NEW YORK The U.S. Securities and Exchange Commission (SEC) has given asset manager BlackRock Inc. the go-ahead to list and trade shares in a physical copper exchange-traded fund (ETF).
The trading and markets division of the SEC said it will allow the New York Stock Exchange (NYSE) to amend its rules so the proposed ETF can list and trade on the exchange.
The move follows the SECs approval of JPMorgan Chase & Co.s copper ETF in December, a decision that is being contested in the U.S. Court of Appeals by two large copper consumers, Southwire Co. and Encore Wire Corp. (amm.com, Feb. 13).
The initial size of the ETF is 121,200 tonnes, but New York-based BlackRock has said that if the product is a success it could apply to increase its size within three years.
The SEC said it proposed the rule change "on an accelerated basis," having received a couple of amendments from the NYSE related to the surveillance and disclosure of the ETF.
Approval wasnt certain; the SECs trading and markets division had been scheduled to rule on the BlackRock application last year but said it needed more time to consider objections and supporting data for the product.
BlackRock has described the proposed ETF as a relatively liquid, low-cost and transparent means to transact in physical copper. It has refuted the suggestion that the product would remove copper from the market and distort prices, estimating that as of last July the total world warrantable copper supply totaled nearly 2.93 million tonnes, of which 1.36 million tonnes of liquid warrantable copper stocks were available.
It also said it expects much of the initial demand for ETF shares will not necessarily represent new incremental investment demand for copper, but "rather a reallocation of current investments in physical copper by professional copper market participants."
Copper ETFs have been fiercely opposed by consumers, who believe they will distort prices and create artificial market tightness.
Sen. Carl Levin (D., Mich.) said that ETFs will be used to speculate in copper (amm.com, Dec. 20). He described the SECs approval of the JPMorgan ETF as "a blow to American businesses and consumers that rely on copper for industrial machinery, plumbing, transportation, electric power generation and transmission, and electronics."