The Waiting Game: Commodity ETPs In Limbo

August 05, 2010

Commodity traders aren't used to waiting, but wait they must if they opt for futures alternatives.


Currently, there's a backup of 78 futures-, forwards- or metals-tracking exchange-traded products awaiting clearance from the U.S. Securities and Exchange Commission.

This has got to be very disappointing for traders eyeing wheat. Drought conditions in Russia have got the domestic wheat market screaming to heights not seen for two years (more about this later) as the first ETF that would track that commodity specifically languishes before the SEC.

This security is part of a 20-issue flotilla of commodity products issued by ETF Securities USA LLC. The firm is a subsidiary of the U.K.'s largest sponsor of exchange-traded commodity products.

ETFS USA, in fact, has the largest share of commodity trackers stacked in the SEC's in-box, according to's ETF Watch. The company is seeking registration for long, short and leveraged products including:




All Commodities


Composite Agriculture


Composite Energy


Composite Industrial Metals


Precious Metals Basket Trust


Asian Gold



Short Wheat


Short Copper

Natural Gas

Short Natural Gas

Ex-U.S. Oil

Short Ex-U.S. Oil


Short Gold

Leveraged Wheat


Leveraged Copper


Leveraged Natural Gas


Leveraged Ex-U.S. Oil


Leveraged Gold



Unlike many extant commodity trusts, the ETFS portfolios don't deal in futures. The trusts are backed instead by over-the-counter forward contacts, which makes short exposures practical outside of an exchange-traded note format The short portfolios thus offer an antidote to the credit risk attached to ETNs (see "Which Is Better: A Commodity Mutual Fund Or An ETP?").

Speaking of ETNs, Barclays Bank plc has pushed 19 commodity ETNs in front of the SEC for review. The notes mirror Barclays' existing line of commodity trackers. The new ETNs, however, are callable; the older issues are not. See "Callable iPath Notes Chart A New Course" for more details.

Sixteen commodity ETF filings from ProShares await an SEC nod. Filings for long and short exposures to the broad-based Dow Jones-UBS Commodity Index and its subsets on agriculture and precious metals are augmented with registration requests for short and long funds on individual commodities, i.e., gold, silver, crude oil and natural gas. Eight of the ProShares funds are leveraged.

ProShares' direct competitor, Rydex SGI, has 10 commodity funds in the hopper—five long and five short—covering pretty much the same territory. One big difference: all Rydex funds are leveraged.

A half-dozen iShares portfolios based upon sector swaths of the S&P GSCI have been logged in for SEC review, including long exposures to industrial metals, energy, livestock, natural gas and a carve-out—GSCI ex-energy.

Jefferies tossed its hat into the ring with its filings for two portfolios—one based upon the Thomson Reuters/Jefferies CRB Index, the other following a Jefferies proprietary index, enhanced with active trading of the portfolio's collateral.

Two more novel products are offered by Factor Capital Management under its FactorShares brand. One tracks the leveraged spread between gold and domestic stocks, the other does the same for the crude oil/stock premium.

There are three singletons on file with the SEC as well:


  • The long-only United States Commodity Index Fund is being brought to market by the same folks that brought us the contango-plagued United States Oil Fund (NYSE Arca: USO)


  • Nuveen Investments' actively managed Diversified Commodity Fund


  • Another active portfolio managed by Claymore Advisors


There are a lot of commodity products shivering on the SEC doorstep now and it's questionable if their clearance will be timely enough to provide securities investors access to the wheat market. No one, of course, knows for certain how long the bull will run through the wheat market.

Speculation is rampant that the Russian drought will lead to export curbs. The demand for domestic grain would likely soar as a result. Wheat prices have already jumped 10 percent this month, on top of a 44 percent surge in July.

Spot was bid above $7.25 a bushel Wednesday. Gauging the runaway gap this week, market momentum could take prices up to the $8.87 level rather quickly.

With the SEC backlog though, that's probably going to be a ride exclusively for futures traders. 

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