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An Exchange Traded Commodity (ETC) is an investment vehicle that tracks the performance of an underlying commodity or basket of commodities. It is a variation on the Exchange Traded Fund (ETF) that was first introduced in the US in 1993 and launched in Europe in 1999.

Exchange Traded Funds are pooled funds that are bought and sold on the stock exchange in exactly the same way as stocks and shares. Typically, each fund is set up to track the performance of an entire index, geographic market or industry sector by buying all the underlying stocks in proportion to their weighting. ETFs subsequently allow you to track the performance of these indices through the purchase of a single share in each.

ETCs work on exactly the same principle as ETFs - with the ETC tracking the performance of a single underlying commodity or a group of associated commodities. “Single commodity ETCs” obviously follow the spot-price of a single commodity, whilst “index-tracking ETCs” follow the movement of a group of associated commodities, such as cattle, energy or livestock.

Why trade ETCs?

ETCs offer the aspiring commodities trader a number of inherent advantages over both shares and futures - without the associated vagaries of trading an individual stock or the dramatic risk inherent in futures trading. But please remember the value of your investments and the income from them can go down as well as up. You may not get back the full amount you have invested. ETC trading offers:

• Direct exposure to the commodities markets - the value of your investment will rise and fall in direct proportion to the price of the underlying commodity
• Liquidity - ETCs are 'open ended' securities, which are created and redeemed on-demand. This means that the supply of ETCs is unlimited and that price changes will accurately mirror developments in the price of the underlying commodity
• Stamp duty & CGT - ETCs are not shares and so trades are exempt from stamp duty. Furthermore, ETCs can be traded within ISA accounts, allowing you to shelter your profit from Capital Gains Tax
• Low dealing costs - ETCs are traded on the regular stock exchange, making them both accessible and affordable - they can be traded through your share dealing service for a commission.

Portfolio diversification - ETCs give broad representation across entire commodity sectors and different geographic regions.

Our ETC platform gives you access to more than funds offering niche funds for a different approach.
To find the ETCs available, simply click on the ETC List tab at the top of the page.

Great value dealing for just £12.50 per trade - online, by telephone or via your mobile - and just £6 per trade when you qualify for our Frequent Trader scheme.

UBS Launches Range of ETC’s to be Available Through Selftrade

UBS has launched 69 exchange-traded commodities (ETCs) on the London Stock Exchange.

It marks the banks first major issuance of ETCs outside Switzerland and is a strong indication of the growth of the market and the exchange traded fund (ETF) market in London. The range will be made available through the Selftrade trading platform.

In the last four weeks hedge fund manager Marshall Wace has listed an ETF that tracks an index based on the firm's market-neutral investment strategy.

Osmosis Investment Management has also been drawn to London, listing a clean tech ETF which tracks a climate solutions index developed by HSBC.

According to the LSE, the average daily value traded in ETFs and ETCs on the index was £169 million in February, a 19% increase year-on-year. The daily number of trades was 3,002, an increase of 11% year-on-year. 

Commenting on UBS's decision to choose London, LSE head of ETFs and ETCs Pietro Poletto said: 'London is fast becoming the venue of choice for issuers looking to break into the European marketplace for exchange traded products. Our market continues to evolve at an encouraging pace as both the breadth of products, and the level of trading activity, maintain trends of strong growth.'