Asset flows from exchange-traded products linked to metals don’t have a significant impact on the price of the commodity, according a study for U.S. regulators weighing JPMorgan Chase & Co. (JPM:US)’s plan for a copper-backed fund.
The analysis, from a division of the Securities and Exchange Commission, is part of deliberations on a proposal by NYSE Arca Inc. to list the JPM XF Physical Copper Trust, a Nov. 6 SEC filing showed. A group of industrial copper users and at least one U.S. lawmaker oppose the plan, saying it would disrupt metal supplies and drive up prices.
The SEC’s Division of Risk, Strategy and Financial Innovation said it looked at the relationship between spot-metal prices and asset flows for funds backed by commodities including silver, gold, platinum, palladium and copper. The study found no evidence that fund flows are related statistically to price changes, according to the filing.
The study also found no strong link between copper inventories and settlement prices on the London Metal Exchange.
“It’s difficult to imagine how the SEC economists could conclude that removing as much as 180,000 metric tons of copper from LME warehouses holding a little more than 200,000 tons globally will have no impact,” said Robert Bernstein, a lawyer at New York-based Vandenberg & Feliu, who represents a group of industrial copper consumers including AmRod Corp., Southwire Co. and Encore Wire Corp. (WIRE:US) He spoke in a telephone interview.
The SEC said in the filing that it “has expressed no view regarding the analysis, findings, or conclusions.”
Jennifer Zuccarelli, a JPMorgan spokeswoman, declined to comment on the filing.
ETFs trade like stocks, giving investors access to commodities such as copper without taking physical delivery. ETF Securities Ltd. started the first exchange-traded products backed by copper, nickel and tin in London in December 2010.
Funds backed by copper would stockpile the metal and leave less available for industrial users, including manufacturers and builders, Senator Carl Levin, a Michigan Democrat, told regulators in a letter in July. JPMorgan’s plan will “severely disrupt” the market, the group of industrial copper users told the SEC in May.
NYSE Arca is the electronic platform of NYSE Euronext.
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