likelihood of JPMorgan Chase & Co. or BlackRock Inc.
launching controversial copper exchange-traded funds (ETFs) is
fading rapidly amid intense scrutiny of bank activity in
physical commodities markets.
JPMorgan has said it
is exploring "strategic alternatives" for its physical
commodities assets, which includes a warehousing business that
will be critical to the performance of the ETF (
amm.com, July 26).
Around the same time,
Goldman Sachs Group Inc. confirmed that its warehousing
company, Metro International Trade Services LLC, wont act
as a custodian servicing BlackRocks iShares ETF,
potentially derailing the asset managers plans to launch
its own physical copper fund.
The U.S. Securities
and Exchange Commission approved the funds late last year
despite opposition from physical copper consumers, who charged
the products would inflate prices and crimp availability in the
However, the Federal
Reserve, the Department of Justice, the Commodities Futures
Trading Commission and the U.S. Senate all launched probes
recently into banks roles in commodity markets through
their ownership of physical assets, such as warehouses and
A JPMorgan subsidiary
late last month paid $410 million to the Federal Energy
Regulatory Commission to settle allegations that it rigged
prices for electricity supplied by power plants in California
and the U.S. Midwest from September 2010 to November 2012 (
amm.com, July 30).
Aside from the
political scrutiny the vehicles might attract, the potential
difficulty in finding another warehouse custodian to help lower
rental costs, combined with weak market conditions, could make
the copper ETFs a tough sell, making it probable that BlackRock
and JPMorgan will delay or scrap the products, sources
"Given all the hoops
theyve already had to jump through, it wouldnt be
all that surprising (if the ETF was shelved)," one observer
JPMorgan and BlackRock
declined to comment.
A spokesperson for
Goldman Sachs confirmed that the investment company has
withdrawn support for its iShares vehicle, but declined to
A version of this
article was first published in AMM sister publication Metal