Share Prices & Company Research

Exchange Traded Commodities

Exchange Traded Commodities (ETCs) are index-tracking funds which are listed and traded on a stock exchange giving exposure to commodities.

WHAT IS AN ETC AND HOW DOES IT WORK?

Exchange Traded Commodities (ETCs) are an alternative for investors wanting exposure to commodities without having to own the actual commodities themselves. Investors can typically gain exposure to individual commodities or a basket of goods through an index related ETC.
 

HOW CAN I TRADE IN ETCs?

Under the current regulations and the rules of the Financial Conduct Authority (FCA), we are required to satisfy ourselves that you have the experience and knowledge to enable you to understand the risk involved when dealing in ‘complex instruments’ such as some ETCs, therefore, a complex instruments form must be understood and completed before you can deal in ETCs. Please note that there are no share certificates available for ETCs, so this means that you must have a Nominee or ISA account to trade.
 

THE BENEFITS OF ETCs

The annual management charges on ETFs are quite low, and most are ISA and SIPP eligible. Furthermore, there is no Stamp Duty to pay on shares purchased within many ETCs. ETCs are open-ended securities with the price largely affected by change in the spot commodity price. By adding different asset types to your portfolio (ie. diversification) such as ETCs, the risk is spread so a move downwards in one asset may be offset by a move upwards in another.
 

THE RISKS OF ETCs

Geopolitics and macroeconomics can add volatility to commodity markets, as seen with the price of oil for example. ETCs are classified as a high risk investment and are subject to counterparty risk.
 

DO YOU NEED FURTHER INFORMATION?

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