SEC again rejects copper users' challenges to JPMorgan ETF

NEW YORK Fri Mar 29, 2013 6:10pm EDT

JPMorgan Chase & Co's international headquarters are seen on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton

JPMorgan Chase & Co's international headquarters are seen on Park Avenue in New York July 13, 2012.

Credit: Reuters/Andrew Burton

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission has again rebuffed claims by copper fabricators that JPMorgan Chase & Co's planned exchange traded fund backed by physical copper would tighten supplies of metal used in plumbing and wiring.

In a filing dated March 28 and posted on the SEC website on Friday, the regulator upheld its December 14 decision to approve the controversial fund, rejecting concerns among copper users that the fund would distort supply and inflate prices.

Industrial users fear the funds would cut off supplies of copper, used in wiring and plumbing, and boost prices since they will use physical copper cathode as collateral against shares of the fund, effectively removing a chunk of metal from the market.

There is no new evidence to suggest that the JPM XF Physical Copper Trust would lead to a scarcity of particular grades or brands of copper, the SEC said.

"The commission does not believe that ... as a result of the trust, it is much more likely that brand-sensitive end-users of copper will not be able to obtain their desired brands of copper at their desired locations," the filing said.

The latest missive came after a last-ditch effort by a consortium of copper users to get the SEC to reverse its decision. Their attorney Robert Bernstein with law firm Eaton & Van Winkle LLP asked the regulator in a letter dated January 9 to block the fund.

Last month, two firms from the group, Southwire Co and Encore Wire Corp, said they were preparing to fight the ruling in the U.S. Court of Appeals.

The consortium, which represents half the annual copper demand of the United States, has also opposed another, similar fund, the iShares Copper Trust, planned by BlackRock Inc. The SEC gave its seal of approval for that product last month.

This week's filing also rejected concerns raised in the January letter that long lines in some warehouses would delay investors getting their metal if they redeemed their shares in the trust for physical material.

The SEC said it expected that metal would be transferred to the relevant investor's account within three days of redemption, which it did not consider to be a "significant" delay.

It remained unclear when JPM may launch the fund after two years of work to get the approval in December.

JPMorgan and BlackRock have said fears about rising prices and supply squeezes are unfounded because the funds would be miniscule compared with the 20-million-tonne global market.

(Reporting by Josephine Mason; Editing by David Gregorio)