This is a very controversial subject that keeps coming up but here is one investor who asked Barclays directly whether their stash can be loaned, shorted against, whatever.
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"I recently sent an email to the iShares management asking the following question:
Dear Sir or Madam,
I have been looking at the information page for your silver ETF and I
see a pdf document listing the bars of sliver owned by the trust.
Please can you tell me whether this silver is in any way available to
the wider market such as through leasing, shorting or lending, or any
other type of derivative.
Thank you for your help.
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I received the following reply:
Thanks for getting in touch with us about iShares ETFs. With regard to your inquiry, the silver that is held in the trust is not used for any of the types of instruments you mentioned. Please refer to this excerpt from the prospectus which states the Trust's Objective:
The objective of the trust is for the value of the iShares to reflect, at any given time, the price of silver owned by the trust at that time, less the trust's expenses and liabilities. The trust is not actively managed. It does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of silver. The trust receives silver deposited with it in exchange for the creation of Baskets of iShares, sells silver as necessary to cover the trust expenses and other liabilities and delivers silver in exchange for Baskets of iShares surrendered to it for redemption.
If you have any additional questions regarding this inquiry, please contact us at 1-800-iShares (1-800-474-2737) Monday through Friday, 8:30 a.m. to 6:30 p.m. (EST) and we will be there to assist you. Thank you again for contacting iShares and have a great day!
Sincerely,??Joshua Rogers?Barclays Global Investors Services
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This information must be accompanied by a current iShares Silver Trust prospectus which may be obtained by clicking here. Please read the prospectus carefully before investing.
Barclays Global Investors International, Inc. (BGII) is the iShares Silver Trust's sponsor. Barclays Global Investors Services (BGIS) assists in the marketing of the Silver Trust. BGII and BGIS are affiliates of Barclays Global Investors, N.A., which is a subsidiary of Barclays Bank PLC.
There are risks involved with investing, including possible loss of principal. The iShares Silver Trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. Shares of the Silver Trust are not subject to the same regulatory requirements as mutual funds. Because shares of the iShares Silver Trust are expected to reflect the price of the silver held by the Trust, the market price of the shares will be as unpredictable as the price of silver has historically been. Additionally, shares of the Silver Trust are bought and sold at market price (not NAV). Brokerage commissions will reduce returns.
Shares of the Silver Trust are created to reflect, at any given time, the market price of silver owned by the trust at that time less the trust's expenses and liabilities. The price received upon the sale of shares of the Silver Trust, which trade at market price, may be more or less than the value of the silver represented by them. If an investor sells the shares at a time when no active market for them exists, such lack of an active market will most likely adversely affect the price received for the shares. For a more complete discussion of risk factors relative to the Silver Trust, carefully read the prospectus.
Following an investment in the iShares Silver Trust, several factors may have the effect of causing a decline in the prices of silver and a corresponding decline in the price of the shares. Among them: (i) A change in economic conditions, such as a recession, can adversely affect the price of silver. Silver is used in a wide range of industrial applications, and an economic downturn could have a negative impact on its demand and, consequently, its price and the price of the iShares. (ii) A significant change in the attitude of speculators and investors towards silver. Should the speculative community take a negative view towards silver, a decline in world silver prices could occur, negatively impacting the price of the shares. (iii) A significant increase in silver price hedging activity by silver producers. Traditionally, silver producers have not hedged to the same extent as other producers of precious metals (gold, for example) do. Should there be an increase in the level of hedge activity of silver producing companies, it could cause a decline in world silver prices, adversely affecting the price of the shares.
The amount of silver represented by shares of the iShares Silver Trust will decrease over the life of the trust due to sales necessary to pay the sponsor's fee and trust expenses. Without increase in the price of silver sufficient to compensate for that decrease, the price of the shares will also decline, and investors will lose money on their investment. The Silver Trust will have limited duration. The liquidation of the trust may occur at a time when the disposition of the trust's silver will result in losses to investors.
Although BGI believes that market makers will take advantage of differences between the NAV and the trading price of Silver Trust shares through arbitrage opportunities, BGI cannot guarantee that they will do so. BGI cannot guarantee an active trading market for the shares, which may result in losses on your investment at the time of disposition of your shares. The value of the shares of the Silver Trust will be adversely affected if silver owned by the trust is lost or damaged in circumstances in which the trust is not in a position to recover the corresponding loss. The Silver Trust is a passive investment vehicle. This means that the value of your shares may be adversely affected by trust losses that, if the trust had been actively managed, it might have been possible to avoid.
Shares of the iShares Silver Trust are not deposits or other obligations of or guaranteed by Barclays Global Investors, N.A. or its affiliates ("BGI"), and are not insured by the Federal deposit Insurance Corporation or any other governmental agency.
When comparing commodities and the iShares Silver Trust, it should be remembered that management fees associated with the Trust are not borne by investors in individual commodities. Buying and selling shares of the iShares Silver Trust will result in brokerage commissions. Because the expenses involved in an investment in physical silver will be dispersed among all holders of shares of the Silver Trust, an investment in the Silver Trust may represent a cost-efficient alternative to investments in silver for investors not otherwise able to participate directly in the market for physical silver.
Although shares of the iShares Silver Trust may be bought or sold on the exchange through any brokerage account, shares are not redeemable except in large aggregated units called Baskets.
London Silver Fix is the price per ounce of silver set by three market making members of the London Bullion Market Association at approximately noon London time, on each working day.
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From a superficial reading of this information it seems to me that they do not short the silver." |
