In the highly controversial and anticipated launch of the first physically-backed copper exchange traded fund, the U.S. Securities and Exchange commission is extending the consultation period for the new copper ETF offering.
After opposition escalated in the week ahead of lastThursday’s ruling deadline, SEC regulators asked JP Morgan Chase, the company that has filed for the new JPM XF Physical Copper Trust, copper fabricators and hedge funds, who oppose the creation, to weigh the merits of such a physically-backed copper ETF, reports Josephine Mason for Reuters. [Physical Copper ETFs Hit Roadblock]
Earlier last week, U.S. Senator Carl Levin also argued that the copper ETF would cause a boost-and-bust cycle in the copper market and “disrupt the global supply of copper.” [Senator Opposes Physical Copper ETFs]
Traditional industrial consumers use copper as a basic input, such as in wiring, whereas banks are seeking to attract retail customers in the hopes of potentially capitalizing on copper prices.
The physically-backed copper ETF would issue shares that are equivalent to a set value of copper that is physically stored in vaults, making copper accessible to everyone as an investment class.
However, the opposition points to the impact on traditional end users as the proposed ETFs would have to hoard 180,000 tons of copper – the JPMorgan fund would hold about 62,000 metric tons while the potential BlackRock ETF would stash away 121,200 metric tons. While the numbers appear insignificant compared to the 20 million metric ton global copper market, U.S. fabricators are worried because the copper required will come out of U.S. markets.