By Tatyana Shumsky
NEW YORK--The Securities and Exchange Commission approved the
first physical copper-backed exchange-traded fund despite
complaints from some U.S. manufacturers and merchants that such a
fund would make the metal more scarce.
The approval was the final hurdle for J.P. Morgan Chase &
Co. (JPM) to list the JPM XF Physical Copper Trust on NYSE Arca, a
division of NYSE Euronext (NYX). The investment bank first filed
its request for the fund in October 2010.
The trust would trade like a stock, though its shares would
represent ownership of the physical copper stored on investors'
behalf. J.P. Morgan wasn't immediately available for comment.
Copper users had opposed plans for the ETF in several comment
letters to the SEC, saying it would kneecap the industry by locking
up too much copper in investors' hands. The gold market has seen
investors' hoard record levels of the precious metal since
gold-backed ETFs were started in 2006. This has made copper users
apprehensive that a copper-linked product would disturb a
delicately balanced market that has faced a production shortfall
for three of the past four years.
Southwire Company, the largest U.S.-based copper-wire producer,
and other copper-product makers said in a joint letter that a
copper ETF would create "forced scarcity" and make it "even harder
for industrial users of copper to obtain the metal." The group also
said the fund could drive up the global price of the industrial
metal. Copper is most widely used in electrical wiring and
pipes.
In its approval filing dated Dec. 14, the SEC said it didn't
believe that listing and trading of the copper ETF was "likely to
disrupt the supply of copper available for immediate delivery."
Moreover, an analysis of market data by the SEC showed that the
level of copper inventories has no statistical effect on copper
prices, leading the regulator to conclude that copper-backed funds
would have no direct impact on market prices.
The Financial Times first reported this filing.
Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com
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