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CFTC publishes proposals for commodity ETFs

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The Commodity Futures Trading Commission has released proposals for the regulation of commodities exchange-traded funds.

The CFTC has cited US Natural Gas and US Oil as examples for the new “Proposed Position Limit Rule”.

According to a briefing by Fund.com, the proposal covers four energy commodities: Henry Hub natural gas, light, sweet crude oil prices, New York Harbor No. 2 heating oil and New York Harbor gasoline blendstock.

The regulation will affect the New York Mercantile Exchange as well as the Intercontinenal Exchange.
 
The proposal offers up a formula that can be used to calculate the number of futures contracts any single fund can hold.
 
Recently, the CFTC has been keeping track of certain ETFs and their impact on the price of the underlying commodities. UNG and USO give investors exposure to the prices of natural gas and oil, respectively, by following near-month futures contracts. The CFTC is now calling for together rules on energy trading and more concise definitions of traders who are exempt.
 
United States Commodity Funds, the provider behind the funds, has vigorously defended its funds and refuted claims that they were responsible for wild energy price swings.
 
In response to the troubles associated with position limits, ETF managers have begun selling of future positions and creating shares through the use of swaps.

Even so, Fund.com says ETFs like the United States 12-Month Natural Gas will continue operations as normal, since it does not rely on near-month futures contracts.

Fund.com through its AdvisorShares Investments subsidiary is creating actively managed ETFs, such as the Dent Tactical ETF, to take advantage of the rapidly growing ETF business.

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