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* Dominant copper stock holding a fraction of global demand
* Copper ETP may not be approved until next April/May
By Pratima Desai
LONDON, Dec 6 (Reuters) - Large holdings of London Metal Exchange stocks can occur unintentionally and are not unusual for large companies with many divisions and clients that delve into metals markets.
The total of these positions, as reported by British newspaper, The Daily Telegraph, is why U.S. bank JPMorgan (JPM.N) could be holding a dominant position of between 50 and 80 percent of copper stock warrants. <LME/WHD> [ID:nL3E6N601B]
Metal industry sources say it is unlikely JPMorgan's compliance department would allow its metals arm to build up a position ahead of a planned physically-backed copper exchange traded product (ETP). [ID:nN27567082]
"Normally compliance wouldn't allow this sort of front-running for a fund that hasn't been launched," a Europe-based commodity fund manager said.
"The position could belong to the bank's proprietary trading desk...It could include client positions and they could be investors, producers or consumers. It could just be the sum total of a lot of small positions."
JPMorgan is a category 1 Ring dealing member of the LME. Metals industry sources say a 50 to 80 percent holding would not be uncommon for a ring dealing market maker.
According to the LME there were dominant positions in copper on 28 occasions last year, with the last one seen on Dec. 14.
Latest data from the London Metal Exchange showed one entity holds between 50 and 80 percent of more than 352,000 tonnes of copper stored in LME warehouses -- the position came to light on Nov. 16.
At 50 percent that is about 176,000 tonnes, small compared with global copper consumption estimated at around 19 million tonnes this year.
Currently there are also large or dominant holdings in aluminium alloy, high grade aluminium, zinc, lead, tin and nickel. <LME/WC>
Some analysts say that plans for industrial metal ETPs are unlikely to be behind the large or dominant holdings, but that expectations of shortages in some metals over coming years mean that the idea cannot be ruled out.
Since October, when ETF Securities announced plans to launch physically backed industrial metal ETPs the market has been debating the advantages and disadvantages for producers, consumers and investors. [ID:nLDE69J0VA] [ID:nLDE69804N]
However, some participants are unaware that the approval process in the United States is a long one.
"It seems strange they would tie up cash like that, given the regulatory process could take up to six months," a copper trader said. "There is no guarantee the funds will be approved, but we won't know until next April or May."
Analysts also note that the planned ETPs may not all use LME metal because stake holders of more than 50 percent of any metal are subject to the exchange's lending guidance.
Editing by Sue Thomas