Shares in the United States Natural Gas ETF (NYSEArca: UNG) were trading at a nearly 2% premium early Friday morning, after creations of new shares of the fund were suspended earlier this week.

As of 10:02 a.m., Yahoo Finance reported that the indicative NAV of the fund was $12.13/share, while the fund itself was trading at $12.35/share, placing it at a 1.81% premium to NAV.

That echoed the premium at which the fund closed on Thursday, July 9.

As Murray Coleman reported in late June (see story here), the possibility of this premium developing was created by a hitch in the regulatory process for futures-based commodity ETFs. Because UNG is a commodities pool, rather than a traditional equity or bond ETF, it must register a fixed number of shares with the Securities and Exchange Commission. If it wants to increase the number of shares available, it must file papers with the SEC and pay a fee, and then wait for approval before those new shares can be issued.

UNG has experienced a tremendous ramp-up in assets over the past few months, with total assets under management rising from approximately $700 million on April 1 to more than $4.3 billion today. This move, which occurred despite falling gas prices, exhausted the number of shares available for creations.

The developers of UNG filed for the right to issue more shares, but the paperwork has yet to grind through the system. As a result, on July 7, UNG filed a notice with the SEC saying that it was halting the creation of new shares because it had exhausted the full number of shares available.

With creations closed, UNG can and likely will trade at a premium to its net asset value. The reason is simple: If there continue to be a lot of investors interested in buying the fund, those buyers will be bidding for a fixed number of shares. That can force the price of the ETF above its net asset value. Usually, when that happens, market makers will create new shares and arbitrage the price difference. But with the creation window temporarily closed, there is no easy way to make the premium disappear.

Once the SEC approves the issuance of new shares, the premium on UNG should go away. But until then, investors risk paying too high a price for the fund.