8-K: Abrdn Precious Metals Basket ETF Trust Changes Custodian, Updates Benchmark Pricing

The abrdn Precious Metals Basket ETF Trust has transitioned to a new custodian, ICBC Standard Bank Plc, and updated its benchmark pricing methodology, effective June 18, 2024.

Summary

• The abrdn Precious Metals Basket ETF Trust has entered into new custody agreements with ICBC Standard Bank Plc, replacing JPMorgan Chase Bank N.A. as its custodian.
• The new agreements include both Allocated and Unallocated Account Agreements for the Trust's bullion.
• The Trust has also amended its Depositary Trust Agreement to update the definition of Benchmark Price, incorporating LBMA Price AM and LBMA Price PM for gold, platinum, and palladium, and LBMA Silver Price for silver.
• These changes are effective as of June 18, 2024.
• The standard settlement cycle for the Trust's creation and redemption processes has changed from T+2 to T+1, effective May 28, 2024, in accordance with SEC rule amendments.
• The size of a creation/redemption basket will be reduced from 50,000 shares to 25,000 shares, also effective June 18, 2024.

Sentiment

Score: 7

Explanation: The document outlines operational changes that are generally positive and expected, with no indication of significant negative impacts. The transition to a new custodian and updated pricing mechanisms are standard practices in the ETF industry.

Positives

• The transition to a new custodian was completed without any cost or expense to the Trust or its shareholders.
• The updated benchmark pricing methodology reflects current market practices.
• The move to T+1 settlement aligns with industry standards and should improve efficiency.
• The reduction in basket size may provide more flexibility for authorized participants.

Risks

• The transition to a new custodian could introduce operational risks, although the document states no costs or expenses were incurred.
• Changes in benchmark pricing could potentially impact the tracking of the ETF's performance against its underlying assets.
• The new custodian and sub-custodians are subject to the rules and regulations of the Relevant Association, LPMCL, the Financial Conduct Authority, the Prudential Regulation Authority, the Governor and Company of the Bank of England, any Sanctioning Body and such other regulatory authority or other body (in the United States, the United Kingdom or Switzerland) applicable to the Parties and/or to the activities contemplated by this Agreement or the activities of a Sub-Custodian.

Future Outlook

The document does not contain specific forward-looking statements, but the changes are intended to improve the operational efficiency and accuracy of the ETF.

Management Comments

• The Sponsor directed the Trustee to enter into the new custody agreements and amend the Depositary Trust Agreement.
• The Sponsor approved and directed the changes on behalf of the Trust.

Industry Context

The move to T+1 settlement is an industry-wide change driven by SEC regulations, and the change of custodian is not uncommon for ETFs seeking to optimize their operations. The updated benchmark pricing reflects a move towards more transparent and widely used pricing sources.

Comparison to Industry Standards

• The move to T+1 settlement aligns with the broader securities industry's shift to faster settlement cycles, as mandated by the SEC.
• The use of LBMA prices as benchmarks is a common practice for precious metals ETFs, ensuring transparency and reliability.
• Other precious metals ETFs, such as those offered by iShares and Sprott, also use LBMA prices and have similar custody arrangements with reputable financial institutions.
• The reduction in basket size is a strategic move that can be seen in other ETFs to improve liquidity and accessibility for authorized participants.

Corporate Governance

Stakeholder Impact

• Shareholders will benefit from the updated benchmark pricing and the move to T+1 settlement.
• Authorized participants will need to adjust to the reduced basket size.
• The transition to a new custodian is not expected to have a negative impact on stakeholders.

Next Steps

• The Trust will operate under the new custody agreements with ICBC Standard Bank Plc.
• The updated benchmark pricing will be used for valuation purposes.
• The T+1 settlement cycle will be implemented for all creation and redemption orders placed on or after May 28, 2024.
• The reduced basket size will be in effect for all creation and redemption orders on or after June 18, 2024.

Key Dates

Keywords

precious metals, ETF, custodian, benchmark price, settlement cycle, bullion, LBMA, ICBC Standard Bank, JPMorgan Chase, GLTR