Investors hungry for silver have a new option today, as the first exchange-traded-fund-like product tracking the price of silver has hit the Street. The Securities and Exchange Commission gave final approval to the much-debated listing of Barclays GlobalInvestors’ iShares Silver Trust yesterday, and the ETF began trading this morning on the American Stock Exchange under the ticker symbol “SLV.”
The eventual listing has been more or less a foregone conclusion since the SEC last month approved a rule change at the Amex that would allow the fund to trade. That decision came after a particularly pitched campaign waged by the Silver Users Association, an industrial silver users trade organization. The association’s effort to derail the ETF was based on claims that the ETF would result in a silver shortage – because the silver held by the ETF will be out of circulation – and job losses.
So far, the new fund has not caused a major spike in silver prices. Though silver futures on the COMEX division of the New York Mercantile Exchange rose 2% on the news yesterday, the contracts actually closed the day lower. Still, the fund has attracted healthy interest already. Following a big first trade of 50,000 shares at the initial $129, the ETF has had a robust morning, with nearly a million shares changing hands in early trading. That trailed the granddaddy of commodity ETFs, the $6.5 billion streetTRACKS GoldShares, which traded 1.6 million shares this morning, but was nine times as active in early trading as the next most active commodity fund. SLV was trading up more than 1.5% at $131 only an hour after the launch.
The fund is not technically an exchange-traded fund, but a commodity-based trust structured security set up in the same way as BGI’s iShares Gold Trust. Initially, 150,000 shares were to be on offer, representing 1.5 million ounces of silver – 10 ounces per share – and not the 13,000,000 shares requiring 130 million ounces feared by ETF opponents. Like an ETF, baskets of 50,000 shares – representing a half-million ounces of silver – can be created and redeemed as investor interest demands to keep the share price in line with the price of silver.
The Silver Trust ETF is the latest in a slew of commodity-based ETFs and ETF-like products to hit the market this year. The United States Oil Fund, the first in the U.S. to track the return of crude oil, made its Amex debut earlier this month, and DeutscheBank’s DB Commodities Index TrackingFund, which tracks the price of six commodities, launched in February. Further oil and commodity basket ETFs are in registration, and BGI’s Lance Berg told InstitutionalInvestor’s Fund Action that he expects his firm to offer more commodities ETFs in the future, as “Investors are telling us they're interested in more fixed-income and commodities funds.”