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ETF Securities to launch 6 new oil ETCs providing investors
with access to different parts of oil futures curve
13/08/07
- 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 tomorrow – 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 1mth |
OILB |
| ETFS WTI 2mth |
OILW |
First dealings in these securities will commence on the London Stock Exchange
tomorrow, Tuesday 14 August.
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.
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 series of conference calls on the launch of the New ETFS Oil
Securities 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 advertisement does not constitute or form part of any offer or invitation to sell or issue, or any
solicitation of any offer to purchase or subscribe for, any transferable securities to be issued by ETFS
Oil Securities Limited or any other securities, nor shall it or any part of it nor the fact of its distribution
form part of or be relied on in connection with any contract or investment decision relating thereto.
Any offer, invitation or solicitation shall be made solely by means of the prospectus and recipients of
this advertisement who are considering a purchase of securities following distribution of the
prospectus in connection therewith are reminded that any such purchase should be made solely on
the basis of the information contained in such prospectus and any supplementary prospectus(es). This
advertisement does not constitute any recommendation regarding the securities of ETFS Oil Securities
Limited.
The communication of this press release is not being made by, 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 ETCs is only being
made to and 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 high net worth entities, and other persons to
whom it may otherwise lawfully be communicated, falling within Article 49(1) 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 ETCs) must not be acted upon or relied upon by persons who
are not relevant persons. Persons distributing this press release must satisfy themselves that it is
lawful to do so. All applicable provisions of the FSMA must be complied with in respect of anything
done in relation to the ETCs in, from or otherwise involving the United Kingdom.
This is not an offer of securities for sale in the United States. Oil Securities have not been and will not
be registered under the US Securities Act or any other applicable law of the United States. Oil
Securities are being offered and sold only outside the United States to non-US persons in reliance on
the exemption from registration provided by Regulation S of the US Securities Act. The Issuer has not
been and does not intend to become registered as an investment company under the Investment
Company Act and related rules. Oil Securities and any beneficial interest therein may not be reoffered,
resold, pledged or otherwise transferred in the United States or to US persons. If the Issuer
determines that any Security Holder is a Prohibited US Person (being a US Person who is not a
"qualified purchaser" as defined in the Investment Company Act), the Issuer may redeem the Oil
Securities held by that Security Holder in accordance with the provisions described in the Prospectus.
Oil Securities may not be purchased with plan assets of any "employee benefit plan" within the
meaning of section 3(3) of the United States Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), any "plan" described in section 4975(e)(1) of the United States Internal Revenue
Code of 1986, as amended (the "Code") or any entity whose underlying assets include "plan assets" of
any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity,
which employee benefit plan, plan or entity is subject to Title I of ERISA or section 4975 of the Code
or any United States Federal, state, or local law or non-United States law that is substantially similar
to the prohibited transaction provisions of section 406 of ERISA or section 4975 of the Code (any such
employee benefit plan, plan or entity, a "Prohibited Benefit Plan Investor"). If the Issuer determines
that any Security Holder is a Prohibited Benefit Plan Investor, the Issuer may redeem the Oil
Securities held by that Security Holder in accordance with the provisions described in the Prospectus."
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