Deutsche Börse Commodities Launches Xetra-Gold In The UK

Today, Deutsche Börse Commodities GmbH launched Xetra-Gold in the UK. Xetra-Gold is an exchange-traded security in the form of a bearer note (ISIN: DE000A0S9GB0) which is always 100 percent backed by gold.

Each unit of the Xetra-Gold bearer note grants investors the right to demand the delivery of one gram of gold from the issuer. Deutsche Börse Commodities’gold reserve for Xetra-Gold is currently around 50 tons – valued at around € 1.6 billion at current prices. Private investors can have the physical gold delivered to their bank and receive it there personally. In Germany, more than 400 private investors have taken this option to date.

The international derivatives exchange Eurex has also started offering futures and options on Xetra-Gold as of 28 September due to the high level of market interest in this contract. The Xetra-Gold ETC can be deposited as collateral with Eurex Clearing, Europe’s largest central counterparty, since 27 August.

Xetra-Gold conforms with European provisions for securities investment (UCITS directive), and can thus be suitable for institutional investors and investment funds too. “Our securitization provides private and institutional investors with access to the gold market and gives them a cost-effective portfolio diversification opportunity,” said Martina Gruber, Managing Director of Deutsche Börse Commodities GmbH. “In the UK, we expect demand to come predominantly from institutional investors,” she continued.

The stable and constant holdings are a competitive advantage of Xetra-Gold.

There is no front-end load for investments in this gold ETC (exchange-traded commodity) and Deutsche Börse Commodities does not charge any ongoing management fees which would deplete the investor’s gold holdings. “If an investor buys 10,000 units of Xetra-Gold today, we will still be holding exactly 10 kilograms of gold in custody in 10 years’ time too,” said Steffen Orben, Managing Director of Deutsche Börse Commodities GmbH. Xetra-Gold is only subject to custody fees that are reported separately. They amount to 0.36 percent annually of the value under custody. It depends on the contract between the custodian bank and the buyer of Xetra-Gold to which amount the bank passes on these charges.

Xetra-Gold is exchange-listed in Deutsche Börse’s ETC segment and is tradable on the pan-European Xetra platform as a highly liquid security. When buying or selling, investors benefit from the transparent pricing and favorable conditions of stock exchange securities trading. The price of one Xetra-Gold bearer note is always exactly the same as the price of one gram of gold on the world market in euros. On the Xetra trading platform, the spread between the bid and ask price of Xetra-Gold is generally around 0.1 percent – a maximum of 1 percent is permitted.

Since its launch in Germany in December 2007, Xetra-Gold has had by far the highest order book turnover in Deutsche Börse’s ETC segment (178 products).

The gold order book volume on Xetra was around €1.2 billion in the first six months of 2010 – a market share of 37 percent in the commodities segment of the Xetra trading platform.