Systems and methods for securitizing a commodity
A system and method for providing a tradable (e.g., exchange-listed) instrument by securitizing a commodity using a commodity trust or other special-purpose vehicle that is established to hold one or more physical commodities and to issue commodity trust shares and/or receipts corresponding to the value of the physical commodity held by the Trust. The commodity trust shares may represent a proportional interest in the Trust and/or the physical commodity held by the trust, e.g., precious metals such as gold, or base metals such as copper. The Trust may include one or more Trust accounts to receive and store the physical commodity deposited with the Trust. The shares or receipts of the trust can be listed, quoted, and traded on a trading system, e.g., an Electronics Communication Network (ECN), and may be traded as Exchange Traded Fund (ETF) shares on a securities exchange.
1. A method for electronically trading shares of a physical commodity over an electronic communications network (ECN), the method comprising:
providing an amount of the physical commodity to a trust, the physical commodity provided to the trust having a value based at least on a weight thereof;
receiving a number of trust shares each representing a proportional ownership interest in the physical commodity; and
using the electronic communication network (ECN) to trade one or more of the trust shares.
2. The method of claim 1 , wherein the physical commodity comprises a precious metal.
3. The method of claim 1 , wherein the physical commodity comprises a base metal.
4. The method of claim 3 , wherein the base metal comprises copper.
5. The method of claim 4 , wherein said using the ECN to trade one or more of the trust shares over the ECN comprises trading via a securities exchange so as to create a secondary market for the trust shares.
6. The method of claim 5 , wherein the securities exchange is the New York Stock Exchange.
7. The method of claim 6 , wherein the trust shares are Exchange Traded Fund (ETF) shares.
8. The method of claim 1 , wherein, after using the ECN to trade said one or more of the trust shares over the ECN, a buyer thereof owns a corresponding interest in a portion of the physical commodity, said portion of the physical commodity being stored in a repository associated with the trust account.
9. The method of claim 1 , wherein, after using the ECN to trade said one or more of the trust shares over the ECN, a buyer thereof owns a corresponding interest in a portion of the physical commodity, said portion of the physical commodity being physically transferred out of a repository associated with the trust account.
10. The method of claim 1 , wherein said using the ECN to trade one or more of the trust shares over the ECN comprises trading via a securities exchange so as to create a secondary market for the trust shares.
11. The method of claim 10 , wherein the securities exchange is the New York Stock Exchange.
12. The method of claim 1 , further comprising establishing the value of the physical commodity bars by use of an assay result of the physical commodity in addition to the weight.
13. The method of claim 1 , further comprising maintaining the trust for the benefit of one or more trust share owners by a trustee.
14. The method of claim 1 , further comprising, establishing a creation order that requests creation of the trust shares.
15. The method of claim 14 , wherein said creation order requests creation of a minimum amount of the trust shares or a multiple of the minimum amount.
16. The method of claim 14 , wherein said creation order requests creation of a specific number of trust shares.
17. The method of claim 14 , wherein said creation order requests creation of a number of trust shares that correspond to a specified amount of the physical commodity.
18. The method of claim 1 , comprising providing a redemption order comprising a request to redeem one or more trust shares corresponding to an associated physical amount of the delivered physical commodity.
19. The method of claim 18 , further comprising obtaining a receipt for the transferred physical amount.
20. The method of claim 1 , further comprising creating additional trust shares responsive to a delivery of an additional physical amount of physical commodity to the trust.
21. A method for electronically trading shares of copper over an electronic communications network (ECN), comprising:
receiving an amount of copper in a trust, the copper received having a value based at least on a weight thereof;
creating trust shares, each share representing a proportional ownership interest in the copper in the trust;
enabling trading of the trust shares over the electronic communications network.
22. The method according to claim 21 , further comprising weighing the copper prior to receiving the copper in the trust to determine a value thereof.
23. The method of claim 21 , wherein the trust shares are Exchange Traded Fund (ETF) shares.
24. The method of claim 23 , wherein the ETF shares are traded on a securities exchange.
25. The method of claim 24 , wherein the securities exchange is the New York Stock Exchange.
26. An commodity trust trading system, comprising:
an electronic communications network (ECN) configured to trade trust shares of a commodity trust, wherein said commodity trust holds an amount of a physical commodity represented by a number of shares corresponding to said amount of the physical commodity,
wherein a trustee administers said commodity trust via an interface to the ECN,
wherein one or more custodians maintain physical custody of a portion of said amount of the physical commodity and manage said physical custody via a interface with the ECN.
27. The system of claim 26 , wherein the physical commodity is a precious metal.
28. The system of claim 26 , wherein the physical commodity is a base metal.
29. The system of claim 28 , wherein the base metal is copper.
30. The system of claim 26 , wherein the trust shares are Exchange Traded Fund (ETF) shares.
31. The system of claim 30 , wherein the ECN comprises an interface to a securities exchange.
32. The system of claim 31 , wherein the securities exchange is the New York Stock Exchange.
33. The system of claim 26 , wherein said amount of the physical commodity comprises a number of receipts, each corresponding to an amount of unallocated physical commodity.