What Regulatory Overhaul Means for Some Commodity ETFs

ETF providers and investors are anticipating overhaul within the financial industry, and the changes could greatly impact how commodity ETFs operate in particular.

The financial industry has been abuzz about regulation overhaul for some time now, with the regulatory issues that many ETF providers view as slowing innovation are threatening to directly impact certain fund providers.

President Barack Obama’s regulations are expected to be plentiful and major. The issue for the ETF providers themselves involves something that many in the industry say costs extra money and creates a need to be one step ahead of the supply and demand equation for investors.

ETFs that deal with futures contracts, such as United States Natural Gas (UNG) and United States Oil (USO), are considered commodities pools have to apply to the SEC for new shares, since they have limits on the number they can issue to meet demand.

This results in extra costs from the paper chase, as well as the need to stay ahead of slippery supply and demand equations for their investors, says Murray Coleman for Index Universe. Managers hope that regulations might streamline the paper chase so that they don’t have to constantly try to figure out the demand/supply equation.

United States Commodities Funds will be watching every detail, as the sort of portfolios USCF put together using futures contracts and derivatives could be more accurately defined as ETPs. Those who run portfolios based on futures contracts and volatile commodities have been complaining about the hurdles for years.

Industry experts agree that those who are supportive of regulators feel whatever rules or regulations the impose, they should be designed to help investors.

Comments

[optionsgirl:]

What is an ETP?

Jul 01 09:50 AM

[one eye:]

got me.

Jul 02 08:18 AM

[fran:]

exchange traded portfolio? within paragraph context?


On Jul 01 09:50 AM optionsgirl wrote:

> What is an ETP?

Jul 02 09:55 AM

[Indexor:]

ETP = Exchange Traded Products

Jul 02 11:42 AM

[stocknerd:]

Confusing with no information. WTF?

Jul 02 12:21 PM

[RECON605:]

WHAT IS BEING PROPOSED IS FAIR IMO.

There is no real regulation on anything involving in commodities such as DBA, which happens to be a LIMITED PARTNERSHIP setup and at the end of the year the general partners pass along profits and losses for investors to file on the tax returns what is reported on Schedcule K-1 even if you sold out before the end of the year!

As far as the cost for a paper chase on number of shares to be issued or reported, it should cost them nothing, yes that's right nothing. It doesn't take a rocket scientist to file a report to increase the shares when in the first place they should figure out what they are going to issue; just like stocks.

Jul 03 06:18 PM

[Tom Lydon:]

An ETP is an Exchange Traded Product. These include such things as Exchange Traded Commodities (ETCs), which are securities rather than funds, Exhcange Traded Notes (ETNs) and Exchange Traded Funds (ETFs). Hope this helps.
-Tom

Jul 15 12:33 PM