ComX Stories
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ComX Stories

Understanding ETCs

by Unrepentant Small Chops Eaters

At AFEX we like to explain Exchange Traded Commodities (ETCs) as a mixed basket of commodities in one contract whose performance is then collectively tracked to form the basis of investor returns. ETCs are similar to Exchange Traded Funds (ETFs) and are traded and settled like normal shares in their own dedicated sector. That’s simple enough for some people, but some of us need a little extra guidance.

Last week, we (the Communications Squad at AFEX) bought about 12 packs of small chops on three different days. We had intended to use small chops to illustrate the concept of ETCs, but small chops are a very popular commodity with the communications team at AFEX just as we suspect ETCs will become once you understand and can relate with them, and we ended up eating up the bulk of the video props before we could get down to shooting.

Here’s the analogy we wanted to make with all those many, sumptuous packs of small chops, and the actual entirety of the script we used to shoot the video that follows:

“An ETC can be likened to a pack of small chops, which has samosa, puff-puff, spring roll, chicken [and whatever else is your poison] inside, which are then sold as a pack.

One could be great…

…But together we have a pack of small chops that really bangs.”

An ETC is a mixed pack of goodies just like your small chops pack. It therefore allows you to invest in a unit or more of a contract that is actually a mixed bag of commodities, where you then gain cumulative returns on everything in the bag.

So what types of ETCs can we have?

It is important to note before we delve into types that ETCs are open-ended securities, created and redeemed on demand by the issuer (Referencing Investopedia, an issuer is a legal entity that develops, registers and sells securities to finance its operations). ETCs come in two forms:

  • Single Commodity ETCs: Investors can buy single commodity ETCs like
    Maize, Soybean, and Cocoa etc.
  • Commodity Baskets: Investors can invest in a basket of commodities
    that tracks the performance of underlying commodities like the AFEX Commodity Index (ACI)

ETCs are a great means of diversifying investment portfolios. They give a wider range of investors an opportunity to gain exposure to the commodities market because they are a varied product class that is perfect for certain investor appetites.

The Communications Squad at AFEX has had a lot of small chops in the past few days and now we’re inviting you to enjoy a pack of goodies that is even better. You can trade ETCs on the ComX by AFEX platform and there’s no better time to dive in than right now.

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AFEX’s infrastructure and platforms drive capital to build a trust economy in Africa’s commodity markets.