Exchange-traded commodities pioneer ETF Securities is set to make 10 of the most popular ETCs available for multi-currency trading when sterling-denominated products join US dollar version
Exchange-traded commodities pioneer ETF Securities is set to make 10 of the most popular ETCs available for multi-currency trading when sterling-denominated products join US dollar versions on the London Stock Exchange for the first time at the end of October.
ETF Securities says investors’ desire for increased accessibility has led the exchange to enhance its ETC segment by offering the multi-currency platform. While international commodity markets trade in US dollars, the launch of multi-currency trading will enable investors to trade ETCs in ordinary sterling brokerage accounts without the need to exchange currency.
The 10 ETCs to be made available for trading in sterling will be the ETFS Agriculture GBP DJ-AIGCI, ETFS All Commodities GBP DJ-AIGCI, ETFS Grains GBP DJ-AIGCI, ETFS Natural Gas GBPm, ETFS Gold GBP, ETFS Physical Gold GBP, ETFS Physical Silver GBP, ETFS Physical PM Basket GBP, ETFS Brent 1mth GBP, and ETFS WTI 2mth GBP
All agriculture ETCs have proved popular in 2007 due to limited options for investment in this market. Agriculture ETCs have already gained USD605m in assets over the past 13 months and have traded more than USD1.3bn on five ETC platforms in Europe.
Physical precious metal ETCs have gained USD450m in assets in just six months. ETFS Physical Gold has been the fastest growing gold exchange-traded product over the past three months, having accumulated USD313m of new assets, an increase of 800 per cent. In total investors have traded more than USD1bn in the eight precious metal ETCs launched over the past 12 months.
More than 50 ETCs are now traded in US dollars, sterling and euros on five leading European stock exchanges, the London Stock Exchange, Deutsche Börse, Euronext Paris, Euronext Amsterdam and Borsa Italiana.
Each exchange has created its own ETC segment with 15 registered market-makers or authorised participants signed up to trade the products, which trade and settle like stocks and have annual fees ranging from 0.39 to 0.59 per cent.
‘ETCs have now been available in Europe since December 2003 and their simplicity and structure have now been embraced by the market,’ says Graham Tuckwell, chairman of ETF Securities. ‘Many investors have approached us showing an appetite for ETCs to be priced in sterling. Increased investor demand and knowledge has resulted in investors wanting access to more choice and alternative trading and investment strategies.
‘Previously commodity markets were hard to access, but now ETF Securities has delivered multicurrency ETCs across five exchanges, providing investors access to both physical precious metals and established commodity indices. Most recently, ETCs that track the Dow Jones-AIG Commodity 3 Month Forward Indices were listed on the LSE earlier this month.
‘Overall there has been a huge surge in global demand for ETCs and we recently passed the landmark of US USD1.8bn invested in our existing offering of over fifty ETCs. With listings on five of Europe’s major exchanges ETF Securities has successfully delivered simple, cost-efficient and accessible products for all investors.’
David Shrimpton, head of product management and development at the LSE, says: ‘The launch of this multi-currency trading service means that investors will be able to trade exchange-traded commodities in sterling for the first time as well as in US dollars.
‘This will particularly benefit UK investors by allowing them to trade in their home currency, removing the requirement to operate a foreign exchange account. I am certain that this latest innovation will contribute to the growth of our ETC segment, which performed strongly during its first year, recording nearly GBP4.5bn worth of trading’.
The Dow Jones-AIG Commodity Index and Dow Jones-AIG Commodity 3 Month Forward Indexes are designed to be liquid and diversified benchmarks for the commodity futures market, and are composed of futures contracts on 19 physical commodities traded on US exchanges, with the exception of aluminium, nickel and zinc, which trade on the London Metal Exchange.
In addition, there are nine sub-indices, representing the major commodity sectors within the index: energy (including petroleum and natural gas), petroleum (including crude oil, heating oil and unleaded gasoline), precious metals, industrial metals, grains, livestock, softs, agriculture and exenergy.
ETF Securities pioneered the development of ETCs in 2003. It created the world’s first entire ETC platform which was listed on the London Stock Exchange in September 2006. Since then it has listed its broad range of ETCs on Europe’s major exchanges (Frankfurt, Paris, Amsterdam and Italy), with each exchange creating a separate ETC segment.