NEW YORK ( TheStreet) -- The iPath Dow Jones Platinum ETN ( PGM) is the latest exchange traded casualty, as ETF issuers struggle to keep ahead of upcoming futures regulation. The futures-based platinum fund, which has just $100 million in assets, has halted creation of new shares due to anticipated position limits. PGM's creation halt follows in the footsteps of new "accountability" limits set by the New York Mercantile Exchange. When it comes to platinum, "accountability" limits are tripped at a lower threshold than other commodities. Currently, the limit is set at 1,500 net futures positions, approximately the same size as PGM's assets. PGM will now enter into the same precarious territory as funds like United States Natural Gas ( UNG), iShares S&P GSCI Commodity Indexed Trust ( CSG), iPath Natural Gas ( GAZ) and PowerShares DB Crude Oil Double Long ( DXO), as it halts creation to stay ahead of regulation. Halting creation isn't the only way to stay ahead of the regulatory curve. UNG has begun to restructure its underlying methodology, exchanging to-be regulated futures contracts for other investments, like swaps. PowerShares recently also restructured shares of its Deutsche Bank ( DB) indexed DB Agriculture ( DBA) and DB Commodity ( DBC) funds. During the DBC restructuring process, index provider Deutsche Bank took the unusual step of exchanging New York Mercantile-traded futures contracts for some holdings in Brent Oil Contracts, which trade abroad. The willingness of these managers to restructure their portfolios suggests that when it comes to commodities ETFs - there's a will and a way. The case of DXO did not have as neat of a result. The popular leveraged oil fund decided to redeem shares of the fund for value, euthanizing the fund before it could be killed off by regulation.
Whether ETFs are eventually restructured or closed , the halt in share creation can negatively impact investors. ETFs are designed to track an underlying net asset value, and a halt in the creation/redemption process can dislodge a fund's price from its worth. Investors end up paying premiums to buy into a strategy that others have bought at cost. The resumption of creation for UNG's shares has helped to put the fund back in line. UNG's premium, which crept towards 20% at the height of its creation halt, has returned to a less than 5% premium to NAV. This fund has been buoyed by natural gas prices, but it is easy to see how a dramatic drop in premium during an inconvenient time would have disastrous results. Definitive regulation on futures limitations is expected by the end of the month. ETF investors need an answer, and the uncertainty surrounding futures-based products needs to end. ETF issuers should remain committed to transparency when listing their holdings. If futures are replaced by swaps, disclosure should highlight inherent risks. Investors who want exposure to the price metals like gold, silver and platinum without derivative exposure should check out physically-backed commodity funds like SPDR Gold Shares ( GLD), iShares Comex Gold ( IAU), ETF Securities Gold Trust ( SGOL), iShares Silver ( SLV) and ETF Securities Silver Trust ( SIVR) (SIVR). Abroad, ETF Securities has launched similar physically-backed platinum and palladium funds. The issuer filed for similar funds in the U.S. earlier this year, but has yet to gain approval and launch. -- Written by Don Dion in Williamstown, Mass.