Things are beginning to look pretty good for a silver ETF.

The commodity market recently increased the amount of money necessary to be held in traders' accounts for the purchase of silver futures contracts (something I would never recommend unless your a millionaire). This suggests they are preparing for coming high volatility in silver. What might cause that? Approval of the silver ETF.

Now, today, the SEC has announced that a silver ETF can list on the Amex. And it has decided that it does not believe the silver ETF will create liquidity problems for silver.

This is pretty big news -- for the silver bugs.

Today, even though gold was down and the stock market reversed down (probably in my opinion marking the start of a major down trend in the stock market), silver was up strongly.

Here's the announcement.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B800FF9D4%2D65A5%2D492C%2D96D7%2D24DB3E975B71%7D&dist=rss&siteid=mktw&print=true&dist=printTop

Another step forward for silver ETF
SEC approves rule change; silver rallies on speculation

By John Spence, MarketWatch
Last Update: 2:43 PM ET Mar 21, 2006

BOSTON (MarketWatch) -- A controversial exchange-traded fund tied to silver prices moved a step closer to reality Tuesday.

The Securities and Exchange Commission has approved a rule change for a silver ETF in registration from Barclays Global Investors that would allow the product to list on the American Stock Exchange, although the fund has not yet been cleared to launch by regulators.

BGI spokeswoman Christine Hudacko said the comment period on the silver ETF's proposed rule change recently closed, and the SEC order says the product can now list on the Amex. However, she said the registration statement submitted by BGI has not taken effect.

"This takes the process one step further, but we're still in the quiet period and no launch date has been determined," Hudacko said.

Silver futures on Tuesday traded at their highest level since late 1983 on speculation the ETF may soon be approved.

There are currently two ETFs that invest in gold: StreetTracks Gold Trust and Shares Comex Gold Trust. The bullion is held in a vault and shares represent ownership in the precious metal, and the silver ETF has a similar design.

The SEC said it received 255 letters during a recently closed public comment period on the proposed rule change allowing the silver ETF to list on the Amex. Of those received, 248 comments supported the rule change and 7 opposed it.

The Silver Users Association, a nonprofit lobby group interested in keeping an orderly silver market, has led the opposition to the silver ETF.

The SEC said in general, commenters opposed to the fund argued that approval of the silver ETF would result in serious liquidity problems in the silver market.

Those opposed to the silver ETF said it would "negatively impact the silver market because . . . creation would require the holding of silver in allocated accounts, which would drain large amounts of silver from the open market and cause higher prices for silver products."

Additionally, the opposition claimed resulting higher silver prices caused by the creation of the silver ETF would cause the loss of jobs specific to the silver industry.

However, the SEC said it sided with the Amex's argument that, like other derivative products, the silver ETF would increase the efficiency and transparency of the silver market.

Therefore, the SEC found the proposed rule change "in the public interest," saying it does not believe the silver ETF is "likely to cause serious liquidity problems in the silver market."

Cliff Weber, senior vice president of the Amex ETF Marketplace, said the exchange is "glad to see the SEC make an important step towards making the iShares Silver Trust available to the public."