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Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Accounting

2.1.    Basis of Accounting 

 

The Sponsor has determined that the Trust falls within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies, and has concluded that for reporting purposes, the Trust is classified as an Investment Company. The Trust is not registered as an investment company under the Investment Company Act of 1940 and is not required to register under such act.

 
Valuation of Palladium

2.2.    Valuation of Palladium

 

The Trust follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 

 

Effective May 23, 2024, the Trustee, at the direction of the Sponsor, entered into an Allocated Account Agreement and Unallocated Account Agreement with ICBC Standard Bank Plc ("ICBC"), providing for the custody of the Trust's palladium. Effective August 8, 2024, JPMorgan Chase Bank N.A. no longer serves as a custodian of the Trust’s palladium. At September 30, 2024, all of the Trust's palladium was held at ICBC.

 

The Trust’s palladium is recorded at fair value. The cost of palladium is determined according to the average cost method and the fair value is based on the afternoon session of the twice daily fix of an ounce of palladium administered by the London Metal Exchange (“LME”) (the “LBMA Palladium Price PM”). Realized gains and losses on transfers of palladium, or palladium distributed for the redemption of Shares, are calculated on a trade date basis as the difference between the fair value and average cost of palladium transferred.

 

The LME is responsible for the administration of the electronic palladium price fixing system (“LMEbullion”) that replicates electronically the manual London palladium fix processes previously employed by the London Platinum and Palladium Fixing Company Ltd (“LPPFCL”), as well as providing electronic market clearing processes for palladium bullion transactions at the fixed prices established by the LME pricing mechanism. LMEbullion, like the previous London palladium fix processes, establishes and publishes fixed prices for troy ounces of palladium twice each London trading day during fixing sessions beginning at 9:45 a.m. London time (the” LBMA Palladium Price AM”) and 2:00 p.m. London time (the “LBMA Palladium Price PM”).

 

Once the value of  palladium has been determined, the net asset value (the “NAV”) is computed by the Trustee by deducting all accrued fees, expenses and other liabilities of the Trust, including the remuneration due to the Sponsor (the “Sponsor’s Fee”), from the fair value of the palladium and all other assets held by the Trust.

 

The Trust recognizes changes in fair value of the investment in palladium as changes in unrealized gains or losses on investment in palladium through the Statement of Operations.

 

The per Share amount of palladium exchanged for a purchase or redemption is calculated daily by the Trustee using the LBMA Palladium Price PM to calculate the palladium amount in respect of any liabilities for which covering palladium sales have not yet been made, and represents the per Share amount of palladium held by the Trust, after giving effect to its liabilities, to cover expenses and liabilities and any losses that may have occurred.

 

Fair Value Hierarchy

 

ASC 820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:

 

– Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.

 

– Level 2. Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments and similar data.

 

– Level 3. Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Trust’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

The Trust’s investment in palladium is classified as a level 1 asset, as its value is calculated using unadjusted quoted prices from primary market sources.

 

The categorization of the Trust’s assets is as shown below:

 

(Amounts in 000’s of US$) 

September 30, 2024 

  

December 31, 2023 

 
Level 1          
Investment in palladium  $270,717   $219,421 

 

There were no transfers between levels during the nine months ended September 30, 2024 or the year ended December 31, 2023.

 
Palladium Receivable and Payable

2.3.    Palladium Receivable and Payable

 

Palladium receivable or payable represents the quantity of palladium covered by contractually binding orders for the creation or redemption of Shares respectively, where the palladium has not yet been transferred to or from the Trust’s account. Generally, ownership of palladium is transferred within one business day of the trade date. At September 30, 2024, the Trust had $2,283,354 of palladium receivable for the creation of Shares and no palladium payable for the redemption of Shares. At December 31, 2023, the Trust had no palladium receivable or payable for the creation or redemption of Shares.

 
Creations and Redemptions of Shares

2.4.    Creations and Redemptions of Shares

 

The Trust expects to create and redeem Shares from time to time, but only in one or more Baskets (effective June 18, 2024, a Basket equals a block of 12,500 Shares. Prior to June 18, 2024, a Basket equaled a block of 25,000 Shares). The Trust issues Shares in Baskets to Authorized Participants on an ongoing basis. Individual investors cannot purchase or redeem Shares in direct transactions with the Trust. An Authorized Participant is a person who (1) is a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions; (2) is a participant in The Depository Trust Company; (3) has entered into an Authorized Participant Agreement with the Trustee and the Sponsor; and (4) has established an Authorized Participant Unallocated Account with the Trust’s Custodian or other palladium bullion clearing bank. An Authorized Participant Agreement is an agreement entered into by each Authorized Participant, the Sponsor and the Trustee which provides the procedures for the creation and redemption of Baskets and for the delivery of the palladium required for such creations and redemptions. An Authorized Participant Unallocated Account is an unallocated palladium account established with the Custodian or a palladium bullion clearing bank by an Authorized Participant.

 

The creation and redemption of Baskets is only made in exchange for the delivery to the Trust or the distribution by the Trust of the amount of palladium represented by the Baskets being created or redeemed, the amount of which is based on the combined NAV of the number of Shares included in the Baskets being created or redeemed determined on the day the order to create or redeem Baskets is properly received.

 

Authorized Participants may, on any business day, place an order with the Trustee to create or redeem one or more Baskets. Effective May 28, 2024, the standard settlement period for Shares is one business day. Prior to May 28, 2024, the settlement period for Shares was two business days. In the event of a trade date at period end, where a settlement is pending, a respective account receivable and/or payable will be recorded. When palladium is exchanged in settlement of a redemption, it is considered a sale of palladium for financial statement purposes.

 

The amount of palladium represented by the Baskets created or redeemed can only be settled to the nearest 1/1000th of an ounce. As a result, the value attributed to the creation or redemption of Shares may differ from the value of palladium to be delivered or distributed by the Trust. In order to ensure that the correct amount of palladium is available at all times to back the Shares, the Sponsor accepts an adjustment to its Sponsor Fee in the event of any shortfall or excess on each transaction. For each transaction, this amount is not more than 1/1000th of an ounce of palladium.

 

As the Shares of the Trust are subject to redemption at the option of Authorized Participants, the Trust has classified the outstanding Shares as Net Assets. Changes in the number of Shares outstanding are presented in the Statement of Changes in Net Assets.

 
Income Taxes

2.5.    Income Taxes

 

The Trust is classified as a “grantor trust” for U.S. federal income tax purposes. As a result, the Trust itself will not be subject to U.S. federal income tax. Instead, the Trust’s income and expenses will “flow through” to the Shareholders, and the Trustee will report the Trust’s proceeds, income, deductions, gains, and losses to the Internal Revenue Service on that basis.

 

The Sponsor has evaluated whether or not there are uncertain tax positions that require financial statement recognition and has determined that no reserves for uncertain tax positions are required as of September 30, 2024 or December 31, 2023.

 
Investment in Palladium

2.6.    Investment in Palladium

 

Changes in ounces of palladium and their respective values for the three and nine months ended September 30, 2024 and 2023 are set out below:

 

   Three Months Ended
September 30, 2024		   Three Months Ended
September 30, 2023		 
(Amounts in 000’s of US$, except for ounces data)          
Ounces of palladium          
Opening balance   292,303.9    184,510.3 
Creations   19,468.1    — 
Redemptions   (40,062.1)   (4,608.7)
Transfers of palladium to pay expenses   (449.9)   (276.2)
Closing balance   271,260.0    179,625.4 
           
Investment in palladium          
Opening balance  $284,119   $231,376 
Creations   18,116    — 
Redemptions   (41,427)   (5,931)
Realized (loss) on palladium distributed for the redemption of Shares   (16,344)   (2,863)
Transfers of palladium to pay expenses   (423)   (356)
Realized (loss) / gain on palladium transferred to pay expenses   (229)   (171)
Change in unrealized gain on investment in palladium   26,905    9,482 
Closing balance  $270,717   $231,537 

 

 

   Nine Months
Ended
September 30, 2024		   Nine Months
Ended
September 30, 2023		 
(Amounts in 000’s of US$, except for ounces data)          
Ounces of palladium          
Opening balance   193,152.2    166,556.4 
Creations   159,426.9    39,271.0 
Redemptions   (80,197.9)   (25,394.5)
Transfers of palladium to pay expenses   (1,121.2)   (807.5)
Closing balance   271,260.0    179,625.4 
           
Investment in palladium          
Opening balance  $219,421   $295,638 
Creations   154,581    59,238 
Redemptions   (80,896)   (38,409)
Realized (loss) on palladium distributed for the redemption of Shares   (39,647)   (10,747)
Transfers of palladium to pay expenses   (1,099)   (1,191)
Realized (loss) / gain on palladium transferred to pay expenses   (670)   (369)
Change in unrealized gain / (loss) on investment in palladium   19,027    (72,623)
Closing balance  $270,717   $231,537 

 
Expenses / Realized Gains / Losses

2.7.    Expenses / Realized Gains / Losses


The primary expense of the Trust is the Sponsor’s Fee, which is paid by the Trust through in-kind transfers of palladium to the Sponsor.
 

The Trust will transfer palladium to the Sponsor to pay the Sponsor’s Fee that accrues daily at an annualized rate equal to 0.60% of the adjusted daily net asset value (“ANAV”) of the Trust, paid monthly in arrears. 

 

The Sponsor has agreed to assume administrative and marketing expenses incurred by the Trust, including the Trustee’s monthly fee and out of pocket expenses, the Custodian’s fee and the reimbursement of the Custodian’s expenses, exchange listing fees, United States Securities and Exchange Commission (the “SEC”) registration fees, printing and mailing costs, audit fees and up to $100,000 per annum in legal expenses.

 

For the three months ended September, 30, 2024 and 2023, the Sponsor’s Fee was $416,100 and $356,407, respectively. For the nine months ended September 30, 2024 and 2023, the Sponsor's Fee was $1,127,429 and $1,157,561, respectively.

 

At September 30, 2024 and at December 31, 2023, the fees payable to the Sponsor were $139,946 and $111,606, respectively.

 

With respect to expenses not otherwise assumed by the Sponsor, the Trustee will, at the direction of the Sponsor or in its own discretion, sell the Trust’s palladium as necessary to pay these expenses. When selling palladium to pay expenses, the Trustee will endeavor to sell the smallest amounts of palladium needed to pay these expenses in order to minimize the Trust’s holdings of assets other than palladium. Other than the Sponsor’s Fee, the Trust had no expenses during the three and nine months ended September 30, 2024 and 2023.

 

Unless otherwise directed by the Sponsor, when selling palladium the Trustee will endeavor to sell at the price established by the LBMA Palladium Price PM. The Trustee will place orders with dealers (which may include the Custodian) through which the Trustee expects to receive the most favorable price and execution of orders. The Custodian may be the purchaser of such palladium only if the sale transaction is made at the next LBMA Palladium Price PM or such other publicly available price that the Sponsor deems fair, in each case as set following the sale order. A gain or loss is recognized based on the difference between the selling price and the average cost of the palladium sold. Neither the Trustee nor the Sponsor is liable for depreciation or loss incurred by reason of any sale.

 

Realized gains and losses result from the transfer of palladium for Share redemptions and / or to pay expenses and are recognized on a trade date basis as the difference between the fair value and average cost of palladium transferred. 

 
Subsequent Events

2.8.    Subsequent Events

 

In accordance with the provisions set forth in FASB ASC 855-10, Subsequent Events, the Trust’s management has evaluated the possibility of subsequent events impacting the Trust’s financial statements through the filing date. During this period, the following material subsequent events were identified. 

 

Effective November 12, 2024, immediately following the filing of this report, Brian Kordeck resigned as Treasurer and Chief Financial Officer of the Sponsor. Mr. Kordeck had served as Principal Financial Officer of the Registrant. Effective November 12, 2024, Sharon Ferrari was appointed Treasurer and Chief Financial Officer of the Sponsor. Ms. Ferrari will serve as Principal Financial Officer of the Registrant.