt trading no later than the beginning of
the trading day following the interruption. In addition, if the
Exchange becomes aware that the NAV with respect to the Units is not
disseminated to all market participants at the same time, it will halt
trading in the Units until such time as the NAV is available to all
market participants. The NAV per Unit will be calculated daily and made
available to all market participants at the same time. One or more
major market data vendors will disseminate for the Trust on a daily
basis information with respect to the recent NAV per Unit and Units
outstanding.
    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 Units and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a CSSA. In addition, as noted above,
investors will have ready access to information regarding gold and
silver pricing and gold and silver futures information.

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 Exchange Act. The Exchange
believes the proposed rule change will enhance competition by
accommodating Exchange trading of an additional exchange-traded product
relating to physical gold and 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-NYSEArca-2017-131 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-2017-131. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 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-2017-131 and should
be submitted on or before December 15, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25347 Filed 11-22-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 88, Number 119 (Thursday, June 22, 2023)]
[Notices]
[Pages 40887-40890]
[FR Doc No: 2023-13218]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97733; File No. SR-MIAX-2023-22]

Self-Regulatory Organizations; Miami International Securities
Exchange LLC; Notice of Filing of a Proposed Rule Change To Amend
Exchange Rule 404, Series of Option Contracts Open for Trading, To
Implement a Low Priced Stock Strike Price Interval Program

June 15, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 5, 2023, Miami International Securities Exchange LLC (``MIAX''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange is filing a proposal to amend Exchange Rule 404,
Series of Option Contracts Open for Trading.
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 these 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 aspects 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 amend Rule 404, Series of Option Contracts
Open for Trading. Specifically, the Exchange proposes to adopt new
Interpretations and Policies .12 to Rule 404 to implement a new strike
interval program for stocks that are priced less than $2.50 and have
open interest equal to or greater than 1,000 contracts.
Background
    Currently, Exchange Rule 404, Series of Option Contracts Open for
Trading, describes the process and procedures for listing and trading
series of options \3\ on the Exchange. Rule 404 provides for a $2.50
Strike Price Program, where the Exchange may select up to 60 option
classes \4\ on individual stocks for which the interval of strike
prices will be $2.50 where the strike price is greater than $25.00 but
less than $50.00.\5\ Rule 404 also provides for a $1 Strike Price
Interval Program, where the interval between strike prices of series of
options \6\ on individual stocks may be $1.00 or greater provided the
strike price is $50.00 or less, but not less than $1.00.\7\
Additionally, Rule 404 provides for a $0.50 Strike Program.\8\ The
interval of strike prices of series of options on individual stocks may
be $0.50 or greater beginning at $0.50 where the strike price is $5.50
or less, but only for options classes whose underlying security closed
at or below $5.00 in its primary market on the previous trading day and
which have national average daily volume that equals or exceeds 1,000
contracts per day as determined by The Options Clearing Corporation
during the preceding three calendar months. The listing of $0.50 strike
prices is limited to options classes overlying no more than 20
individual stocks (the ``$0.50 Strike Program'') as specifically
designated by the Exchange. The Exchange may list $0.50 strike prices
on any other option classes if those classes are specifically
designated by other securities exchanges that employ a similar $0.50
Strike Program under their respective rules. A stock shall remain in
the $0.50 Strike Program until otherwise designated by the Exchange.\9\
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    \3\ The term ``option contract'' means a put or a call issued,
or subject to issuance, by the Clearing Corporation pursuant to the
Rules of the Clearing Corporation. See Exchange Rule 100.
    \4\ The terms ``class of options'' or ``option class'' means all
option contracts covering the same underlying security. See Exchange
Rule 100.
    \5\ See Exchange Rule 404(f).
    \6\ The term ``series of options'' means all option contracts of
the same class having the same exercise price and expiration date.
See Exchange Rule 100.
    \7\ See Interpretations and Policies .01(a) of Rule 404.
    \8\ See Interpretations and Policies .04 of Rule 404.
    \9\ Id.
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Proposal
    At this time, the Exchange proposes to adopt a new strike interval
program for stocks that are not in the aforementioned $0.50 Strike
Program (or the Short Term Option Series Program) \10\ and that close
below $2.50 and have open interest equal to or greater than 1,000
contracts. The $0.50 Strike Program considers stocks that have a
closing price at or below $5.00 whereas the Exchange's proposal will
consider stocks that have a closing price below $2.50. Currently, there
is a subset of stocks that are not included in the $0.50 Strike Program
as a result of the limitations of that program which provides that the
listing of $0.50 strike prices shall be limited to option classes
overlying no more than 20 individual stocks as specifically designated
by the Exchange and requires a national average daily volume that
equals or exceeds 1,000 contracts per day as determined by The Options
Clearing Corporation during the preceding three calendar months.\11\
Therefore, the Exchange is proposing to implement a new strike interval
program termed the ``Low Priced Stock Strike Price Interval Program.''
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    \10\ See Interpretations and Policies .02 of Rule 404.
    \11\ See Interpretations and Policies .04 of Rule 404.
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    To be eligible for the inclusion in the Low Priced Stock Strike
Price Interval Program, an underlying stock must (i) close below $2.50
in its primary market on the previous trading day; and (ii) have open
interest equal to or greater than 1,000 contracts. The Exchange notes
that there is no limit to the number of classes that will be eligible
for inclusion in the proposed program, provided, of course, that the
underlyings satisfy both the price and open interest requirements of
the proposed program.
    The Exchange also proposes that after a stock is added to the Low
Priced Stock Strike Price Interval Program, the Exchange may list $0.50
strike price intervals from $0.50 up to $2.00. For the purpose of
adding strikes under the Low Priced Stock Strike Price Interval
Program, the ``price of the underlying stock'' shall be measured in the
same way as ``the price of the underlying security'' as set forth in
Rule

404A(b)(1).\12\ Further, no additional series in $0.50 intervals may be
listed if the underlying stock closes at or above $2.50 in its primary
market. Additional series in $0.50 intervals may not be added until the
underlying stock again closes below $2.50.
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    \12\ The Exchange notes this is the same methodology used in the
$1 Strike Price Interval Program. See Interpretations and Policies
.01(c)(3) of Rule 404.
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    The Exchange's proposal addresses a gap in strike coverage for low
priced stocks. The $0.50 Strike Program considers stocks that close
below $5.00 and limits the number of option classes listed to no more
than 20 individual stocks (provided that the open interest criteria is
also satisfied). Whereas, the Exchange's proposal has a narrower focus,
with respect to the underlying's stock price, and is targeted on those
stocks that close below $2.50 and does not limit the number of stocks
that may participate in the program (provided that the open interest
criteria is also satisfied). The Exchange does not believe that any
market disruptions will be encountered with the addition of these new
strikes. The Exchange represents that it has the necessary capacity and
surveillance programs in place to support and properly monitor trading
in the proposed Low Priced Stock Strike Price Interval Program.
Impact of Proposal
    The Exchange recognizes that its proposal will introduce new
strikes in the marketplace and further acknowledges that there has been
significant effort undertaken by the industry to curb strike
proliferation. This initiative has been spearheaded by the Nasdaq BX
who filed an initial proposal focused on the removal, and prevention of
the listing, of strikes which are extraneous and do not add value to
the marketplace (the ``Strike Interval Proposal'').\13\ The Strike
Interval Proposal was intended to remove repetitive and unnecessary
strike listings across the weekly expiries. Specifically, the Strike
Interval Proposal aimed to reduce the density of strike intervals that
would be listed in the later weeks, by creating limitations for
intervals between strikes which have an expiration date more than
twenty-one days from the listing date.\14\ The Strike Interval Proposal
took into account OCC customer-cleared volume, using it as an
appropriate proxy for demand. The Strike Interval Proposal was designed
to maintain strikes where there was customer demand and eliminate
strikes where there wasn't. At the time of its proposal Nasdaq BX
estimated that the Strike Interval Proposal would reduce the number of
strikes it listed by 81,000.\15\
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    \13\ See Securities Exchange Act No. 91225 (February 12, 2021),
86 FR 10375 (February 12, 2021) (SR-BX-2020-032) (BX Strike Approval
Order); see also BX Options Strike Proliferation Proposal (February
25, 2021) available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal.
    \14\ See Securities Exchange Act No. 91225 (February 12, 2021),
86 FR 10375 (February 12, 2021) (SR-BX-2020-032).
    \15\ See id.
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    The Exchange recognizes that its proposal will moderately increase
the total number of option series available on the Exchange. However,
the Exchange's proposal is designed to only add strikes where there is
investor demand \16\ which will improve market quality. Under the
requirements for the Low Priced Stock Strike Price Interval Program as
described herein, the Exchange determined that as of March 31, 2023,
413 symbols met the proposed criteria. Of those symbols 99 are
currently in the $1 Strike Price Interval Program with $1.00 and $2.00
strikes listed. Under the Exchange's proposal the Exchange would add
the $0.50 and $1.50 strikes for these symbols for the current
expiration terms. The remaining 314 symbols eligible under the
Exchange's proposal would have $0.50, $1.00, $1.50 and $2.00 strikes
added to their current expiration terms. Therefore, for the 413 symbols
eligible for the Low Priced Stock Strike Price Interval Program a total
of approximately 13,000 options would be added. As of March 31, 2023,
the Exchange listed 1,090,896 options, therefore the additional options
that would be listed under this proposal would represent a relatively
minor increase of 1.19% in the number of options listed on the
Exchange.
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    \16\ See proposed Interpretations and Policies .12(b) of Rule
404 which requires that an underlying stock have open interest equal
to or greater than 1,000 contracts to be eligible for inclusion in
the Low Priced Stock Strike Price Interval Program.
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    The Exchange does not believe that its proposal contravenes the
industry's efforts to curtail unnecessary strikes. The Exchange's
proposal is targeted to only underlying stocks that close at less than
$2.50 and that also meet the open interest requirement. Additionally,
because the strike increment is $0.50 there are only a total of four
strikes that may be listed under the program ($0.50, $1.00, $1.50, and
$2.00) for an eligible underlying. Finally, if an eligible underlying
is in another program (e.g., the $0.50 Strike Program or the $1 Strike
Price Interval Program) the number of strikes that may be added is
further reduced if there are pre-existing strikes as part of another
strike listing program. Therefore, the Exchange does not believe that
it will list any unnecessary or repetitive strikes as part of its
program, and that the strikes that will be listed will improve market
quality and satisfy investor demand.
    The Exchange further believes that the Options Price Reporting
Authority (``OPRA''), has the necessary systems capacity to handle any
additional messaging traffic associated with this proposed rule change.
The Exchange also believes that Members \17\ will not have a capacity
issue as a result of the proposed rule change. Finally, the Exchange
believes that the additional options will serve to increase liquidity,
provide additional trading and hedging opportunities for all market
participants, and improve market quality.
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    \17\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
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2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent
with the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act,\18\ in that it is designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in, securities, to remove impediments to
and perfect the mechanisms of a free and open market and a national
market system and, in general, to protect investors and the public
interest. Additionally, the Exchange believes the proposed rule change
is consistent with the Section (6)(b)(5) \19\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78(f)(b)(5).
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    The Exchange believes its proposal promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanisms of a free and open market and a national market system as
the Exchange has identified a subset of stocks that are trading under
$2.50 and do not have meaningful strikes available. For example, on
March 20, 2023, symbol SOND closed at $0.82 and had open interest of
34,566

contracts.\20\ Currently the lowest strike listed is for $2.50, making
the lowest strike 200% away from the closing stock price. Another
symbol, POL, closed at $0.56 on March 20, 2023, and had open interest
of 22,780 contracts.\21\ Similarly, the lowest strike listed is for
$2.50, making the lowest strike more than 300% away from the closing
stock price. Currently, such products have no at-the-money options, as
well as no in-the-money calls or out-of-the-money puts. The Exchange's
proposal will provide additional strikes in $0.50 increments from $0.50
up to $2.00 to provide more meaningful trading and hedging
opportunities for this subset of stocks. Given the increased
granularity of strikes as proposed under the Exchange's proposal out-
of-the-money puts and in-the-money calls will be created. The Exchange
believes this will allow market participants to tailor their investment
and hedging needs more effectively.
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    \20\ See Yahoo! Finance, https://finance.yahoo.com/quote/SOND/history?p=SOND (last visited June 1, 2023).
    \21\ See Yahoo! Finance, https://finance.yahoo.com/quote/POL/history?p=POL (last visited June 1, 2023).
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    The Exchange believes its proposal promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanisms of a free and open market and a national market system and,
in general, protects investors and the public interest by adding
strikes that improves market quality and satisfies investor demand. The
Exchange does not believe that the number of strikes that will be added
under the program will negatively impact the market. Additionally, the
proposal does not run counter to the efforts undertaken by the industry
to curb strike proliferation as that effort focused on the removal and
prevention of extraneous strikes where there was no investor demand.
The Exchange's proposal requires the satisfaction of an open interest
threshold in addition to the underlying closing at a price below $2.50
to be eligible for the program. The Exchange believes that the open
interest requirement threshold of the program ensures that only strikes
with investor demand will be listed. Further, being that the strike
interval is $0.50, there are only a maximum of four strikes that may be
added ($0.50, $1.00, $1.50, and $2.00). Therefore, the Exchange does
not believe that its proposal will undermine the industry's efforts to
eliminate repetitive and unnecessary strikes in any fashion.
    The Exchange believes that the proposed rule change is consistent
with Section 6(b)(1) of the Act, which provides that the Exchange be
organized and have the capacity to be able to carry out the purposes of
the Act and the rules and regulations thereunder, and the rules of the
Exchange. The proposed rule change allows the Exchange to respond to
customer demand to provide meaningful strikes for low priced stocks.
The Exchange does not believe that the proposed rule would create any
capacity issue or negatively affect market functionality. Additionally,
the Exchange represents that it has the necessary systems capacity to
support the new options series and handle additional messaging traffic
associated with this proposed rule change. The Exchange also believes
that its Members will not experience any capacity issues as a result of
this proposal. In addition, the Exchange represents that it believes
that additional strikes for low priced stocks will serve to increase
liquidity available as well and improve price efficiency by providing
more trading opportunities for all market participants. The Exchange
believes that the proposed rule change will benefit investors by giving
them increased opportunities to execute their investment and hedging
decisions.

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 does not believe that its proposed rule change will
impose any burden on intra-market competition as the Rules of the
Exchange apply equally to all Members of the Exchange and all Members
may trade the new proposed strikes if they so choose. Specifically, the
Exchange believes that investors and market participants will
significantly benefit from the availability of finer strike price
intervals for stocks priced below $2.50, which will allow them to
tailor their investment and hedging needs more effectively.
    The Exchange does not believe that its proposed rule change will
impose any burden on inter-market competition, as nothing prevents
other options exchanges from proposing similar rules to list and trade
options on low priced stocks. Rather the Exchange believes that its
proposal will promote inter-market competition, as the Exchange's
proposal will result in additional opportunities for investors to
achieve their investment and trading objectives, to the benefit of
investors, market participants, and the marketplace in general.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
file number SR-MIAX-2023-22 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-MIAX-2023-22. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and

printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MIAX-2023-22 and should be
submitted on or before July 13, 2023.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13218 Filed 6-21-23; 8:45 am]
BILLING CODE 8011-01-P