The largest natural gas-focused exchange traded fund (ETF) provider has filed a statement with the Securities and Exchange Commission (SEC) in order to refute what it sees as erroneous claims about the fund’s impact on the marketplace.
United States Natural Gas (UNG) is the largest natural gas fund, holding up to $480-million worth of natural gas futures and swaps. Various experts have pointed to this fund as the culprit of the run-up in natural gas prices, as well as the sudden drop in prices this year, reports Eileen Moustakis for Reuters.
This and next week, the Commodity Futures Trading Commission (CFTC) is conducting hearings to determine whether size limits should be in place when it comes to energy commodity investors (including ETFs). The hearings are meant to determine whether the run-up was caused by the natural gas ETF and other such funds.
However, an 8-K recently filed by UNG (and a previous 8-K filed by USO) shows that the buying and selling of these futures does not support this theory.
“This despite the claims of s0-called ‘experts’ to the contrary who, in their statements in recent months, always seem long on theory and very short on hard data when making their claims,” says John Hyland, the chief investment officer for the fund.
Asjylyn Loder for Bloomberg reports that the ETF bought an off-market gas swap for the first time as a sign that it has outgrown the main markets for fuel futures and swaps.
The $4.4-billion fund purchased a $250 million bilateral swap that isn’t subject to the size limits imposed by the New York Mercantile Exchange.
A commodity swap entails the user of a commodity would secure a maximum price and agree to pay a financial institution this fixed price. The user gets paid according to the market price of the commodity, according to Investopedia.
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