U.S. regulators have delayed by two months a ruling on BlackRock Inc.’s plan to launch a copper exchange-traded fund backed by physical metal, a week after giving the go-ahead to a similar product proposed by JPMorgan Chase & Co.
The U.S. Securities and Exchange Commission set a new and final deadline of Feb. 22 to rule on the BlackRock fund. It said it needed more time to consider the issues surrounding the iShares Copper Trust, which along with JPMorgan’s fund has ignited fears among copper fabricators about their impact on prices and supplies.
The postponement comes just a week after the SEC gave the green light to JPMorgan’s fund, saying it did not believe it would disrupt the availability of the metal.
That decision was seen as a benchmark for BlackRock’s product. The SEC followed a similar path with JPMorgan, waiting to rule until the final deadline in order to investigate claims by copper fabricators that by hoarding more than 180,000 tonnes of copper off the market, the funds would inflate prices and tighten supplies.
There is one final regulatory hurdle that JPMorgan must cross before it can launch its product – it must file a prospectus for the product with the SEC.
Copper end users who have launched a strenuous attack on the products may challenge the ruling in federal court.
Robert Bernstein, an attorney with the law firm Eaton & Van Winkle LLP, who is representing a consortium of fabricators, said he will decide whether to appeal the ruling on the JPMor gan XF Physical Copper Trust once he has analyzed the SEC’s findings.
“I think there are grounds to appeal,” he said in an interview on Monday.
Mr. Bernstein has until Feb . 18 – 60 days after the ruling’s publication in the Federal Register on Dec. 20 – to file a legal challenge, he said.
The end users say the removal of up to 183,000 tonnes of copper, which would be used as collateral against shares in the funds, would have a “devastating” effect on the market.
The BlackRock and JPMorgan products are very similar, although BlackRock’s is twice as large.
JPMorgan’s fund would store LME brand-approved copper valued at up to $499,761,150 – equivalent to about 62,000 tonnes based on a copper price of $8,000 per tonne. BlackRock’s trust would use up to 121,200 tonnes of copper as guarantee against shares in its fund.
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