Fewer new commodity products as recovery drags

NEW YORK (Reuters) - The commodities marketplace, one of Wall Street's favourite playgrounds for testing new investment ideas, is hardly seeing any product rollouts now as the slow economy delays the pace of innovation.

A "green" futures index and a remodelled online derivatives exchange are among the few commodity product launches in the United States this year. A U.S. platinum exchange-traded fund -- the first of its kind -- is awaiting regulatory approval.

Compare that with the commodities boom of the past few years, which spawned a multitude of exchange-traded products and mutual funds linked to oil, metals and agricultural futures, as well as equities of energy and mining companies.

Even British investment bank Barclays Capital (BARC.L), which dominates the U.S. market for bond-like notes linked to commodities, has not introduced anything in that market for more than a year.

BarCap issued 18 exchange-traded notes -- or ETNs -- linked to commodities in 2007, up from just three in 2006. But the last came out in June 2008.

Many think the halting progress boils down to one thing: the economy's slower-than-expected recovery from recession.

"You don't have those big amounts of money sloshing around anymore to do what you want," said Edward Meir, a metals and energy analyst in New York for broker MF Global. "Not everybody is going to get enough to make their markets liquid."

Michael Pento, chief economist for Delta Global Advisors in New Jersey, agrees.

"I believe there were many products that were supposed to come out and I don't think there was a desire for them at the end of the commodities boom-bust cycle," Pento said. "They are probably being held in abeyance, awaiting the right time."

Delta Global itself was trying to find a more opportune launch for a couple of commodity-backed investment trust and exchange-traded projects, which have been ready since the start of the year, Pento said.

"Some of our other ideas have been kicked outright because there's no demand for them right now," he added.

Even BarCap indicates that its relative inactivity in the commodity products market could be a wait-and-see strategy.

"Obviously, I cannot speak about what's going to be done," said Philippe Comer, who oversees commodity ETNs for BarCap in the Americas. "But it's definitely a sector where we have a leading position and we're looking to maintain that position."

After the market downturn in late 2008 extended into early this year, commodity prices suddenly sprung to life in March as U.S. macroeconomic data suggested the recession may have hit bottom.

But by mid-June, the rally faded as key statistics on jobs and consumer spending turned weak again.

Trading restrictions proposed recently for non-commercial investors in commodities -- which include banks, hedge funds and their clients with multibillion-dollar accounts -- could further thwart the appetite for new products, analysts said.

MONEY-MAKING IDEAS WELCOME

Still, there are those who believe the market will welcome ideas that break new ground -- or simply show people new ways to make money.

The U.S. platinum exchange-traded fund -- proposed by London's ETF Securities and awaiting approval from the U.S. Securities and Exchange Commission -- could be one.

Exchange-traded funds are backed by physical stocks of a given commodity and analysts have said the platinum ETF could spark a rally in the metal, which is used mainly for purifying auto emissions.

The "green" commodity index launched last week by Prudential Financial's (PRU.N) Bache Commodities is another first for the United States. The index comprises of futures in platinum, palladium, sugar, soybeans, palm oil and corn, as well as carbon credits.

Bache Commodities said it was aiming the product at institutional funds. "But we're getting interest from retail investors too, wondering how they can access this thing," senior Vice-President Stephen Ilnitzki said.

Nadex.com, launched late month, is another venture hoping to make it big. The Internet-based exchange for commodity futures and financial derivatives had limited hits when it operated over the past four years as Hedgestreet.com.

But its remodelled version comes on the back of sweeping reforms for financial and commodity markets proposed by the Obama administration. Those reforms encourage trading on exchanges watched by the Commodity Futures Trading Commission -- like Nadex -- versus unregulated over-the-counter swaps.

But Nadex, which targets retail investors, said it has more to offer.

"We are an inexpensive trading platform, but we have premium features like charting," company President Yossi Beinart said. "With us, you can open a trading account for just $100 (61.67 pounds). With the other exchanges, you need at least $10,000."

(Editing by Walter Bagley)