Gold and silver exchange traded funds have made big progress in recent months. But now ETF Securities has launched 19 Exchange Traded Commodities and 10 index securities on the London Stock Exchange. Investing in commodities has never been easier as ETFs and ETCs can be traded from any e-broker account.
This is largest-ever simultaneous listing on the LSE and will enable ordinary investors, for the first time, to trade an expansive range of commodities through ordinary brokerage accounts just like any equity. It could mark a new phase in the commodities bull market with the public gaining broad access to commodity trading.
The new securities will also be the first listed products to track a series of sub-indices representing individual commodities, along with commodity groups, that have recently been added to the Dow Jones-AIG Commodity Index family.
Skeptics will note that the launch of both the gold and silver exchange traded funds were followed by an immediate market dip, as the real gains came in the run up to the launch and not the actual event itself. But to be fair both gold and silver did rally powerfully later on, and their ETFs now hold more physical metal than some central banks.
Similar to Exchange Traded Funds, ETCs are liquid, accessible and simple. ETCs are created and redeemed on a continuous basis by market makers, matching the liquidity of the underlying markets. ETCs are open-ended securities which can be bought and sold intraday by investors on a regulated exchange in the same way as any equity.
They provide accurate and transparent commodity exposure to recognised benchmarks in a single trade. In addition, ETCs require no trading or management of futures contracts as ETCs are simply priced off new commodity indices published by Dow Jones Indexes.
Investors can buy and sell the new 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 CFDs.
Secure commodity trading
Graham Tuckwell, Chairman of ETF Securities, said: 'We designed ETCs to be simple and secure, open-ended securities. They have lowered many of the barriers that previously prevented some investors from investing in commodities including access, trading and operational risks, custody, and transaction costs.
'ETCs also provide a pure way of tracking a commodity rather than trying to replicate exposure by trading shares of commodity companies - many of which do not correlate to the underlying commodity, if available at all.
'ETCs do not involve any of the difficulties with buying and then managing a futures position - such as worrying about margin calls, contracts expiring and rolling positions - or in buying and storing physical commodities.'
The 19 separate classes of commodity securities listed tomorrow are: aluminium, coffee, copper, corn, cotton, crude oil, gasoline, gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybean oil, soybeans, sugar, wheat and zinc.
The 10 baskets of commodities to be listed are: All Commodities DJ-AIGCI; Agriculture DJ-AIGCI; Energy DJ-AIGCI; Ex-Energy DJ-AIGCI; Grains DJ-AIGCI; Industrial Metals DJ-AIGCI; Livestock DJ-AIGCI; Petroleum DJ-AIGCI; Precious Metals DJ-AIGCI; amd Softs DJ-AIGCI.