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Long-awaited approval for ETF spurs silver to 22-year high
Another step forward for silver ETF;
SEC approves rule change;
silver rallies on speculation
By John Spence
CBSMarketWatch
Tuesday, March 21, 2006
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B800FF9D4%
2D65A5%2D492C%2D96D7%2D24DB3E975B71%7D&siteid=mkwt&dist=
BOSTON -- A controversial exchange-traded fund tied to silver prices
moved a step closer to reality Tuesday.
The Securities and Exchange Commission has approved a rule change for
a silver ETF in registration from Barclays Global Investors that
would allow the product to list on the American Stock Exchange,
although the fund has not yet been cleared to launch by regulators.
BGI spokeswoman Christine Hudacko said the comment period on the
silver ETF's proposed rule change recently closed, and the SEC order
says the product can now list on the Amex. However, she said the
registration statement submitted by BGI has not taken effect.
"This takes the process one step further, but we're still in the
quiet period and no launch date has been determined," Hudacko said.
Silver futures on Tuesday traded at their highest level since late
1983 on speculation the ETF may soon be approved. There are currently
two ETFs that invest in gold: StreetTracks Gold Trust and iShares
Comex Gold Trust.
The bullion is held in a vault and shares represent ownership in the
precious metal, and the silver ETF has a similar design. The SEC said
it received 255 letters during a recently closed public comment
period on the proposed rule change allowing the silver ETF to list on
the Amex. Of those received, 248 comments supported the rule change
and 7 opposed it.
The Silver Users Association, a nonprofit lobby group interested in
keeping an orderly silver market, has led the opposition to the
silver ETF. The SEC said in general, commenters opposed to the fund
argued that approval of the silver ETF would result in serious
liquidity problems in the silver market. Those opposed to the silver
ETF said it would "negatively impact the silver market because ...
creation would require the holding of silver in allocated accounts,
which would drain large amounts of silver from the open market and
cause higher prices for silver products."
Additionally, the opposition claimed resulting higher silver prices
caused by the creation of the silver ETF would cause the loss of jobs
specific to the silver industry.
However, the SEC said it sided with the Amex's argument that, like
other derivative products, the silver ETF would increase the
efficiency and transparency of the silver market. Therefore, the SEC
found the proposed rule change "in the public interest," saying it
does not believe the silver ETF is "likely to cause serious liquidity
problems in the silver market."
Cliff Weber, senior vice president of the Amex ETF Marketplace, said
the exchange is "glad to see the SEC make an important step towards
making the iShares Silver Trust available to the public."
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