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ETF Securities creates first exchange-traded precious metals platform backed by physical metal

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ETF Securities, is set to bring another first to the London Stock Exchange with the listing of a range of physically-backed, precious metal, exchange traded commodities (ETCs).
ETF Securities, is set to bring another first to the London Stock Exchange with the listing of a range of physically-backed, precious metal, exchange traded commodities (ETCs).

Platinum, palladium or a precious metals basket have not previously been made available to investors through ordinary brokerage accounts; however, this is set to change as ETF Securities intends to list these new ETCs – along with silver and gold ETCs – on the London Stock Exchange in an innovative new listing. The listing of the silver ETC is the first time a physical silver ETC has been available to investors outside the United States.

Martin Graham, Director of Markets at the London Stock Exchange, said: ‘We’re delighted to welcome these new ETCs to our market. Since its launch in September last year, we have seen nearly GBP 2 billion worth of trading on our commodities segment, which demonstrates that investors welcome the opportunity to use commodities for portfolio diversification without the need to access the futures market.’

The 4 separate classes of metal securities to be listed are:

  • ETFS Physical Platinum: LSE code: PHPT
  • ETFS Physical Palladium : LSE code:  PHPD
  • ETFS Physical Silver : LSE code:  PHAG
  • ETFS Physical Gold: LSE code:  PHAU

The basket of metals to be listed is: ETFS Physical PM Basket: LSE code:  PHPM. The basket will consist of platinum, palladium, silver and gold.

First dealings in these securities are expected to commence on the main market of the LSE on Tuesday 24 April 2007.

The management of ETF Securities created the world’s first ETC, Gold Bullion Securities in Australia and London which have over USD 2 billion of assets combined.  All of the new ETCs are backed by physical allocated metal held by the Custodian HSBC N.A., who is the world’s leading Custodian for ETCs with over USD 13 billion of precious metals being held for such products.  All physical metals held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA) and London Platinum Palladium Market (LPPM).

ETCs are relatively new investment tools which enable investors to gain exposure to commodity prices without trading futures or taking physical delivery. The ETCs are designed to offer investors a simple, cost-efficient and secure way to access the precious metals market.  They provide investors with a return equivalent to movements in their spot price less a small annual management fee which accrues daily.

Similar to Exchange Traded Funds, ETCs are open-ended securities which can be created or redeemed on demand (by market-makers) provided that the relevant amount of metal is delivered to the Custodian.  Investors can buy and sell the new ETCs through regulated brokers or approved market makers. ETCs can be traded with all the same order types available to equities, including market, limit and stop orders. They can also be shorted through stock borrowing or CFDs. The minimum trade size is one security and settlement is T+3 (trade date plus three business days) in CREST.  In addition, this is the first time that physically backed precious metal ETCs have been eligible for UK pension accounts including PEP, ISA, CTF and SIPP.

Commenting on the intention to list the new range of physical ETCs, Graham Tuckwell, Chairman, said: "Our decision to launch this range of precious metals is twofold. Firstly, it comes in the wake of successful and increasing global demand for precious metals through ETCs which have seen steady growth over the last four years to over USD 16 billion.  Secondly, we want to offer investors exposure to a broad range of precious metals which have historically been extremely difficult to access.

‘Unlike many other commodities, precious metals are durable and easily stored, enabling the ETCs to be backed by allocated physical bars which have transparent pricing and carry no credit risk.  As a result, the new physical ETCs save investors from many of the difficulties associated with purchasing precious metals such as access to physical bars and then having to store and insure those bars.’

ETCs provide investors with an investment vehicle that tracks the price of precious metals not a portfolio of equities.  Uncorrelated to equities, they can provide investors with an additional tool for portfolio diversification.

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