JP Morgan (NYSE: JPM) has received SEC approval for the first physically backed copper exchange traded fund, but the decision has been met with wide disapproval from fabricators that contend the new fund would incite greater volatility and speculation.
A group of fabricators, which represents half of U.S. demand for copper, demanded the SEC to reconsider its decision on the copper ETF, criticizing regulators as “arbitrary and capricious,” reports Josephine Mason for Reuters. [SEC Green-Lights JP Morgan Copper ETF]
The fabricators argue that the SEC has not given enough assurances that the physically backed copper ETF would not distort supply and prices in the copper market.
Industrial users believe that the physical copper ETF would have a “devastating” affect on the market as the easy access would disrupt supplies and inflate prices since the ETF would have to physically hold a set amount of copper to back the shares, which effectively removes a chunk of global supply.
“It appears the commission categorically rejected all of the substantial evidence presented as to the catastrophic damage that the proposed (fund) could have for industrial users of copper,” Robert Bernstein, an attorney with the law firm Eaton & Van Winkle LLP, who represents the group of fabricators, said in the article.
Bernstein has warned that they will take the decision to the federal appeals court if needed.