United States Natural Gas (UNG) exchange traded fund (ETF) has gotten the long-awaited approval to issue new shares, but the providers behind it have decided they won’t do so.
After a controversial round with the Commodity Futures Trading Commission (CFTC), the ETF that tracks natural gas futures finally has been granted clearance to issue another 1 billion shares, explains John Spence for MarketWatch. The ETF provider, however, has decided not to issue them after all.
The fund’s provider explained its decision by citing “current and anticipated new regulatory restrictions and limitations” that could be put forth by the CFTC.
UNG and other futures-based commodity ETFs had been accused of pushing the price of natural gas and other commodities higher because of speculation and loose regulation. The CFTC has yet to make a final ruling on those questions, however.
Meanwhile, UNG has been looking at new ways to invest in natural gas without breaking any rules about position limits, says Christine Buurma for The Wall Street Journal. Last month, the fund bought a $250 million over-the-counter swap, which is a bet between the fund and another party on the direction of the price of natural gas. Buurma notes that if the fund can invest in more swaps, it might be able to issue new units.
The hearings didn’t seem to dent the popularity of the fund. UNG’s assets surged to more than $4 billion and the fund saw inflows of more than $1 billion in July.
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For full disclosure, some of Tom Lydon’s accounts hold UNG.
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