* 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 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.
FRACTION OF GLOBAL CONSUMPTION
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
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
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)