Dow Jones has reported that the Security & Exchange Commission has approved J.P. Morgan’s application to introduce a copper Exchange Traded Fund (ETF) to the market. The fund would be backed by 61,800 metric tons of copper.
Since the company first floated the idea of offering the ETF as an investment vehicle more than two years ago, significant opposition cropped up as copper consumers expressed concern that the fund would make copper a far more scarce metal, ultimately driving up copper prices.
Where the JP Morgan ETF, the JPM XF Physical Copper Trust, would differ from other copper EFTS is that the J.P. Morgan fund would be backed by actual copper, while other copper ETFs are backed by futures.
The SEC approval was the final hurdle in a 26-month slog for J.P. Morgan to list the ETF. The investment bank had amended its request at least five times to answer the SEC's questions and address concerns by U.S. copper users.
In its approval filing dated Dec. 14, the SEC said it didn't believe the copper ETF was “likely to disrupt the supply of copper available for immediate delivery.”
In a statement approving the EFT, the SEC said the trust would not affect the copper market’s integrity, but rather would serve as a transparent and accessible alternative by which participants in the copper market could access or offload physical copper inventory and associated price risk.
Moreover, an analysis of market data by the SEC showed the level of copper inventories has no statistical effect on copper prices, leading the regulator to conclude copper-backed funds would have no direct impact on market prices, the SEC notes.
In related news, two other financial firms, IBlackRock Inc. and ETF Securities Ltd., have announced plans to introduce physically backed ETFs for industrial metals.