US Natural Gas Fund Cannot Issue More Shares Without Authorization

Tuesday, October 13, 2009

This was the reason UNG was suspended earlier today,

"The United States Natural Gas Fund will temporarily suspend issuing new shares pending regulatory approval to expand the number of shares it can issue to 1.2 billion, the company said in a filing with the U.S. Securities and Exchange Commission on Tuesday.
The U.S. Natural Gas fund , also known as UNG, filed on June 5 with the SEC for permission to issue 1 billion new units, adding to the previously approved 200 million units.

The SEC has not yet approved the request and a spokesman for the agency said the SEC has no comment.

The UNG fund tracks the price of natural gas futures on the New York Mercantile Exchange, providing a way for smaller, retail players to invest in commodities like gas by buying shares in the fund without worrying about margin calls associated with futures trade if their bets go wrong.

The long-only exchange traded fund's move to massively expand the number units it can issue has sparked concerns among market players who say the jump in the number of units may open the natural gas market to more speculation and influence prices when it rolls positions on the futures market from month to month.

On Monday, UNG had 32.1 million units left of the 200 million it is authorized to issue. By Tuesday, all of those units had been issued and UNG suspended the issuance of "creation baskets"—UNG's term for blocks of 100,000 units.

The suspension of issuing creation baskets will have no effect on the ability of authorized purchasers to redeem baskets of units, the company said in its Tuesday SEC filing." in CNBC

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