“However, like all bubbles, as investor demand for this product wanes, as it inevitably will, the bubble will burst, leaving in its wake a glut of physical copper that the JPM Trust will be forced to dump on the market, causing prices to plummet, and leaving in its wake unsuspecting investors who will have lost the value of their investment,” Vandenberg & Feliu wrote.
“In short, this proposed rule-change will allow the trading of an ETF whose sole purpose is to remove from the market a physical metal in short supply that, unlike other ETFs backed by physical metals that have been successfully offered for sale in the United States, is used only in manufacturing and for no other purpose,” according to the letter sent to the SEC, which was dated May 9. “Adopting this rule change will therefore undermine the integrity of the very markets that the NYSE and the SEC are supposed to protect, grossly and artificially inflate prices for an industrial commodity already in short supply and, as a consequence, wreak havoc on the U.S. and global economy.”
There are copper exchange traded products currently on the market, but they are designed to track futures contracts rather than hold the physical metal. One example is iPath Copper ETN (NYSEArca: JJC). [Getting Physical with Copper ETFs]
BlackRock and ETF Securities have also filed to list copper-backed ETFs. [JP Morgan Readies First Physical Copper ETF]