SEC denies appeal to block copper trade fund by consortium that includes 2 wire companies
The U.S. Securities and Exchange Commission has denied an appeal of a prior decision rejecting claims by copper fabricators that a planned exchange traded fund (ETF) backed by physical copper would tighten supplies and impact their businesses.
"The commission does not believe that ... as a result of the trust, it is much more likely that brand-sensitive end-users of copper will not be able to obtain their desired brands of copper at their desired locations," the court ruled in a March 28 filing according to a Reuters report. The proposed ETF by JPMorgan Chase & Co., called the JPM XF Physical Copper Trust, was opposed by a consortium of copper users that included Southwire Co. and Encore Wire. The consortium had argued that the funds would cut off supplies of copper and boost prices since they will effectively removing a chunk of metal from the market.
The SEC, however, found that "there is no new evidence to suggest that the JPM XF Physical Copper Trust would lead to a scarcity of particular grades or brands of copper," the Reuters story said. It noted that the consortium, which represents half of the U.S. annual copper demand, had also opposed another similar fund, the iShares Copper Trust, planned by BlackRock. Inc., which was given an okay by the SEC last month.
The report said that the SEC's decision rejected concerns that "long lines in some warehouses would delay investors getting their metal if they redeemed their shares in the trust for physical material." It added that no set launch date for the new fund has been announced. It also noted that JPMorgan and BlackRock have said that the funds should not have an impact as their holdings "would be miniscule compared with the 20-million-metric ton global market."