The SEC has decided to approve trading in Exchange Traded Funds (ETFs) backed by physical copper. As speculative interest grows, quantities of this vital industrial commodity will be withdrawn from the market, and prices for real-economy businesses and consumers will increase.
AFR issued the following statement:
“We are deeply disappointed in the SEC’s decision to approve trading in Exchange Traded Funds (ETFs) backed by physical copper. Unlike other commodity tracking products, which use paper derivatives, this ETF will store actual physical copper to back the financial investment in the commodity. Financial speculation in the ETF product will thus lead to changes in physical supply and demand of a vital industrial commodity. As speculative interest increases, the commodity will be withdrawn from the market, and prices for real-economy businesses and consumers will increase.
“If such a product can be approved for copper, the same thing could happen with oil, food, and other crucial commodities. The result would be to translate Wall Street speculation even more directly into prices at the gas pump or grocery store than is already occurring with derivatives-based speculation. The increasing financialization of our commodity markets is a trend that regulators must act to stop. This decision goes in precisely the wrong direction.”
Blog Post – “Is the SEC Disproving the Laws of Supply and Demand?” (11/16/12)
Analysis of SEC Memo on Copper ETFs (11/16/12)
Letter to SEC (submitted 10/23/12)