FSA examines base metals ETP complaint

City A.M. Reporter
CITY watchdog the Financial Services Authority (FSA) yesterday said it has received a complaint about plans to launch base metal exchange traded products (ETP).

“Because it [the complaint] has just recently been sent, we have to look at issues that have been raised,” the FSA said. “We are not a price regulator. Generally what we would look at is the potential for market abuse or distortion of price and consumer protection.”

Providers that in recent weeks have announced plans to launch ETPs include UK-based ETF Securities and US investment bank JP Morgan.

ETF Securities said in early October it will introduce physical ETPs for copper, aluminium, zinc, lead, tin, nickel and a basket of the six major base metals. However, it has no date, as yet, for the launch.

JPMorgan Commodity ETF Services registered to launch an ETP for copper in a filing with US regulator the Securities and Exchange Commission late last month.

For a factbox on recent copper ETPs, see Traders said that an ETP could suck down London Metal Exchange (LME) inventories that are already constrained by declining ore grades and demand that is steadily improving since the global economic crisis.

“People are saying they have or are going to complain to the LME and the FSA. The argument is that they will distort the market and tie up the stocks,” a metals trader said. “My reaction is; how could the market be any more distorted and non-related to the real world than it already is?”