What's Next for the Natural Gas ETF? | ETF Trends

The provider of the United States Natural Gas (UNG) exchange traded fund (ETF), in anticipation of a regulatory crackdown, is now exploring ways to get around it. What are the options for the popular ETF?

UNG received the Securities and Exchange Commission’s (SEC)  go-ahead to create more shares this week, but the provider has opted not to use. That’s because they expect new rules from the Commodity Futures Trading Commission (CFTC) that could limit the size of the fund’s positions in natural gas.

John Hyland, the fund’s chief investment officer, has just spent the past few months defending his fund against the critics who claim the growth of these funds, including UNG, has put the markets and investors at risk and are causing volatility in pricing.

Carolyn Cui for The Wall Street Journal reports that the provider is considering going into offshore energy exchanges or moving further into the unregulated over-the-counter swaps markets in order to avoid any CFTC limits. The CFTC doesn’t have any jurisdiction over swaps and overseas holdings.

The last resort would be for the fund to get its holdings within the limits and distribute the money to shareholders.

UNG has been phenomenally popular this year. Its assets grew to $4.5 billion in July from just $727 million in March.

  • United States Natural Gas (UNG): down 46.2% year-to-date


For more stories about natural gas, visit our natural gas category.

For full disclosure, some of Tom Lydon’s accounts hold UNG.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.