US - United States Commodity Funds (USCF) has listed a short oil fund on NYSE Arca, as the price of oil declines.
The launch comes in the wake of the Commodity Futures Trading Commission (CFTC) considering position limits on certain investments to curb speculation which is thought to inflate the price of commodities, in particular oil.
The exchange-traded security is designed to inversely reflect the movements in the price of light, sweet crude oil. As a result, the security benefits when the price of oil falls.
Crude oil fell to an eight-week low in New York on Thursday, according to Bloomberg, while crude oil for November stands at around US$65 a barrel in trading on the New York Mercantile Exchange (Nymex).
The net asset value of the security aims to inversely mirror the performance of changes in the spot price of light, sweet crude oil, as measured by the changes in the price of these crude oil futures contracts on Nymex.
USCF warns that the price of the units could be influenced by factors including the short term supply and demand for crude oil, as well as the short term supply and demand for the security's units. These factors could significantly alter the tracking error of the security.
The launch comes amid calls to curtail speculation that some say inflate the price of commodities. The CFTC is considering imposing position limits, which includes futures contracts and over the counter derivatives
As well as limiting positions, the move to regulate OTC derivatives could also have an impact. In a speech on Friday concerning OTC derivatives regulation to the European Commission, CFTC chairman Gary Gensler said comprehensive regulation to OTC derivatives should be applied, in order to prevent another global financial crisis.
Gensler said in order to promote market transparency and efficiency, the standardized part of the OTC markets should be required to move onto regulated exchanges. He said: "Exchanges greatly improve the functioning of the existing securities and futures markets."
He added: "We should bring the same transparency and efficiency to the OTC swaps market. Increasing transparency - including a consolidated reporting tape - for standardized derivatives would give both large and small end-users better pricing on standard and customized products."
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