ETF Securities, a London-based issuer of exchange-traded commodities and funds, is launching a range of exchange-traded currencies (currency ETCs) on the London Stock Exchange.

The first range of currency ETCs will offer long or short passive exposure to various G10 currency exchange rates against the US Dollar. Currencies available include the Australian, Canadian and New Zealand dollar, Swiss franc, British pounds sterling, Norwegian and Swedish krona and Japanese yen. 

The currency ETCs are collateralised debt securities issued by ETFS Foreign Exchange Limited, incorporated in Jersey. According to Nik Bienkowski, chief operating officer at ETF Securities, the issuer plans to broaden its range of currency ETCs in due course to include leveraged and emerging market currencies.

The new products will be listed on the London Stock Exchange next week and will trade in the ETC section. Settlement will be T+3 (trade date plus three business days) in CREST. The management charge will be 0.39% per annum.

Each ETC will track the total return version of one of the Morgan Stanley Foreign Exchange (MSFX) indices. The total return index for any given currency pair has two components: a constant (long or short) position in the relevant MSFX currency, achieved by daily rebalancing via a “spot-next” transaction, and an interest component which tracks the one-month US dollar Treasury bill rate.

Collateral will be held in a segregated account with the Bank of New York, which acts as custodian and collateral administrator for the ETCs. Eligible collateral will include AAA-rated money market funds and G 10 government, US agency and supranational debt obligations, subject to certain concentration limits.

In a company press release, ETFS’s Bienkowski said, “Our investors have demanded access to new asset classes in a liquid and secure package. Currency ETCs will deliver this through an open-ended exchange traded security which is fully collateralised and available through ordinary brokerage accounts.”

According to the issuer, “Currencies have been one of the best performing asset classes, along with commodities, over the past one year, three years and five years.  Currencies also have low correlation to other asset classes and low volatility, making them an asset which can improve portfolio performance through increased diversification.”

“Currency ETCs offer investors a way to achieve an institutional interest rate return,” Bienkowski added. “They will be of use to asset allocators, can be seen as an alternative to cash deposits in different currencies, and will help investors manage the cash position of their portfolios more efficiently.”