SEC Endorses JPMorgan’s Physical Copper ETF

on Dec 18, 2012

**JPMorgan Given Go-Ahead for First US Physical Copper ETF**

After more than two years of waiting for approval and in the face of strong opposition from manufacturers and merchants, JPMorgan’s (NYSE:JPM) controversial plan to launch an exchange-traded fund (ETF) backed by physical buying of copper has been given a green light from the US Securities and Exchange Commission (SEC), The Financial Times reported on 17 December 2012.

The proposed JPM XF Physical Copper Trust will be the first such investment vehicle in the United States. The ETF will be initially backed by 61,800 metric tonnes of physical copper, compared to currently available copper ETFs, which are backed by metal futures. JPMorgan plans to list the exchange fund on NYSE Arca, a division of NYSE Euronext (NYX). According to the FT report, the trading platform also has a separate request to list rival BlackRock’s (NYSE:BLK) iShares copper ETF, which is now likely to be approved too.

JPMorgan said it could not comment until the launch of the copper ETF, but in a previous submission to the SEC, the bank had said that the fund would not consume metal, but would only hold it. If and when the metal is needed by real consumers the investors can sell their shares in the ETF and the copper will be available to the market within days.
**SEC Approval amid Strong Opposition**

The SEC approval was the final hurdle in a 26-month slog for JPMorgan to launch the copper ETF. The investment bank had amended its request several times to answer the SEC’s questions and address concerns by some US manufacturers and merchants that such a fund would affect the metal’s supplies and prices.
!m[](/uploads/story/1055/thumbs/pic1_inline.png)According to one of the main opponents of JPMorgan’s copper investment vehicle, Carl Levin, chairman of the US Senate subcommittee on investigations, the proposed product “would allow speculators to create a squeeze on the market”. Senator Levin further voiced his opposition to the ETF, saying that the SEC’s approval of the fund was “a blow to American businesses and consumers” and that it would “increase copper prices and volatility, and undermine market efforts to produce prices in response to supply and demand by copper users”.

According to the SEC, however, JPMorgan’s physical copper ETF would “provide another way for market participants and investors to trade in copper”, and could enhance competition amongst exchanges. In its filing dated Friday and posted on its website on Monday, the SEC said it did not believe the fund would affect the flow of copper for immediate delivery.
The regulator said in its ruling: “The Commission does not believe that the listing and trading of the shares is likely to disrupt the supply of copper available for immediate delivery, which is what (the copper fabricators) predict would increase the price of copper.” Additionally, a study released last month by a SEC division concluded that asset flows from exchange-traded products tied to metals, such as gold ETFs, do not have a significant impact on the price of the commodity.


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