The JP Morgan XF Physical Copper Trust, a fund that has been in
the regulatory pipeline for two years awaiting approval, will have
to wait at least through mid-December before it has a chance of
getting rubber-stamped by regulators.
Originally scheduled to rule on the matter on Oct. 17, the
Securities and Exchange Commission said instead it would again
postpone a decision to December on whether to approve the proposed
fund in order to have "sufficient time" to consider all the facts
that have arisen in various comment letters it's received.
Indeed, this isn't the first time JP Morgan's plans to launch a
physical copper ETF have been roadblocked.
Earlier this year, the approval process was mired, among other
things, by a complaint a New York law firm filed on behalf of
copper merchants and fabricators arguing that the proposed trust
would remove as much as 30 percent of the copper available for
immediate delivery worldwide, creating an artificial squeeze.
Many who oppose the trust have suggested that a physically
backed copper ETF would require the ETF trust to hold onto supplies
that they say are crucial to the global industry today. The tighter
supplies should also cause prices to rise.
J.P. Morgan's copper trust is looking to register 6.18 million
shares, or 61,800 metric tons, of copper.
But others see the arguments as mere scare tactics to prevent a
transparent investment vehicle to shed light on what, thus far, has
been a rather murky copper market.
"I think the people complaining about having a transparent
physical player are people who do not want transparency brought to
the physical copper market," United States Commodity Funds CIO John
Hyland told IndexUniverse. "Who wants some transparent new kid on
the block messing up their game?"
USCF is the only ETF provider to have a copper fund on the
market today. The U.S. Copper Index Fund (NYSEArca:CPER) is a
futures-based copper portfolio launched about a year ago.
J.P. Morgan first filed a registration statement for the copper
trust in October 2010, and the New York Stock Exchange, where the
fund would be listed, filed its petition to add the ETF as one of
its listings in April of this year.
"The notion that a physical copper ETF is going to hoard copper
is absolute nonsense," Hyland said. "As long as you can redeem your
shares in the copper ETF for the underlying physical copper on a
daily basis-in some sort of batch like 50,000 shares-that means the
ETF is in fact the only physical holder of copper who cannot hoard
But the SEC is caught between a rock and a hard place, and the
upcoming presidential election certainly adds another constraint to
this problem, Hyland said.
"I am not surprised that the SEC elects to defer the decision
until after the election," he said. "No matter how they finally
rule it is going to make somebody angry."
Hyland spoke to IndexUniverse about the issue back in May in an
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