ETF Securities, the pioneer of exchange-traded commodities, says it has experienced strong demand for its physically-backed precious metal exchange-traded commodity platforms on European e
ETF Securities, the pioneer of exchange-traded commodities, says it has experienced strong demand for its physically-backed precious metal exchange-traded commodity platforms on European exchanges, with assets under management exceeding USD60m after the first month’s trading.
ETCs are simple and transparent securities that enable investors to gain exposure to commodities via ordinary brokerage accounts without trading futures or taking physical delivery.
The new ETCs aim to offer investors a simple, cost-efficient and secure way to access the precious metals market. They provide investors with a return equivalent to movements in their spot price less a small management fee that accrues daily.
Last year ETF Securities launched 31 ETCs on five major European stock exchanges. Including all 36 ETCs now available to investors, precious metals have accounted for USD192 million in new assets over the past three months or 50 per cents of all net ETC investment inflow.
Since launching the world’s first physical ETC precious metals platform on the London Stock Exchange, allowing investors to trade all four major precious metals (platinum, palladium, silver and gold) individually or as a basket, the company says it has enjoyed a flood of demand. Subsequent listings on Deutsche Börse, Euronext Amsterdam, and Euronext Paris have further swelled investor interest.
Each of the five new ETCs is backed by physical metal bars held by or on behalf of the custodian HSBC Bank USA, the world’s leading custodian in the sector. 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.
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, IMC, Nyenburgh, Susquehanna, Morgan Stanley, Barclays Capital, UBS, ABN Amro, HVB, HSBC, Merrill Lynch, Citigroup, Winterflood and JP Morgan
Investors can buy and sell the ETCs through regulated brokers or approved market-makers. ETCs can be traded with all the same order types available to equities, including market, limit and stop orders. They can also be shorted through stock borrowing or contracts for difference.
‘We are very pleased with early investor take-up,’ says ETF Securities chairman Graham Tuckwell. ‘Initial trading figures have backed our assertion of the huge European demand for precious metals.
‘We are delighted to provide an investment vehicle by which investors can get access to a range of precious metals, which have historically been extremely difficult to access. In the past precious metals such as platinum and palladium have only been available through derivatives or a limited number of equities.
‘Unlike many other commodities, precious metals are durable, homogenous and easily stored, enabling the ETCs to be backed by allocated physical bars which have transparent pricing and carry no credit risk. The new physical ETCs save investors from many of the difficulties associated with purchasing precious metals such as access to physical bars and having to store and insure them.
‘ETCs provide investors with an investment vehicle that tracks the price of precious metals, not a portfolio of equities. Uncorrelated to equities, they can provide investors with an additional tool for portfolio diversification.’
