UBS platinum ETNs driven by investor demand
* Reuters
* , Friday May 9 2008
guardian.co.uk
By Frank Tang
NEW YORK, May 9 (Reuters) - UBS launched two platinum exchange-traded notes (ETNs) on Friday, the first such trading products in the United States, to take advantage of strong investment interest amid near-record metals prices.
Kurt Nelson, managing director and head of ETNs at UBS, told Reuters in an interview that the Swiss-based investment bank will continue to roll out additional commodity products and expand into other asset classes later this year.
"The main reason is investor demand. There is investor interest in platinum, and people are both interested in going long or going short. And there is not an access product, an ETF (exchange-traded fund) or ETN on platinum in the U.S., until today," Nelson said.
The two ETNs are senior unsecured notes backed by UBS. They are namely UBS E-Tracs Long Platinum ETN and UBS E-Tracs Short Platinum ETN, which began trading at Friday's market open on the NYSE Arca platform.
The two platinum ETNs track the performance of a sub-index of the UBS Bloomberg Constant Maturity Commodity Index, and the two products are designed to be a representative of the prices of platinum futures contracts.
ETNs trade on exchanges throughout the day and have some similarity to exchange-traded funds (ETFs). ETFs and ETNs broaden market participation by providing easier access to investors.
Exchange-traded notes, unlike exchange-traded funds, do not purchase the physical commodity to back the number of shares sold.
Platinum prices surged more than 10 percent this week as the new ETNs boosted buying sentiment. The U.S. platinum contract for July delivery ended at $2,101.80 an ounce on Friday, nearly $200 higher than its close last week. Spot platinum traded at $2,084 an ounce.
Platinum hit a record high of $2,290 an ounce on March 4.
"I think that platinum's move has been sideways for a couple of months, and we're giving investors an opportunity to express either view by going long or by going short in a cost-effective way."
Ralph D'Esposito, a floor trader with RJ Futures in New York, said that the ETN news gave platinum a boost this week. He also cited strong support from the physical platinum market and robust buying by the trades.
"If you think about the exchange-traded fund and exchange-traded notes space, it is very helpful to be first in the market with an access product," Nelson said.
There was market talk last year that a U.S. platinum ETF might be launched, but such a fund would draw intense opposition from the U.S. auto industry, which is the biggest consumer of platinum. Platinum end-users fear that a U.S. platinum ETF could soak up physical metal in a thin market and drive prices sharply higher.
Several non-U.S. platinum ETFs, such as ETF Securities' ETFS Physical Platinum Fund, were launched last year in Zurich and London, where most of the world's platinum stocks and warehouses are located.
Platinum and sister-metal palladium are used as autocatalysts to filter out carbon monoxide and particulate emissions.
Nelson said UBS would build many other ETN products including equities, currencies and alternative assets over time.
"We are going to retain the first-mover advantage in some markets, like we have with platinum, and look forward to doing that in commodities as well as other assets," Nelson said. (Editing by Jim Marshall) |
