Exchange Traded Commodities & iPath® ETNs

If you are looking for the benefits of investing in commodities combined with the ease and efficiency of trading in stocks and shares then look no further than Exchange Traded Commodities (ETCs) or iPath® ETNs

What are ETCs?

An ETC is an investment vehicle that tracks the performance of an underlying commodity or basket of commodities, providing retail investors with access to a notoriously difficult area to invest in.
Similar to (ETFs), ETCs are listed on the London Stock Exchange and are traded and settled exactly like shares.

iPath® ETNs are an alternative way to gain exposure to commodities.

• Find out more about iPath® ETNs.

Choose from:

• Single-commodity ETCs. These can be 100% backed with allocated metal, such as ETFS Physical Gold, or tracking an individual commodity futures based index such as ETFS Wheat and ETFS natural gas, or commodity futures, such as ETFS Brent 1yr
• Index tracking ETCs which reflect the performance of your chosen broad commodity index. Available indices include agriculture (DJ-UBS Agriculture Sub-IndexSM); energy (ETFS Energy DJ-UBSCISM); industrial metals (ETFS Industrial Metals DJ-UBSCISM); softs (ETFS Softs DJ-UBSCISM) and more.

Where ETCs are tracking futures or indices priced off futures, different types of exposure to underlying futures can be provided, i.e.

• Constant exposure to futures 1-3 months out
  ETFS Agriculture DJ-UBSCISM, ETFS Brent 1mth, ETFS Crude Oil, ETFS Precious Metals DJ-UBSCISM, ETFS WTI 2mth
• Constant exposure to futures 4-6 months out
  ETFS Forward Agriculture DJ-UBSCI-F3SM, ETFS Forward Energy DJ-UBSCI-F3SM
  
• Constant exposure to futures 1 year and further out
  ETFS Brent 1yr, ETFS WTI 2yr, ETFS Brent 3yr.

 

Benefits of ETCs

• Gain direct exposure to commodity prices
• They have guaranteed liquidity – trade in them intraday, every day
• No stamp duty
• Transparent and accurate pricing – pay a dealing commission and nothing else
• Eligible to hold within your Barclays Stockbrokers or .
  

 

ETC Risk Warning

ETCs typically achieve their objectives through the use of derivatives, typically swaps, which carry counterparty risk. If the counterparty (issuer of the derivatives) does not pay the sums due, the investor’s funds will be at risk and they may receive back none of their capital regardless of the performance of the underlying assets. A number of ETC issuers seek to mitigate the counterparty risk by posting collateral, that is, setting aside a pool of assets that the investor can claim on in the event of the issuer’s default.  In these instances, care must be taken to ensure that the collateral will perform as desired and investors’ attention should be paid to the quality of the collateral to establish whether it would continue to hold its value were the issuer to default.. Full details can be found in the issuers simplified prospectuses which can be accessed from their websites.

In addition, there are leveraged and inverse (or short) ETCs products available from some providers. ETCs that offer leverage, or that are designed to perform inversely to their underlying index or benchmark, are highly complex financial instruments that carry significant risks. These securities may not be appropriate for many investors, especially for those who plan to hold them longer than one trading session.

Leveraged and inverse ETCs have unique compounding, daily reset and leverage features that may significantly amplify risk, particularly for medium and long-term investors, and in periods of high market volatility. Before investing in any leveraged or inverse ETCs, you should read the individual prospectus carefully.

ETCs are traded like shares and may not be for everyone. They closely track the performance of an index and as such their value can go down as well as up and you may get back less than you invested. If you are in any doubt as to their suitability, please seek independent financial advice.

See a summary table of the different levels of counterparty risks that can apply to ETCs.

 

How to invest

Looking for a list of ETCs?

Type ‘ETFS’ into the search box on the Market news and data tab for a complete list of all ETCs from ETF Securities, or type in name of the commodity i.e. 'Gold' for a list of all products. Click on the name of the commodity you are interested in for the epic code e.g. ETFS Coffee (COFF), detailed research and current pricing.

 

Want to trade?

 

Select the Deal tab and enter the epic code for the ETC you want to trade. Remember you can also set limits, stops and trailing stop orders for GBP ETCs to help you manage your ETC investments more effectively.

Trade with the best

 

New to Barclays Stockbrokers? - Open an account today and get trading online from just £6.95 per online trade when you trade 25 times or more in a calendar month, and £9.95 for between 15 and 24 trades; otherwise it is £12.95.

You can access ETCs from our account or if you’re looking for a tax shelter for your investments, you can hold your ETCs in our and accounts.