Two commodity-based Deutsche Bank exchange traded funds (ETFs) have seen their position limit exemptions repealed by the Commodity Futures Trading Commission (CFTC). This brings up a number of questions about the fate of these and other commodity ETFs.
Two funds issued by PowerShares will no longer be exempt from U.S. position limits in wheat and corn, forcing a shift in their holdings to comply with federal trading restrictions.
Asjylyn Loder and Tina Seeley for Bloomberg report that PowerShares DB Commodity Index Fund (DBC) and PowerShares DB Agriculture Fund (DBA) will have to comply with caps designed to keep a one investor from gaining too much control of the market, according to the CFTC. Together, the two ETFs are worth $5.8 billion.
Deutsche Bank says that the funds are going to continued to conduct business “in the normal course.” The Securities and Exchange Commission (SEC) filing said:
As of Oct. 31, the funds will be subject to federal limits of 13,500 Chicago Board of Trade corn contracts in any non-spot month, and 5,000 wheat contracts, and an all-months combined limit of 22,000 corn contracts and 6,500 wheat contracts.
The repeal of these exemptions are in response to suspicions that such ETFs could be having an undue influence on the prices of certain commodities. The imposition of these limits could be bad news for commodity funds, as these ETFs have been under the microscope lately.