ETF Securities Limited, the innovator and pioneer of Exchange Traded Commodities (ETC), has formally completed the acquisition of the world's first gold ETCs - Gold Bullion Securities listed on the London Stock Exchange (LSE: GBS) and the Australian Stock Exchange (ASX: GOLD).
Due to the acquisition, the Marketing Agent Agreement between Lyxor and Gold Bullion Holdings Ltd and Gold Bullion Securities Ltd., will expire. Lyxor will no longer act either as marketing and distribution agent, or as liquidity provider for Gold Bullion Securities on the various European Stock Exchanges where it is listed.
Graham Tuckwell, Chairman of ETF Securities, commented:
"The acquisition of these two gold ETCs demonstrates ETF Securities' commitment to be the leading provider of exchange traded commodities. These products will fit well within our commodities platform and will be part of an expanded marketing effort for gold products in particular."
James Burton, CEO of World Gold Council, added:
"As the world's first two gold ETFs, GBS and GOLD have played a pivotal role in the development of the allocated, physically-backed, gold ETF market, which now represents more than 1093 tonnes of global gold demand.
"Gold is a unique asset. Its safe haven and diversification benefits are clear and it bears no credit risk and therefore involves no counterparty and is no one else's liability. These characteristics are extremely attractive to investors given the current financial environment."
The change in ownership of Gold Bullion Securities will have no effect to the daily operations, management, pricing and liquidity of Gold Bullion Securities:
- Custody: HSBC Bank N.A. will continue to provide secured custodial services for all gold bullion. HSBC Bank N.A. is the world's leading custodian for ETCs.
- Daily administration: Rawlinson and Hunter has provided for the past five years and will continue to administer the daily operations of Gold Bullion Securities. Rawlinson and Hunter provides administration services to over 120 ETCs.
- Market Making and Liquidity Provision: Société Générale has ceased to be a liquidity provider for GBS. Flow Traders B.V and or Nyenburgh B.V. have signed contracts with various Exchanges in markets where Société Générale was previously quoting. Flow Traders B.V. and/or Nyenburgh B.V. are the leading market makers for ETCs in Europe. In addition, ETF Securities brings one of the largest pools of Authorised Participants and market makers with over 18 currently trading the full range of ETCs.
- Credit risk: As stated in the relevant prospectus, both Gold Bullion Securities products are backed by allocated metal - uniquely identifiable bars which carry no bank credit risk. The gold bars are held in trust in London by the Custodian HSBC Bank USA N.A., the world's leading Custodian for physically backed ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA). Securities are only issued once gold is confirmed as being deposited into the Company's bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out and thus does not earn any income.
- Marketing: ETF Securities will replace Lyxor as Marketing Agent for all Gold Bullion Securities. ETF Securities currently manages approximately $7 billion in ETCs which trade in excess of $1 billion each week on five major European exchanges.
GBS is currently listed on the London Stock Exchange and trades in US Dollars (GBS) and British pence (GBSS). Gold Bullion Securities also trade in Euros on Euronext Paris (GBS), Deutsche Borse (GG9B) and Borsa Italiana (GBS). GOLD is listed on the Australian Stock Exchange and trades in Australian dollars. Assets for both products total US$3.3 billion. Prior to the acquisition, ETF Securities had owned a one-third interest in Gold Bullion Holdings Limited, the World Gold Council (WGC) and members of the WGC had owned the remaining two-thirds. The WGC will continue to partner with ETF Securities on the marketing of gold ETCs with both Gold Bullion Securities and ETFS Physical Gold (PHAU) contributing to the Exchange Traded Gold platform.
In addition to the Gold Bullion Securities suite of products, ETF Securities now offers more than 120 ETCs, which give investors greater choice to implement different investment strategies with the choice of physical, long, forward, leveraged and short exposure to a wide range of commodity sectors. ETCs are simple to access as they are traded in three currencies (Euros, USD and Sterling) and listed on five major European Exchanges including the London Stock Exchange, Euronext Paris, Euronext Amsterdam, Deutsche Borse and Borsa Italiana. Each Exchange has created unique ETC trading segments.
