--SEC gives second approval to a U.S. physical copper
exchange-traded fund
--Industrial copper users objected to shares' listing, arguing
fund would disrupt supply, prices
--Copper wire maker has sued to reverse SEC's approval of
similar J.P. Morgan product
By Matt Day
U.S. regulators have approved BlackRock Inc.'s (BLK) copper
exchange-traded fund, two months after giving the green light to a
similar product sponsored by J.P. Morgan Chase & Co. (JPM).
In a regulatory filing dated Friday, the Securities and Exchange
Commission approved BlackRock's iShares Copper Trust. The fund,
along with J.P. Morgan's XF Physical Copper Trust, would be the
first U.S. funds to store physical metal for investors.
The funds, both proposed in late 2010, have drawn objections
from industrial consumers of the metal who argue that they may
limit the amount of copper available for delivery and artificially
inflate the prices they pay for the metal.
Copper is widely used in plumbing and wiring in construction,
appliances and general manufacturing.
In its order dated Friday, the SEC said the listing and trading
of BlackRock's ETF is not "likely to disrupt the supply of copper
available for immediate delivery." The commission added that even
if the ETF did limit the amount of copper held in the London Metal
Exchange warehouse system, the change to stockpiles wouldn't have a
direct impact on prices for the metal.
The regulator used similar language in its Dec. 14 approval of
J.P. Morgan's ETF.
That approval of J.P. Morgan's fund is being challenged in
court, after a pair of industrial copper users earlier this month
asked a federal appeals court to review the SEC's decision.
Southwire Co. and Encore Wire Corp. (WIRE), in a filing with the
Court of Appeals for the District of Columbia Circuit, said the
fund would lead to an "investor-financed squeeze" in the copper
market.
Last week, Encore dropped out of the suit. Robert Bernstein, the
lawyer representing the pair of companies, said in court papers
that Encore "has decided it no longer wishes to be a party to the
petition."
In an interview, Mr. Bernstein declined to elaborate on the
reasons behind Encore's decision.
"I don't know whether and to what extent (the companies) will
challenge the BlackRock ruling," Mr. Bernstein said. "It's an
expensive undertaking to challenge the agency."
Encore, Southwire, and BlackRock didn't immediately respond to
messages seeking comment.
BlackRock's fund would be about twice the size of J.P. Morgan's
ETF, holding about 121,200 metric tons of copper, filings show. JP
Morgan's ETF would initially hold about 61,800 tons. The SEC has
yet to approve the final prospectus for either fund, which would
pave the way for their listing on NYSE Euronext's (NYX) Arca
division.
Write to Matt Day at matt.day@dowjones.com
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