Commodity ETFs Could See More Scrutiny
Published 4/26/2011 3:21 p.m. EDT
Has the rapid onslaught of commodity ETFs gone too far? Accusations over speculation and manipulation continue to fly, with ETF/ETN issuers such as U.S. Commodity Funds and Barclays serving as the complicit dealers for big-bank manipulators.
Recent actions by the Commodity Futures Trading Commission (CFTC) reveal that regulators are serious about cracking down on some commodities vehicles. According to an article in today's Wall Street Journal, the CFTC is moving to curb mutual funds that rely on non-U.S. subsidiaries to make speculative bets on commodities and currencies. By using foreign subsidiaries, these mutual funds evade the limits of CFTC regulation. (They are, however, within the regulatory range of the SEC.)While the spectacular rise and relative youth of the ETF industry help to force it into the spotlight, the mutual fund industry is still the seasoned big brother. As the managers of large futures-backed commodity ETFs such as the United States Natural Gas Fund (UNG) and the PowerShares DB Commodity Index Tracking Fund (DBC) have already realized, the CFTC is developing an equal zeal for regulating commodities vehicles across the board. While many futures-backed ETFs have yet to reach the critical mass necessary to put them on the CFTC's radar, the current pressure on the commodity mutual fund industry could easily extend to a growing force of commodity ETFs in the months ahead. On a personal note, today's headlines about the structure of commodity-tracking mutual funds sent a shiver down my spine. Exactly one year ago today, I wrote a blog piece that predicted that hastily enforced CFTC regulations could push ETF issuers to restructure funds abroad. In a post titled "
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV