Continuing concerns about regulations from the Commodity Futures Trading Commission (CFTC) has led to yet another exchange traded product putting a temporary stop to issuing new shares.
iPath Dow Jones AIG Natural Gas ETN (GAZ) is the third commodity-focused exchange traded product to stop issuing new shares over the past few weeks. GAZ posted large inflows after United States Natural Gas (UNG) suspended any issuance of new shares. GAZ began the year with $20 million in assets, and by the time it decided to stop issuing new shares, it had amassed $187 million.
Yesterday, UNG entered into another natural gas-related total return swap yesterday (reported on their website at end of day) in order to reduce their holdings in listed futures contracts. The swap was for $500 million.
“This is an attempt by UNG to deal with whatever new regulations may be introduced by the CFTC and to allow us to permit creations of new units,” John Hyland, chief investment officer at United States Commodity Funds, said in an email.
UNG’s actions yesterday, and the natural gas-based swap the fund entered into a few weeks ago, Hyland said, are not enough by themselves to yet allow us to either meet what they think the CFTC limits may be. The provider feels that they are making progress, though.
Earlier in the week, PowerShares DB Crude Oil Double Long ETN (DXO) also stopped issuing shares, also in anticipation of new CFTC limits. The new regulations were imposed after the UNG fund, along with the commodity market in general, was accused of manipulating futures prices and market fluctuations.
The CFTC did rule yesterday that PowerShares DB Commodity Index Fund (DBC) and PowerShares DB Agriculture Fund (DBA) are no longer exempt from position limits in wheat and corn.
Meanwhile, we may be seeing other commodity-based notes and funds temporarily suspend trading while they wait for an official CFTC decision.
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