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March
22, 2006
By:
Tom Szabo
SILVERAXIS.com
There
is news
out that the SEC has approved the rule
change to allow the Barclays iShares Silver
ETF to trade on the AMEX. The rule change
clears the remaining regulatory hurdles
which means that approval of the registration
statement (Form S-1) is now a technicality.
Many of the points I raised in my Silver
ETF Ironies piece have been addressed
in the SEC
Release announcing approval of the rule
change. I have already analyzed the
release and will be providing more
detailed comments shortly, but for
now I should point out that the SEC feels
the silver ETF will increase the efficiency
and transparency of the silver market and
appears to believe that concerns about liquidity
are overblown.
I
must say that reading over the SEC Release
makes some of my arguments seem a little
loony and conspiratory. There appear to
be good answers for almost every point I
made and I certainly need to revisit this
topic with a sharper pencil. So, have I
changed my opinion that the silver ETF will
not be approved by the SEC? Obviously yes.
I was dead wrong! But I still have some
nagging issues.
So
what does this mean as to the tightness
of supplies in the silver market? Curiously,
the SEC barely addressed this in its
32 pages of comments, instead focusing on
COMEX and LBMA daily trading volumes in
light of the 1.5 million ounce initial demand
by the silver ETF. I believe the situation
is more complicated than this, but in essence
the SEC seems to be saying that the physical
or spot silver market is big enough to handle
whatever demand the ETF can throw at it.
On the opposite side of this argument are
Ted Butler and the CPM Group, which is quite
a rare sight for people familiar with
the silver story. I personally believe that
some details have been glossed over by the
SEC, but only time will tell who in fact
was right.
For
now, I will leave you with this statement from
the SEC Release which sums up its position
very well:
"The
Commission agrees with Amex that, like other
derivative products, the Silver Shares will
increase the efficiency and transparency
of the market for this underlying instrument,
i.e., silver. In this
regard, the Commission finds that the proposed
rule change is in the public interest. The
Commission also does not believe that the
Silver Shares are likely to cause serious
liquidity problems in the silver market
such that approval of the proposed rule
change is not consistent with the Act."
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