82 FR 24177 - Self-Regulatory Organizations; The Depository Trust Company; Fixed Income Clearing Corporation; National Securities Clearing Corporation; Order Approving Proposed Rule Changes To Enhance the Credit Risk Rating Matrix and Make Other Changes

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 100 (May 25, 2017)

Page Range		24177-24180
FR Document		2017-10690

Federal Register, Volume 82 Issue 100 (Thursday, May 25, 2017)

[Federal Register Volume 82, Number 100 (Thursday, May 25, 2017)]
[Notices]
[Pages 24177-24180]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-10690]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80734; File Nos. SR-DTC-2017-002; SR-FICC-2017-006; SR-
NSCC-2017-002]

Self-Regulatory Organizations; The Depository Trust Company;
Fixed Income Clearing Corporation; National Securities Clearing
Corporation; Order Approving Proposed Rule Changes To Enhance the
Credit Risk Rating Matrix and Make Other Changes

May 19, 2017.
On March 22, 2017, The Depository Trust Company (``DTC''), Fixed
Income Clearing Corporation (``FICC''), and National Securities
Clearing Corporation (``NSCC,'' each a ``Clearing Agency,'' and
collectively, ``Clearing Agencies'') filed with the Securities and
Exchange Commission (``Commission'') proposed rule changes SR-DTC-2017-
002, SR-FICC-2017-006, and SR-NSCC-2017-002 (collectively, the
``Proposed Rule Changes'') pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder.\2\ The Proposed Rule Changes were published for comment in
the Federal Register on April 11, 2017.\3\ The Commission received no
comments to the Proposed Rule Changes. This order approves the Proposed
Rule Changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4. The Clearing Agencies also filed the
Proposed Rule Changes as advance notices pursuant to Section
806(e)(1) of the Payment, Clearing, and Settlement Supervision Act
of 2010 and Rule 19b-4(n)(1) under the Act. 15 U.S.C. 5465(e)(1) and
17 CFR 240.19b-4(n)(1). The advance notices were published for
comment in the Federal Register on April 7, 2017. See Securities
Exchange Act Release Nos. 80395 (April 7, 2017), 82 FR 17921 (April
13, 2017) (SR-NSCC-2017-801); 80396 (April 7, 2017), 82 FR 17906
(April 13, 2017) (SR-FICC-2017-804); and 80394 (April 7, 2017), 82
FR 17901 (April 13, 2017) (SR-DTC-2017-801). The Commission did not
receive any comments on the advance notices.
\3\ Securities Exchange Act Release Nos. 30383 (April 5, 2017),
82 FR 17468 (April 11, 2017) (SR-FICC-2017-006); 80382 (April 5,
2017), 82 FR 17483 (April 11, 2017) (SR-DTC-2017-002); and 80381
(April 5, 2017), 82 FR 17475 (April 11, 2017) (SR-NSCC-2017-002)
(``Notices'').
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I. Description of the Proposed Rule Changes

The Proposed Rule Changes consist of proposed modifications to the
Rules, By-Laws and Organizational Certificate of DTC (``DTC Rules''),
the Rulebook of GSD (``GSD Rules''), the Clearing Rules of MBSD (``MBSD
Rules''), and the Rules & Procedures of NSCC (``NSCC Rules'')
(collectively, the ``Rules'').\4\ The Proposed Rule Changes are
proposals by the Clearing Agencies to amend the Rules to: (i) Enhance
their shared credit risk rating matrix (``Credit Risk Rating Matrix''
or ``CRRM''), which was developed by the Clearing Agencies to evaluate
the credit risks posed by certain Clearing Agency members to the
Clearing Agencies (and by implication to all of the Clearing Agency
members), as a result of providing services to such members; and (ii)
make other amendments to the Rules, both related and unrelated to the
CRRM, to provide more transparency and description regarding the
Clearing Agencies' current ongoing membership monitoring process, as
described below.
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\4\ Available at http://www.dtcc.com/en/legal/rules-and-procedures. FICC is comprised of two divisions: The Government
Securities Division (``GSD'') and the Mortgage-Backed Securities
Division (``MBSD''). Each division serves as a central counterparty,
becoming the buyer and seller to each of their respective members'
securities transactions and guarantying settlement of those
transactions, even if a member defaults. GSD provides, among other
things, clearance and settlement for trades in U.S. Government debt
issues. MBSD provides, among other things, clearance and settlement
for trades in mortgage-backed securities. GSD and MBSD maintain
separate sets of rules, margin models, and clearing funds.
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Currently, the CRRM rates the credit risk presented by members of
the Clearing Agencies that are U.S. broker-dealers and U.S. banks. The
CRRM assigns a credit rating based on certain quantitative factors
(``Credit Rating''), which vary based upon whether the member is a
broker-dealer or bank.\5\ The current CRRM also uses a relative scoring
approach (i.e., rating participants on a curve) and relies on peer
grouping of members to calculate the Credit Rating of a member.
Ultimately, the ratings generated are based on a 7-point rating system,
with ``1'' being the strongest Credit Rating and ``7'' being the
weakest Credit Rating. Although the current CRRM does not directly
consider qualitative factors, the Clearing Agencies' credit risk staff
may manually downgrade a particular member's Credit Rating based on
various qualitative factors.\6\ Members that receive a Credit Rating of
5, 6, or 7 are placed on the Clearing Agencies' ``Watch List,'' as
these members present a greater risk of default.\7\
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\5\ For U.S. broker-dealers, the Clearing Agencies consider size
(i.e., total excess net capital), capital, leverage, liquidity, and
profitability. For U.S. banks, the Clearing Agencies consider size,
capital, asset quality, earnings, and liquidity.
\6\ Quantitative factors currently considered by the Clearing
Agencies include: (a) Available news reports and/or regulatory
observations relating to the member; (b) member's liquidity
arrangements; and (c) material changes to the member's
organizational structure.
\7\ Members on the Watch List are subject to enhanced
surveillance by the Clearing Agencies and additional margin charges.
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To improve the coverage and the effectiveness of the current CRRM,
the Clearing Agencies are proposing three enhancements, as discussed
below. In addition to the enhancements, the Clearing Agencies also
propose to make other changes to their Rules to more fully describe the
Clearing Agencies' current ongoing membership monitoring process, both
related and unrelated to the CRRM, also discussed below.\8\
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\8\ Although each of the Clearing Agencies uses the CRRM
uniformly, the description of the respective Clearing Agencies'
Rules regarding the CRRM are different. To address this issue, the
Clearing Agencies propose to adopt similar Rules at each Clearing
Agency.
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A. Proposed CRRM Enhancements

Currently, the CRRM is comprised of two Credit Rating models--one
for U.S. broker-dealers and one for U.S. banks. The first proposed
enhancement would expand the CRRM by adding a third model that would
enable the CRRM to generate Credit Ratings for members that are foreign
banks or foreign trust companies that have audited financial data that
is publicly available. The Credit Rating for these particular members
would be based on both quantitative and qualitative factors, as
indicated in the second enhancement, below. According to the Clearing

[[Page 24178]]

Agencies, the expected benefit of this expansion and enhancement of the
CRRM would be that the Clearing Agencies could better evaluate the
default risk of their foreign bank or foreign trust company members.
The second proposed enhancement would supplement the Clearing
Agencies' ability to manually downgrade members by incorporating new
qualitative factors into the two existing CRRM models, as well as in
the new foreign bank and trust company model.\9\ Instead of relying
primarily on quantitative data, as do the current CRRM models, the
proposed enhancement would modify the CRRM models to blend qualitative
factors with quantitative factors to produce a Credit Rating for each
applicable member in relation to the member's credit risk. For U.S.
banks, foreign banks, and foreign trust companies, the enhanced CRRM
would use 70/30 weights between quantitative and qualitative factors to
generate Credit Ratings. For U.S. broker-dealers, the weights between
quantitative and qualitative factors would be 60/40. According to the
Clearing Agencies, these weights were chosen by the Clearing Agencies
based on the industry best practice, as well as research and
sensitivity analysis conducted by the Clearing Agencies.\10\ The
Clearing Agencies would review and adjust both the weights and the
quantitative and qualitative factors as needed, based on recalibration
of the CRRM. According to the Clearing Agencies, this proposed
enhancement is expected to reduce the need and the frequency for them
to manually override a member's Credit Rating.
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\9\ Quantitative and qualitative factors used for each of the
three models differ. The quantitative factors for foreign banks and
foreign trust companies would include size, capital, leverage,
liquidity, profitability, and growth. Qualitative factors would
include market position and sustainability, information reporting
and compliance, management quality, capital management, and
business/product diversity. The added qualitative factors for U.S.
broker-dealers would include market position and sustainability,
management quality, capital management, liquidity management,
geographic diversification, business/product diversity, and access
to alternative sources of funding. The added qualitative factors for
U.S. banks would include the current business environment,
regulatory compliance and litigation risk, management quality,
liquidity management, and parental demands/needs.
\10\ Notices at 82 FR 17485, 17477, 17470.
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The third enhancement would replace the current CRRM's relative
scoring approach (which considers other members' Credit Ratings) with a
statistical approach that would estimate the absolute probability of
default of each member by ranking members based on their individual
probability of default. According to the Clearing Agencies, under the
current relative scoring approach, a member's Credit Rating can be
affected by changes in its peer group, even if the member's financial
condition is unchanged. They believe this issue would be addressed by
the proposed statistical approach because it would eliminate any
potential distortion of the rating from the member's peer group that
can occur under the relative scoring approach, and therefore a member's
Credit Rating would better reflect the absolute measure of the member's
default risk.

B. Proposed Other Changes Related to the CRRM

The Proposed Rule Changes also contain a number of other changes to
the Clearing Agencies' Rules with respect to the CRRM. Generally, these
CRRM-related changes are intended to make the Rules more clear,
consistent, and current for members that rely on them. The proposed
CRRM-related changes would include:
Adding both the CRRM and the Watch List to the definitions
sections of the Clearing Agencies' Rules;
providing more description regarding the Clearing
Agencies' continuing ability to downgrade a member's Credit Rating if
the Clearing Agencies believe the factors used as part of the CRRM may
not identify all risks that a member may present to the Clearing
Agencies, and providing more description that any such downgrade could
result in the member being placed on the Watch List and/or being
subject to enhanced surveillance;
providing more description regarding the Clearing
Agencies' ability to place non-CRRM members on the Watch List and/or
subject them to enhanced surveillance, if necessary under certain
specified conditions, such as news reports and/or regulatory
observations that raise reasonable concerns relating to the member and
material changes to the member's organizational structure;
providing more description regarding, with respect to
members on the Watch List, that the Clearing Agencies will (i) collect
additional deposits to the clearing fund; and (ii) retain deposits in
excess of the required deposits;
providing more description regarding the Clearing
Agencies' ability to continue to monitor and review all members on an
ongoing and periodic basis, and that such monitoring may include
conducting reviews of news and market developments relating to these
members, as well as financial reports and other public information of
these members;
providing more description regarding both members placed
on the Watch List and members subject to enhanced surveillance for
other reasons being subject to more thorough monitoring of their
financial condition and/or operational capability, and being required
to provide more frequent financial disclosures;
providing more description regarding thresholds for any
margin ``add-on charges'' \11\ not applying to Watch List members, but
applying to non-Watch List members; and
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\11\ Add-on charges are margin requirements that are in addition
to the Clearing Agencies' primary value-at-risk margin requirement,
such as an intraday charge to account for market volatility and a
charge for having a concentrated position in a security. See, e.g.,
NSCC Procedure XV, Section 1.(B), supra note 4.
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conforming changes to other sections of the Clearing
Agencies' Rules to use consistent terminology and to provide updated
cross references.

C. Proposed Other Changes Unrelated to the CRRM

The Clearing Agencies also propose changes that would provide more
description regarding the Clearing Agencies' explicit authority to
review additional reporting from members regarding their financial or
operational condition. Such reporting could include information
regarding the businesses and operations of the member and its risk
management practices with respect to the Clearing Agencies' services
utilized by the member for another person (``Indirect Member'').
According to the Clearing Agencies, such a review could result in the
member being placed on the Watch List, and/or becoming subject to
enhanced surveillance. The Clearing Agencies believe such authority
would enable them to better determine whether the member and Indirect
Member has sufficient financial resources and monitor compliance with
the Clearing Agencies' financial requirements on an ongoing basis.

II. Discussion of Commission Findings

Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and rules and regulations thereunder applicable to such
organization.\12\ After carefully considering the Proposed Rule
Changes, the Commission finds that the Proposed Rule Changes are
consistent with the requirements of the Act and the rules

[[Page 24179]]

and regulations thereunder applicable to the Clearing Agencies. In
particular, the Commission believes the proposal is consistent with
Section 17A(b)(3)(F) of the Act,\13\ as well as Rules 17Ad-22(e)(1),
(3), and (18) thereunder.\14\
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\12\ 15 U.S.C. 78s(b)(2)(C).
\13\ 15 U.S.C. 78q-1(b)(3)(F).
\14\ 17 CFR 240.17Ad-22(e)(1), (3), and (18).
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A. Consistency With Section 17A(b)(3)(F) of the Act

Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency be designed to (i) promote the prompt and accurate
clearance and settlement of securities transactions, (ii) assure the
safeguarding of securities and funds which are in the custody and
control of the Clearing Agencies or for which it is responsible, and
(iii) protect investors and the public interest, generally.\15\
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
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First, the Commission believes that (i) the above described CRRM-
related changes that are intended to make the Rules more clear,
consistent, and current for members that rely on them, as well as (ii)
the above described non-CRRM related changes that are intended to
provide more description regarding the Clearing Agencies' explicit
authority to review additional reporting from members regarding their
financial or operational condition, are each consistent with promoting
prompt and accurate clearance and settlement. These changes are
designed to provide specificity, clarity, and additional transparency
to the Rules by improving the descriptions of the Clearing Agencies'
existing practices. Such improved descriptions could help members
better understand the Rules, which could help decrease the likelihood
of errors in the performance of members' responsibilities to the
Clearing Agencies, thereby helping to ensure that the Clearing
Agencies' clearing and settlement systems work more efficiently.
Therefore, the Commission believes that these Proposed Rule Changes
could promote the prompt and accurate clearance and settlement of
securities transactions by the Clearing Agencies, consistent with
Section 17A(b)(3)(F) of the Act.\16\
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\16\ Id.
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Second, the Commission believes that the proposed enhancements to
the CRRM are consistent with safeguarding funds within the Clearing
Agencies' control. As described above, the Clearing Agencies propose to
improve their methodology for calculating CRRM ratings by (i) more
effectively evaluating the credit risk presented by a distinct class of
members (i.e., foreign banks and foreign trust companies); (ii) more
effectively incorporating qualitative data into the Credit Rating; and
(iii) more accurately measuring the absolute probability of default by
rated members. These enhancements, both individually and collectively,
could improve the Clearing Agencies' ability to determine and evaluate
the credit risk presented by many of the Clearing Agencies' members,
which could enable the Clearing Agencies to deploy more effectively
their risk management tools to manage the credit, market, and liquidity
risks presented by such members. By enabling the Clearing Agencies to
more effectively utilize their risk management tools, the proposed
enhancements to the CRRM could help mitigate the risk that the Clearing
Agencies would suffer a loss from a member default. Therefore, the
Commission believes that these Proposed Rule Changes could help
safeguard funds within the Clearing Agencies' control, consistent with
Section 17A(b)(3)(F) of the Act.\17\
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\17\ Id.
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Third, the Commission believes that the proposed enhancements to
the CRRM also could help protect investors and the public interest by
mitigating some of the systemic risk presented by FICC and NSCC as
central counterparties and by DTC as a securities depository. Because a
defaulting member could place stresses on the Clearing Agencies, with
respect to the Clearing Agencies' ability to meet their respective
clearance and settlement obligations (upon which the broader financial
system relies), it is imperative that the Clearing Agencies have a
strong understanding of the credit risk presented by their members. As
described above, the Proposed Rule Changes would add three enhancements
to the CRRM to enable the Clearing Agencies to measure more effectively
the credit risk presented by many members. As such, the Clearing
Agencies could have a more refined view and understanding of credit
risks presented by the CRRM rated members, which could help improve the
Clearing Agencies' ability to calculate margin and deploy risk-
management tools; thus, improving the likelihood that the Clearing
Agencies would continue to meet their clearance and settlement
obligations, despite a member default. Accordingly, the Commission
believes that the proposed changes related to the CRRM enhancement
could help protect investors and the public interest by promoting the
stability of the broader financial system, consistent with Section
17A(b)(3)(F) of the Act.\18\
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\18\ Id.
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B. Consistency With Rules 17Ad-22(e)(1), (e)(3), and (e)(18)

The Commission believes that the changes proposed in the Proposed
Rule Changes are consistent with Rules 17Ad-22(e)(1), (e)(3)(i), and
(e)(18) under the Act.\19\
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\19\ 17 CFR 240.17Ad-22(e)(1); (e)(2); and (e)(3).
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The Commission believes that the changes proposed in the Proposed
Rule Changes are consistent with Rule 17Ad-22(e)(1) under the Act,
which requires, in part, that the Clearing Agencies ``establish,
implement, maintain and enforce written policies and procedures
reasonably designed to . . . [p]rovide for a well-founded, clear,
transparent and enforceable legal basis for each aspect of its
activities.'' \20\ As described above, the Clearing Agencies propose a
number of other changes to their Rules that are designed to update them
and to make them more consistent and provide greater description for
members that rely on them. As such, the Commission believes that these
proposed changes could make the Clearing Agencies' Rules more clear and
transparent for members that rely on them, consistent with Rule 17Ad-
22(e)(1).
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\20\ 17 CFR 240.17Ad-22(e)(1).
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The Commission also believes that the changes proposed in the
Proposed Rule Changes are consistent with Rule 17Ad-22(e)(3)(i) under
the Act, which requires, in part, that the Clearing Agencies
``establish, implement, maintain and enforce written policies and
procedures reasonably designed to . . . [m]aintain a sound risk
management framework for comprehensively managing . . . risks that
arise in or are born by [the Clearing Agencies], which includes . . .
systems designed to identify, measure, monitor and manage the range of
risks that arise in or are borne by [the Clearing Agencies].'' \21\ As
discussed above, the CRRM is a risk measurement tool used by the
Clearing Agencies to help assess the credit risk presented by their
various members. The proposed enhancements to the CRRM could help the
Clearing Agencies better identify and measure such risks, which in turn
could help facilitate the Clearing Agencies' management of credit,
market, and liquidity risk that arises from being a central
counterparty (in the case of NSCC and FICC) and central securities
depository (in the case of DTC). Accordingly, the Commission believes
that the proposed enhancements are

[[Page 24180]]

designed to help effectively manage the Clearing Agencies' risk
exposures, including their credit exposure to participants, arising
from their payment, clearing, and settlement processes, consistent with
Rule 17Ad-22(e)(3)(i).
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\21\ 17 CFR 240.17Ad-22(e)(3)(i).
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Finally, the Commission believes that the proposal is consistent
with Rule 17Ad-22(e)(18) under the Act, which requires, in part, that
the Clearing Agencies ``establish, implement, maintain and enforce
written policies and procedures reasonably designed to . . .
[e]stablish objective, risk-based, and publicly disclosed criteria for
participation, which . . . require participants to have sufficient
financial resources and robust operational capacity to meet obligations
arising from participation in the clearing agency, and monitor
compliance with such participation requirements on an ongoing basis.''
\22\ As described above, the proposal would provide more description
regarding the Clearing Agencies' authority to review additional
reporting from members regarding their financial or operational
condition and the financial information of any Indirect Member. Because
such authority could enable the Clearing Agencies to better determine
whether the member has sufficient financial resources and monitor
compliance with the Clearing Agencies' financial requirements on an
ongoing basis, the Commission believes this requirement is consistent
with Rule 17Ad-22(e)(18).
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\22\ 17 CFR 240.17Ad-22(e)(18).
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III. Conclusion

On the basis of the foregoing, the Commission finds that the
Proposed Rule Changes are consistent with the requirements of the Act,
in particular the requirements of Section 17A of the Act \23\ and the
rules and regulations promulgated thereunder.
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\23\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule changes SR-DTC-2017-002, SR-FICC-2017-006, and SR-
NSCC-2017-002 be and hereby are APPROVED as of the date of this order
or the date of a notice by the Commission authorizing the Clearing
Agencies to implement their advance notice proposals (SR-DTC-2017-801,
SR-FICC-2017-804, and SR-NSCC-2017-801) that are consistent with the
Proposed Rule Changes, whichever is later.\24\
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\24\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10690 Filed 5-24-17; 8:45 am]
BILLING CODE 8011-01-P

24180 Federal Register / Vol. 82, No. 100 / Thursday, May 25, 2017 / Notices

designed to help effectively manage the For the Commission, by the Division of A. Self-Regulatory Organization’s
Clearing Agencies’ risk exposures, Trading and Markets, pursuant to delegated Statement of the Purpose of, and the
including their credit exposure to authority.25 Statutory Basis for, the Proposed Rule
participants, arising from their payment, Eduardo A. Aleman, Change
clearing, and settlement processes, Assistant Secretary.
1. Purpose
consistent with Rule 17Ad–22(e)(3)(i). [FR Doc. 2017–10690 Filed 5–24–17; 8:45 am]
BILLING CODE 8011–01–P The Exchange proposes to list and
Finally, the Commission believes that trade shares (‘‘Shares’’) of the
the proposal is consistent with Rule GraniteShares Gold Trust (‘‘Trust’’),
17Ad–22(e)(18) under the Act, which under NYSE Arca Equities Rule 8.201.4
SECURITIES AND EXCHANGE
requires, in part, that the Clearing Under NYSE Arca Equities Rule 8.201,
COMMISSION
Agencies ‘‘establish, implement, the Exchange may propose to list and/
maintain and enforce written policies [Release No. 34–80730; File No. SR–
or trade pursuant to unlisted trading
and procedures reasonably designed to NYSEArca–2017–55]
privileges (‘‘UTP’’) ‘‘Commodity-Based
. . . [e]stablish objective, risk-based, Trust Shares.5
and publicly disclosed criteria for Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed The Trust will not be registered as an
participation, which . . . require investment company under the
participants to have sufficient financial Rule Change Relating to the Listing
and Trading of the GraniteShares Gold Investment Company Act of 1940, as
resources and robust operational amended,6 and is not required to
Trust Under NYSE Arca Equities Rule
capacity to meet obligations arising from register under such act. The Trust is not
8.201
participation in the clearing agency, and a commodity pool for purposes of the
monitor compliance with such May 19, 2017. Commodity Exchange Act, as amended.7
participation requirements on an Pursuant to Section 19(b)(1) 1 of the The Sponsor of the Trust is
ongoing basis.’’ 22 As described above, Securities Exchange Act of 1934 (the GraniteShares LLC, a Delaware limited
the proposal would provide more ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 liability company. The Bank of New
description regarding the Clearing notice is hereby given that, on May 8, York Mellon is the trustee of the Trust
Agencies’ authority to review additional 2017, NYSE Arca, Inc. (the ‘‘Exchange’’ (the ‘‘Trustee’’) 8 and ICBC Standard
reporting from members regarding their or ‘‘NYSE Arca’’) filed with the Bank PLC is the custodian of the Trust
financial or operational condition and Securities and Exchange Commission (the ‘‘Custodian’’).9
the financial information of any Indirect (the ‘‘Commission’’) the proposed rule
Member. Because such authority could change as described in Items I and II 4 On January 3, 2017, the Trust submitted to the

enable the Clearing Agencies to better below, which Items have been prepared Commission its draft registration statement on Form
S–1 (the ‘‘Registration Statement’’) under the
determine whether the member has by the self-regulatory organization. The Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities
sufficient financial resources and Commission is publishing this notice to Act’’). The Jumpstart Our Business Startups Act,
monitor compliance with the Clearing solicit comments on the proposed rule enacted on April 5, 2012, added Section 6(e) to the
Agencies’ financial requirements on an change from interested persons. Securities Act. Section 6(e) of the Securities Act
provides that an ‘‘emerging growth company’’ may
ongoing basis, the Commission believes
I. Self-Regulatory Organization’s confidentially submit to the Commission a draft
this requirement is consistent with Rule registration statement for confidential, non-public
Statement of the Terms of Substance of
17Ad–22(e)(18). review by the Commission staff prior to public
the Proposed Rule Change filing, provided that the initial confidential
III. Conclusion The Exchange proposes to list and submission and all amendments thereto shall be
publicly filed not later than 21 days before the date
trade shares of the GraniteShares Gold on which the issuer conducts a road show, as such
On the basis of the foregoing, the
Trust under NYSE Arca Equities Rule term is defined in Securities Act Rule 433(h)(4). An
Commission finds that the Proposed
8.201. The proposed change is available emerging growth company is defined in Section
Rule Changes are consistent with the 2(a)(19) of the Securities Act as an issuer with less
on the Exchange’s Web site at
requirements of the Act, in particular than $1,000,000,000 total annual gross revenues
www.nyse.com, at the principal office of during its most recently completed fiscal year. The
the requirements of Section 17A of the
the Exchange, and at the Commission’s Trust meets the definition of an emerging growth
Act 23 and the rules and regulations
Public Reference Room. company and consequently has submitted its Form
promulgated thereunder. S–1 Registration Statement on a confidential basis
It is therefore ordered, pursuant to II. Self-Regulatory Organization’s with the Commission.
Section 19(b)(2) of the Act, that Statement of the Purpose of, and 5 Commodity-Based Trust Shares are securities

Statutory Basis for, the Proposed Rule issued by a trust that represents investors’ discrete
proposed rule changes SR–DTC–2017– identifiable and undivided beneficial ownership
002, SR–FICC–2017–006, and SR– Change interest in the commodities deposited into the
NSCC–2017–002 be and hereby are In its filing with the Commission, the Trust.
6 15 U.S.C. 80a–1.
APPROVED as of the date of this order self-regulatory organization included 7 17 U.S.C. 1.
or the date of a notice by the statements concerning the purpose of, 8 The Trustee is responsible for the day-to-day
Commission authorizing the Clearing and basis for, the proposed rule change administration of the Trust. The responsibilities of
Agencies to implement their advance and discussed any comments it received the Trustee include (1) processing orders for the
notice proposals (SR–DTC–2017–801, on the proposed rule change. The text creation and redemption of Baskets; (2)
of those statements may be examined at coordinating with the Custodian the receipt and
SR–FICC–2017–804, and SR–NSCC– delivery of gold transferred to, or by, the Trust in
2017–801) that are consistent with the the places specified in Item IV below. connection with each issuance and redemption of
Proposed Rule Changes, whichever is The Exchange has prepared summaries, Baskets; (3) calculating the net asset value of the
later.24 set forth in sections A, B, and C below, Trust on each business day; and (4) selling the
of the most significant parts of such Trust’s gold as needed to cover the Trust’s
expenses. The Trust does not have a Board of
22 17 CFR 240.17Ad–22(e)(18). statements. Directors or persons acting in a similar capacity.
23 15 U.S.C. 78q–1. 9 The Custodian is responsible for safekeeping the
25 17 CFR 200.30–3(a)(12).
24 In approving the proposed rule change, the gold owned by the Trust. The Custodian is
1 15 U.S.C. 78s(b)(1).
Commission considered the proposals’ impact on appointed by the Trustee and is responsible to the
2 15 U.S.C. 78a.
efficiency, competition, and capital formation. 15 Trustee only. The Custodian will facilitate the
U.S.C. 78c(f). 3 17 CFR 240.19b–4. transfer of gold in and out of the Trust (i) through

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Document Created: 2018-11-08 08:52:44
Document Modified: 2018-11-08 08:52:44

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 24177