Wt Agriculture Discussion Threads

[sjtill] 19/9/2008 07:41

StretchMark2 - After looking down the barrel, personally I would be happy to recover my capital (or even most of it).

[neg] 19/9/2008 07:25

the price will always reflect the value of the underlying commodities.

[stretchmark2] 18/9/2008 23:11

Well it seems fairly certain that we'll get our money back, but I am confused about one issue:

Since the shares are suspended, does that mean that they will not change in price to reflect the underlying investment (i.e. agriculture) during the suspension? For instance, if the price of soyabeans, corn, wheat, etc go up by say 10% in the period before the suspension is lifted, will the price be updated to take account of this, or will they just stay the same?

Thanks in advance.

[sjtill] 18/9/2008 20:41

comment in moneyweek

[nabcom] 18/9/2008 11:33

Latest update:

Commodity Securities and AIG – Update

18/09/08

[mart] 18/9/2008 10:27

Well I've been pretty much wrong about softs for the last month or so. Beginning to wonder whether I was just too damn early. Put some profits from gold back into SM64. You may call me obstinate...

[nabcom] 18/9/2008 09:36

I can't see where it says Monday and I can't see any further update to:

17/09/08

TFS continues to be in close dialogue with AIG, the Exchanges and its market makers and Authorised Participants with the hope of returning to an orderly and liquid market on every Exchange as soon as possible.

[woracle] 18/9/2008 09:29

As per their website.
It will track underlying asset prices, but no doubt MMs will widen the spread for a while until confidence returns.. but with all that selling of agri commodities, will probably impact asset prices anyway is my guess.

[etarip] 18/9/2008 08:55

AIG's woes reverberated through commodity markets on Wednesday, triggering a wave of selling and forcing two exchanges to make an extraordinary intervention in the markets. The insurer acts as a counterparty to a substantial portion of the $30bn invested in the Dow Jones AIG Commodity Index, the second top benchmark for commodities investors. The insurer provides derivatives to investors that offer exposure to the index, and commodities markets were beset by worries about potential risks on these deals. The London Stock Exchange suspended trading for a range of exchange traded commodities issued by ETF Securities, which are backed by matching products from AIG, after a number of marketmakers stopped trading them. An emergency sale of AIG's agricultural commodity positions also was staged by CME Group, after US regulators gave approval for an unusual block-trading session.

[nabcom] 18/9/2008 08:27

woracle

Where is that stated?

[sjtill] 18/9/2008 08:26

ETF Securities said today that it expects the London Stock Exchange to end a trading suspension on 113 of its commodity products before the weekend.


Hector McNeil, head of UK Sales, said: "We are aiming for tomorrow. We will keep our investors informed."

The exchange traded commodities were suspended after market makers lost confidence in AIG, the insurance company which has been rescued by an $85bn two-year US Government package and which backs 113 ETFS products.

A market maker who did not want to be named said he would not be surprised if ETF Securities products did not trade again until Monday.

In an earlier statement today, ETF Securities said: "ETFS continues to be in close dialogue with AIG, the Exchanges and its market makers and Authorised Participants with the hope of returning to an orderly and liquid market on every Exchange as soon as possible."

In its statement ETF Securities said: "AIG confirmed that last night there was an announcement by the Federal Reserve Board, that the Federal Reserve Bank of New York is providing a two-year, $85 billion secured revolving credit facility to AIG that will ensure the company can meet its liquidity needs."

Although AIG has continued to honour all of its obligations, it is believed that market makers lost confidence in the insurer and were not prepared to be exposed to that risk. This resulted in erratic pricing with discounts

[woracle] 18/9/2008 08:24

very old news indeed ... will be back to normal by Monday, tracking underlying asset prices is the latest.

[nabcom] 18/9/2008 08:15

Commodities ETF's Trading Freeze Due to AIG Fears

Sep 17, 2008 - 07:29 AM
By: Mark_OByrne

According to reports, many of the products issued by ETF Securities are backed by credit agreements with AIG. They carry a credit risk similar to the one facing exchange-traded notes; i.e., if the party backing the ETCs goes bankrupt, shareholders become creditors of the firm.

AIG's collapse and quasi nationalisation is leading to concerns which are affecting ETF Securities' AIG-backed products.  According to a press release issued by the company, "a number of firms who were making markets in the [AIG-backed] Commodity Securities stopped doing so yesterday afternoon."

As a result, many of the ETCs did not track their underlying indexes during trading on September 16. Some products appeared to have stopped trading altogether, and there is no fully liquid market in the shares.  The company is working on alternate ways to provide investors with liquidity. For instance, it is trying to permit holders of the securities to redeem them directly from the issuer; typically, only large-scale authorized participants are allowed to do this. It is also trying to arrange suitable collateral to entice market-makers back into the market.

It notes that, "we can give no assurance as to whether these or other alternatives can be implemented at this stage."

ETF Securities deny that their precious metal ETFs will be affected ETF Securities deny that their precious metal ETFs will be affected ( such as Gold Bullion Securities) and say that the "credit risk from one group does not and cannot bleed over into the others." They claim that as the precious metal funds are backed by physical bullion, they carry no credit risk.

more at:

[mart] 17/9/2008 15:46

Note what is happening with gold now. Up 6% in half-an-hour. Probably massive short position being closed. Will we see anything similar with more 'fundamental' commodities?

[bhoytrader] 17/9/2008 13:43

Andrew,

Agreed - these are as safe as anything else out there now. What I do expect is that the market makers will create a pretty wide spread when these start trading, as I'm sure they are well aware quite a few investors will have had the fright of their lives and will be itching to get out.

For me I simply need to ask whether I want to be invested here for the reasons I first invested? Commodities are very volatile at the minute and lots of money is running for safety so short/medium term its going to be bumpy.

[andrewbaker] 17/9/2008 13:10

My understanding is that these ETF will be back up on normal electronic trading at the LSE tomorrow morning Thursday 18 Sept. The prices quoted will reflect the underlying holdings as before. The US Govt. bail-out of AIG could be argued as making the counterparty risk less! It may be that the counterparty could be changed or added to at some time in the future.

I hold stock here, and intend to trade it on price as intended, and no, I have no connection with ETF Securities other than as an invester.

[nabcom] 17/9/2008 12:16

Guess the question now is just how much confidence has been dashed now that people have had a first hand taste of counterparty risk.

[juju43] 17/9/2008 11:42

good news for those who thought they might lose all

[nabcom] 17/9/2008 11:40

Commodity Securities and AIG - Update

17/09/08

ETF Securities Limited ("ETFS") would like to update investors and all market participants regarding the Exchange Traded Commodities (ETCs) issued by ETFS Commodity Securities Limited and which are backed by matching contracts from AIG Financial Products Corp. and guaranteed by American International Group, Inc (collectively "AIG").

AIG confirmed that last night there was an announcement by the Federal Reserve Board, that the Federal Reserve Bank of New York is providing a two-year, $85 billion secured revolving credit facility to AIG that will ensure the company can meet its liquidity needs.

AIG has continued to honour all of its obligations under our agreements with them, including processing all creations and redemptions in the usual manner and paying all redemptions due on time.

ETFS is in discussion with its market makers and the Exchanges (London Stock Exchange, Deutsche Borse, Borsa Italiana and Euronext) to ensure that trading can resume and/or continue in an orderly fashion as soon as possible. It is our understanding that the London Stock Exchange ("LSE") has suspended electronic execution for Wednesday 17th September but off-book trading will continue. ETFS Commodity Securities will continue trading on all other Exchanges.

ETFS continues to be in close dialogue with AIG, the Exchanges and its market makers and Authorised Participants with the hope of returning to an orderly and liquid market on every Exchange as soon as possible.

[techmark] 17/9/2008 11:35

Yes I did the same. I never thought that AIG could get itself in such a mess that it might go bust. A very good lesson in counter party risk.

[bhoytrader] 17/9/2008 11:07

I'm now getting quoted for my SUGA shares. Spread is about 9%, but its a start.

These should get back to normal also but spreads are going to be wide for a while.

Scary few days, SUGA was down 90% at a stage. I guess its a good lesson learned. I probably didn't fully understand the default risk and took it for granted that an AA rated backer would never go bust!! Silly me.

[neg] 17/9/2008 09:51

This is not like an investment trust and the price quoted reflects the net asset value of the various tracked commodities. I expect they are waiting to speak to AIG and given that it is now backed by the Fed, trading should resume either later today or tomorrow. I should think that they will eventually change from AIG to another financial institution.

[juju43] 17/9/2008 09:33

but could only do that for a while

[swordv] 17/9/2008 09:18

Net Asset Value should remain but market makers (if/when they return) may play games with the price/spread i reckon

[juju43] 17/9/2008 08:29

i cant read what happens now . does the price here go back to pre-problem level i.e. around 8 .any wisdom?