ETF Securities has launched a range of precious metals exchange-traded commodities backed by physical metal on Milan’s Borsa Italiana, covering platinum, palladium, silver and gold as well
ETF Securities has launched a range of precious metals exchange-traded commodities backed by physical metal on Milan’s Borsa Italiana, covering platinum, palladium, silver and gold as well as a basket of the four precious metals.
The listing of the ETCs on Borsa Italiana follows the launch of the ETF Securities precious metals platform backed by physical metal on the London Stock Exchange, Deutsche Börse, Euronext Paris and Euronext Amsterdam. The basket of metals comprises 42 per cent gold, 26 per cent silver, 20 per cent platinum and 12 per cent palladium.
According to the firm, the launch of its ETC range in Italy follows strong interest demonstrated by investors have shown in ETFs and the Milan exchange’s new ETC segment on the ETFplus market.
The ETCs are backed by physical metal bars held by or on behalf of the custodian, HSBC Bank USA, the leading custodian for ETCs worldwide. All metal must conform to the rules for good delivery of the London Bullion Market Association and London Platinum Palladium Market, and may not be lent out.
Assets in ETF Securities’ ETCs now exceeds USD950m, with more than 25 per cent of the total represented by precious metals. ETF Securities listed three precious metal ETCs in Italy in April based on the DJ-AIG commodity indices tracking gold, silver and a gold-silver basket.
ETCs are designed to offer investors a simple, cost-efficient and secure way to access the precious metals market by enabling them to gain exposure to commodity prices without trading futures or taking physical delivery. They provide investors with a return equivalent to movements in their spot price less a small management fee that accrues daily.
Investors can buy and sell ETCs through regulated brokers or approved market-makers. They can be traded with all the same order types available to equities, including market, limit and stop orders, and they can also be shorted through stock borrowing or contracts for difference.
In the same way as exchange-traded funds, ETCs are open-ended securities that can be created or redeemed on demand provided that the relevant amount of metal is delivered to the custodian by authorised participants or market-makers, which currently include Flow Traders, Nyenburgh, Susquehanna, Morgan Stanley, Barclays Capital, UBS, ABN Amro, HVB, HSBC, Merrill Lynch, Citigroup, Winterflood and JP Morgan.
‘Our decision to launch this range of precious metals is twofold,’ says ETF Securities chairman Graham Tuckwell. ‘It comes in the wake of successful and increasing global demand for precious metals through ETCs which have seen steady growth over the last four years to more than USD16bn. In the past eight months, 25 per cent of demand for our range of 36 ETCs has some from demand for precious metals.
‘Secondly, we want to offer investors exposure to a broad range of precious metals that have historically been extremely difficult to access. Before our listing of precious metals ETCs on the London Stock Exchange, Deutsche Börse, Euronext Paris and Euronext Amsterdam in April, exposure to metals such as platinum and palladium was only available through derivatives or a limited number of equities.
‘Unlike many other commodities, precious metals are durable, homogenous and easily stored, enabling ETCs to be backed by allocated physical bars that have transparent pricing and carry no credit risk. As a result, the new physical ETCs save investors from many of the difficulties associated with purchasing precious metals such as access to physical bars and then having to store and insure them.
‘They also provide investors with an investment vehicle that tracks the price of precious metals, not a portfolio of equities. Being uncorrelated to equities, they can provide investors with an additional tool for portfolio diversification.’
Adds Pietro Poletto, head of the ETFplus market at Borsa Italiana: ‘This partnership with ETF Securities has enriched our market with a new important asset class for both retail and institutional investors. The physically-backed gold, silver, platinum and palladium ETCs, together with the other 32 securities in the market, offer a wide and diversified range of trading opportunities in the commodities sector.
‘This confirms that our ETCs platform is increasingly attractive for investors who can access the commodities market in a simple and transparent way and with a high potential for liquidity.’