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.