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ETF Securities to launch 6 new oil ETCs providing investors with access to different parts of oil futures curve
24/07/07
- World first for listed access to the entire oil futures curve
- Response to strong demand for more choice
- ETCs accumulate more than $1 billion in assets with $200m linked to oil
Global pioneer in exchange traded commodities, ETF Securities (ETFS), will deliver another world first by listing six new oil Exchange Traded Commodities (ETCs) on the London Stock Exchange - offering investors, for the first time ever, the opportunity to gain direct and simple exposure to one, two and three year oil futures prices in Brent and WTI oil benchmarks.
ETFS Brent Oil was first listed on the London Stock Exchange in July 2005 and ETFS WTI Oil was listed in May 2006. Since then, Oil ETCs have accumulated over $200 million in assets and are listed on five European stock exchanges including London Stock Exchange, Deutsche Borse, Euronext Paris, Euronext Amsterdam and Borsa Italiana. Trading volumes in these two oil ETCs now total $100 million each month. Due to their popularity, [7] leading investment banks have signed up as Authorised Participants in Oil Securities.
Substantial demand from investors for more choice to different parts of the oil futures curve has led ETF Securities to create these new products, allowing investors to implement different investment strategies in oil. The demand for new oil ETCs is a result of significant investor interest in commodities and increased knowledge about commodities investing. As a result of this interest, ETF Securities has taken in $1 billion of new assets in the past 9 months across the full commodity offering.
The six new ETCs to be listed are:
| ETC | LSE Code |
| ETFS Brent 1yr |
OSL1 |
| ETFS Brent 2yr |
OSL2 |
| ETFS Brent 3yr |
OSL3 |
| ETFS WTI 1yr |
OSW1 |
| ETFS WTI 2yr |
OSW2 |
| ETFS WTI 3yr |
OSW3 |
The two existing ETCs are:
| ETFS Brent |
OILB |
| ETFS WTI |
OILW |
Demand for these new ETCs is also being driven by investors searching for a means to expose their portfolio to the benefits of backwardation* which can provide a source of return in addition to the oil price return. Due to the dynamic nature of backwardation and contango, investors wish to be able to track different oil futures dependent on this feature.
ETCs are priced off ICE Future's Brent and NYMEX's WTI oil futures, and the return of ETCs is thus influenced by the shape of the oil future curve. With a total of eight oil ETCs available (6 new ones and 2 existing ones), investors now have the choice of gaining exposure to a range of four different maturities with varying rates of backwardation or contango. Historical simulations show that the performance of each of the four different maturities varies considerably in the short term but is similar over the long term. The ETCs with exposure to the longest maturity had the lowest volatility.
The listing of the 6 new oil ETCs in the London Stock Exchange's dedicated ETC segment is expected to occur within the next few weeks.
Commenting on launching another world first, Graham Tuckwell, Chairman of ETF Securities, said:
"ETCs have now been available in Europe since December 2003 and their simplicity and structure have now been embraced by the market. Many investors have approached us showing an appetite for a range of oil ETCs. Increased investor demand and knowledge has resulted in investors wanting access to more sophisticated trading and investment strategies.
"Our six new oil ETCs are a simple and direct answer to fulfil a demand that currently no one else is able to. Currently most investors cannot invest in oil futures due to limited market access and lack of liquidity in pricing, but our response to this problem in the form of an ETC creates a practical and accessible answer for investors.
"Overall there has been a huge surge in global demand for ETCs and we recently passed the landmark of US $1 billion invested in our existing offering of 36 different ETCs. With listings on five of Europe's major exchanges and a new total of 42 ETCs, ETF Securities has successfully delivered simple, cost-efficient and accessible products for all investors."
Adding to this David Shrimpton, Head of Product Management and Development at the London Stock Exchange, said:
"I am delighted to welcome these new long-dated oil ETCs to our market. Through our Exchange Traded Commodities market investors can gain exposure to commodities without the need to access the futures market. Since its launch last September the market has seen over £3.2 billion worth of trading, demonstrating that investors are embracing the opportunity to use these simple commodity products for portfolio diversification."
These listings follow ETF Securities' pioneering world first listings of ETCs based on a range of underlyings - oil futures, DJ-AIG Commodity Indices and physical precious metals including platinum and palladium. As a result, Exchange Traded Commodity segments have been created on Europe's major stock exchanges.
ETCs are relatively new investment tools which enable investors to gain exposure to commodity prices without trading futures or taking physical delivery. The ETCs are designed to offer investors a simple, cost-efficient and secure way to access the commodities market. They provide investors with a return equivalent to movements in their spot price (or futures prices in the case of the new ETCs) less a small management fee which accrues daily.
* 'Backwardation' and 'contango' - definitions:
Backwardation refers to a downward sloping forward curve (as in an inverted yield curve) or, more formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery.
Contango is the opposite to 'backwardation' and refers to an upward sloping forward curve (as in the normal yield curve) in prices or, more formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery.
We are holding a conference call on the launch of the New ETFS Oil Securities
31st July at 12:00pm (GMT) for more information contact helen.burden@etfsecurities.com
For further information, please contact:
Roman Townsend / John Kelly
Penrose Financial
Tel: +44 (0) 20 7786 4875 / 4821
Notes to editors:
The management of ETF Securities Limited pioneered the development of Exchange Traded Commodities (ETCs), with the world's first listing of an ETC, Gold Bullion Securities in Australia and London in 2003 and then the world's first entire ETC platform which was listed on the London Stock Exchange in September 2006. Since then, ETF Securities has listed its entire range of ETCs on Europe's major exchanges (Deutsche Borse, Euronext Paris, Euronext Amsterdam and Borsa Italiana) with each exchange creating a separate ETC segment.
To learn more about ETF Securities go to: www.etfsecurities.com
This is not an offer of securities for sale in the United States. The offer and sale of the ETFS Oil Securities have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act") and, subject to certain exceptions, may not be offered or sold within the United States. Any offering of securities to be made in the United States will be made by means of a Prospectus that will contain detailed information about the Issuer and management, as well as financial statements. No public offering of securities will be made in the United States and any offering will be made pursuant to an applicable exemption from the registration requirements of the Securities Act.
The communication of this press release is not being made and this press release has not been approved by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000 (the "FSMA"). Accordingly this press release is not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of this press release or any other document issued in connection with the offer and sale of the ETFS Oil Securities as a financial promotion is only being directed at those persons in the United Kingdom falling within the definition of Investment Professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or persons who are within Article 43 of the Order or any person to whom it may otherwise lawfully be made (all such persons together being referred to as "relevant persons"). The communication of this press release (or any other document issued in connection with the offer and sale of the ETFS Oil Securities) must not be acted upon or relied upon by persons who are not relevant persons. All applicable provisions of the FSMA must be complied with in respect of anything done in relation to the ETFS Oil Securities in, from or otherwise involving the United Kingdom.
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