These proposals have been in the works for a few months. These new rules may only effect a few of the commodity based ETFs offered to investors.

The United States Natural Gas ETF is a fund that invests in natural gas futures. This is accomplished by primarily purchasing futures contracts on the New York Mercantile Exchange. Since this is a long only fund, it only purchases future contracts and doesn’t hedge the position.

This wasn’t a problem when the fund first started out, but as it has grown in popularity, its size is becoming to big for the futures market to handle. That is when the CFTC first stepped in.

The CFTC first examine the fund over the summer. Concerns were raised about UNG exceeding the position limits set forth by the CFTC. For a brief time during the summer, the United States Natural Gas ETF wasn’t allowed to create new shares for investors. This move then created a premium to the net asset value of the fund. The CFTC then allowed UNG to issue more shares and the premium went down.

To ease the pressure on the natural gas futures markets, UNG has moved into other areas to invest in natural gas. One place they have traded is on the IntercontinentalExchange (ICE). They trade a natural gas futures contract based on the NYMEX contract. UNG has also moved to trade swaps and over the counter products. By doing this, there is less risk to the fund to exceed the futures position limits set by the CFTC.

The United States Natural Gas ETF has sought ways to get around the position limits. The CFTC grants exemptions to position limits in certain ways. Position limits can be exceeded if used for hedging for example. This is a legal way to increase their position to meet the demand of investors wanting to buy into a natural gas ETF.

The CFTC has moved into this because of the run up in energy prices during the summer of 2008. The CFTC is trying to determine why prices spiked that summer. Was it due to speculation or was the worldwide demand for energy that great?

Even with this attention, today’s investor should look into natural gas ETFs if they want to invest in the energy market.

Possibly Related Posts:

• Natural Gas Futures, How They Effect Natural Gas ETFs
• Natural Gas ETF Short Funds
• Wildcatters Exploration & Production Equity ETF Review
• Why you should trade the Natural Gas ETF over futures and index funds.
• Natural Gas ETF frequently asked questions (FAQ)

WCAT joins the United States Natural Gas ETF (UNG) and the First Trust ISE-Revere Natural Gas Index Fund (FCG) as a play on natural gas prices. However WCAT will invest primarily in small cap firms. This will probably be a more volatile fund as compared to the larger cap gas ETFs on the market.

The fund comes with an expense ratio of .65% and currently has 56 companies in its portfolio. The top 3 holdings currently in the fund are Forest Oil, Encore Acquisition and St. Mary Land & Exploration. Each of these stocks makes up roughly 5% of the funds portfolio.

According to the prospectus, Wildcatters Exploration & Production Equity ETF will provide exposure to stocks listed on the United States and Canadian stock exchanges. These companies are engaged in the production and distribution of the oil and gas sectors. WCAT will try to replicate (before fees and expenses) the price and yield performance of the Thomson Reuters/Jefferies CRB Wildcatters Energy E&P Equity Index.

This fund will invest in companies involved with natural gas as opposed to UNG, which is a pure play on natural gas futures.

Small and mid-cap companies can be very volatile, but can also give you a big return on your investment. The natural gas market has been growing over the last few years. Exxon Mobil is making a move into natural gas with its purchase of XTO Energy in December of 2009.

Hopefully as natural gas grows, larger companies will be looking at small companies in the Wildcatters Exploration & Production Equity ETF as possible acquisitions. Do your research before investing.

Possibly Related Posts:

• Natural Gas Futures, How They Effect Natural Gas ETFs
• Natural Gas ETF Short Funds
• Natural Gas ETFs and the CFTC New Rules
• Why you should trade the Natural Gas ETF over futures and index funds.
• Natural Gas ETF frequently asked questions (FAQ)