J.P. Morgan Defends Its Copper ETF Plans
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Thursday, September 06, 2012

J.P. Morgan Defends Its Copper ETF Plans

The J.P. Morgan [profile] team is defending a commodity ETF that hasn't even hit the market yet. Jack Farchy of the Financial Times reports that the mutual fund shop submitted a letter to the SEC saying that it "does not believe that [exchanged-traded vehicles] have a significant impact on price," in defense of the proposed J.P. Morgan physical copper ETF.

J.P. Morgan first proposed the JPM XF Physical Copper Trust almost two years ago. Yet as of July of this year, the SEC extended the consultation period and asked for more outside input on the proposed ETF [see the amended S-1]. That delay came even as U.S. industrial users of copper, at least one hedge fund trader and a U.S. senator all lined up to oppose it, worrying about an increase in the volatility of copper prices.

The FT argues that J.P. Morgan's defense of the proposed ETF is a contradiction with its older published views on commodity ETFs, like in November 2010 when J.P. Morgan wrote that ETFs could help drive up silver prices, or like in March 2012 when J.P. Morgan wrote that ETFs had helped crowd out other palladium buyers.

One analyst told the pub that "To say that ETF demand has no impact on the price is nonsense."

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