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Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Notices
jspears on DSK121TN23PROD with NOTICES1

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.18
Also, pursuant to NYSE Arca Rule 8.201Eg, 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 Trust on the Exchange.
The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Trust to comply with the continued listing requirements, and, pursuant to its obligations under Section 19g1 of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Trust is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5Em.
III. Proceedings To Determine Whether To Approve or Disapprove SR
NYSEArca202165 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19b2B of the Act 19 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.
Pursuant to Section 19b2B of the Act,20 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposals consistency with Section 6b5 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. 21
Under the Commissions 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. 22 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,23 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.24
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 describes a process whereby the Mint will convert unallocated gold into ESG Approved Gold or convert ESG Approved Gold into unallocated gold.25 However, the Exchange does not explain how this conversion process will take place or provide sufficient details on how costly it will be for the Mint to perform such a conversion on the Funds behalf and the extent to which these costs will be 20 Id.
21 15

U.S.C. 78fb5.
CFR 201.700b3.
23 See id.
24 See id.
25 See Notice, supra note 3.

borne by investors in the Shares. The Exchange also does not explain why this conversion from unallocated gold to ESG Approved Gold is necessary rather than allowing Authorized Participants to submit Creation Units of ESG
Approved Gold that they have sourced from the Mint. In addition, the Exchange states that to the extent that the Trusts existing holdings of unallocated gold are insufficient to meet a redemption request, the Trust will be required to request that the Mint convert ESG Approved Gold to unallocated gold, which may result in delays in the Trusts ability to meet redemption requests from Authorized Participants.
However, the Exchange does not sufficiently explain why such a conversion is necessary to effect redemptions instead of the Fund redeeming Shares using ESG Approved Gold without a delay, or why this delay does not raise concerns under the Act.26
As such, the Commission has concerns about the proposed conversion process and whether the proposal is sufficiently 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 6b5 of the Act.
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 6b5 of the Act.
For example, the Exchange represents that the Administrator will value the Trusts gold, including both ESG
Approved Gold and unallocated gold held by the Trust, based on LBMA Gold Price PM or LBMA Gold Price AM.27
The Exchange further states that the Trust is not aware of a separate market for ESG Approved Gold and does not believe that one will develop.28
However, given that ESG Approved Gold may constitute, by construction, a small portion of the total gold outstanding in the market, the Exchange has not sufficiently explained why the Trust can expect to trade or value ESG
Approved Gold at the same price as unallocated gold. In addition, the proposal does not address the potential effects that the listing and trading of the Shares may have on the development of a separate market for ESG Approved Gold or differential pricing terms for
22 17
18 For a list of the current members of ISG, see www.isgportal.org.
19 15 U.S.C. 78sb2B.

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26 See
Notice, supra note 3.
id.
28 See id.
27 See
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