The managers of a popular exchange-traded fund focusing on natural gas futures are planning to re-open it to new investments by month's end.

The U.S. Natural Gas Fund (NYSEArca: UNG) will accept new creation units beginning on Sept. 28, its sponsor explained in a new filing to the Securities and Exchange Commission. That would end a stalement between regulators and managers that has lasted since June.

Re-opening UNG would also signal the end of a nearly three-month period in which investors watched their open-end ETF trading at huge premiums, much like a closed-end fund.

Drama Unfolds

UNG invests in futures contracts and other derivatives. It basically operates as a commodities pool, which subjects it to different regulations than most other ETFs and open-end mutual funds. A part of that regulatory process requires the United States Commodities Funds LLC, which runs UNG, to formally submit requests to issue new creation units.

The Alameda, Calif.-based USCF runs a family of commodity ETFs, including the United States Oil Fund (NYSEArca: USO) and the United States Gasoline Fund (NYSEArca: UGA).

The firm was last forced to seek approval  to issue new creation units in June; it asked regulators for permission to offer another one billion units. (See related article here.)

But authorities didn't give their approval to UNG's managers until early August. Then, in a surprise statement on Aug. 12, the fund's sponsors notified investors that they had decided against opening UNG, citing regulatory uncertainty in the commodities marketplace.

That decision followed a nearly year-long run in which UNG's assets shot past $4.5 billion. In a two-week period in May, the ETF's assets doubled despite lagging performance. (See related story here.)

In the new filing, USCF's management again pointed to potential trading restrictions still looming in the market. In particular, it notes possible investment limits being considered by the Commodity Futures Trading Commission as well as the Intercontinental Exchange and the New York Mercantile Exchange.

Both regulators and trading exchanges are concerned that highly specialized and popular commodity funds could dictate market conditions. A recent Citigroup report, which came out just as USCF was deciding to keep its fund closed, estimated that UNG controlled roughly one-quarter to one-third of trading activity in natural gas futures contracts on ICE and the NYMEX. (See related story here.)

Conditions Still Unclear

Through the filing, USCF's managers say now that the situation has progressed to the point where "UNG's management believes that UNG will have the ability, under limited circumstances, to offer creation baskets as of the above-referenced date and meet its investment objective."

The filing also stipulates that UNG's management reserves the right to keep the fund closed if it determines that new circumstances have arisen before the end of September. It also sets up a tight set of conditions for institutions and other big investors interested in purchasing creation units through swap agreements and other contracts.

Since halting the issuance of new shares, UNG has traded at a sharp premium to its underlying net asset value, as demand for the fund has outstripped supply. On Aug. 21, for example, it was trading at a 16 percent premium to NAV. Now, that's down to around 5 percent.

But, since then, UNG's managers have been taking baby steps back into the market. Last month, it entered into a $500 million total return swap to exchange cash flows with a bank based on front-month natural gas contract valuations. That followed a similar $200 million deal.

The idea behind using swap contracts is that since they're privately negotiated and not linked directly to any specific underlying holding, such deals shouldn't count toward any new regulatory limits. The deals also seemingly allowed UNG to reduce its positions in natural gas futures while still tracking the performance of the natural gas market.

You can read the new filing here.