Barclays Suspends New Shares in iShares S&P GSCI ETF (Update2)
>>>The government has once again decided that oil prices are too high and created a sneaky mechanism to try to manipulate the market. I am holding some DB Powershares Oil. Interesting to see what will happen when the supply is restricted. I wonder if the government has pondered the notion that many more options can exist on an equity than the equity float. Ah well. I guess that if they limit the number of oil contracts, those who want them will only bid them higher. Is this stupid or what!!!!!<<<
By Asjylyn Loder and Eric Martin
Aug. 24 (Bloomberg) -- Barclays Global Investors stopped selling new shares in its iShares S&P GSCI Commodity-Indexed Trust today, the latest of almost $12 billion in exchange-traded products squeezed by limits on commodity speculation.
The Commodity Futures Trading Commission has been tightening trading rules amid concerns that speculation drove prices to record highs last year. So far, new and anticipated limits have affected the largest agricultural, natural gas and broad-based commodity funds in the U.S.
“It looks like that was the next to fall,” said Bradley Kay, an ETF analyst with Morningstar Inc. in Chicago. “It’s really going to keep happening at least until after the shape of CFTC regulations becomes clear.”
The fund rose $1.35, or 4.4 percent, to $31.98 on the New York Stock Exchange. The ETF’s premium rose to 2.8 percent greater than the value of the fund’s underlying assets. The shares outstanding have more than tripled this year 52.45 million.
The fund buys index futures that track the S&P GSCI Total Return Index. The index includes metals, energy, agricultural and livestock commodities.
The fund has a hedge exemption from CME Group Inc. to exceed the Chicago Mercantile Exchange’s limit of 10,000 contracts, Barclays spokeswoman Christine Hudacko said in an e- mail. The exemption expires Dec. 31.
Position Limits
The exemption allows the ETF to hold up to 40,000 index futures, Hudacko said. As interest in the fund grew, its holdings expanded to “very close” to the limit, she said. Barclays decided to stop issuing new shares before the limit was reached.
“We are actively working with regulators, product partners and exchanges to explore solutions that will lead to resumption of the creation of new shares,” Michael Latham, co-chief executive officer of iShares at Barclays Global Investors, said in a statement.
The CFTC held hearings in July and August on limiting energy speculation amid concerns that speculators contributed to record-high prices last year. The commission may tighten rules designed to prevent one trader from gaining too much control of the market.
Several exchange-traded products have already stopped issuing new shares or modified their investment strategy due to the anticipated limits.
Natural Gas Fund
The U.S. Natural Gas Fund, the world’s largest exchange- traded product in gas, hasn’t issued new shares because it can’t expand its fuel holdings due to the CFTC review, the fund said in the Aug. 12 regulatory filing.
Barclays Bank PLC suspended sales of its iPath Dow Jones- UBS Natural Gas Total Return Sub-Index ETN on Aug. 21. Other iPath ETNs may also be affected, Barclays said in a Aug. 21 statement. Barclays’ iPath ETNs include the $1.5-billion iPath Dow Jones-UBS Commodity Index Total Return ETN and the $623- million iPath S&P GSCI Crude Oil Total Return Index ETN.
The CFTC on Aug. 19 announced that two Deutsche Bank AG PowerShares commodity funds, worth a total of $5.9 billion, will no longer be exempt from limits on corn and wheat, curtailing the holdings of PowerShares DB Commodity Index Tracking Fund, the largest broad-based commodity index fund in the U.S., and PowerShares DB Agriculture Fund, the largest agricultural exchange-traded fund. Both track Deutsche Bank indexes.
PowerShares Suspension
On Aug. 18, Deutsche Bank said it would temporarily suspend new share sales of its PowerShares DB Crude Oil Double Long ETN.
The $270 million PowerShares DB Oil Fund and the $299 million PowerShares DB Energy Fund, and the may also soon run into limits on their growth, said Morningstar’s Kay.
“Since no one is privy to what the CFTC is going to do regarding any limits, the providers are smart to proceed with caution until they get a firm decision,” Tom Lydon, president and chief executive officer of Global Trends Investments and editor of ET Trends, said in an e-mail. “These moves, while inconvenient right now, may save a lot of trouble later.” |
