23772 Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 

17A round lot of 100 shares applies to most 

NASDAQ and NYSE listed securities. The 

Commission notes that those OTC Equity Securities 

priced at or above $175 are proposed to have a 

minimum quotation size that would equal the 

round lot size applicable to those securities, which 

is one share. 

18 17 CFR 200.30–3(a)(57). 

1 15 U.S.C.78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4Commodity-Based Trust Shares are securities 

issued by a trust that represent investors’ discrete 

identifiable and undivided interest in and 

ownership of the net assets of the Trust. 

5See Securities Exchange Act Release No. 56224 

(August 8, 2007), 72 FR 45850 (August 15, 2007) 

(SR–NYSEArca–2007–76) (approving listing on the 

Exchange of the streetTRACKS Gold Trust); 

Securities Exchange Act Release No. 56041 (July 11, 

2007), 72 FR 39114 (July 17, 2007) (SR–NYSEArca– 

2007–43) (order approving listing on the Exchange 

of iShares COMEX Gold Trust). 

6See Securities Exchange Act Release Nos. 58956 

(November 14, 2008), 73 FR 71074 (November 24, 

2008) (SR–NYSEArca–2008–124) (approving listing 

on the Exchange of the iShares Silver Trust). 

The revised tiers also would continue 

to yield the other benefits discussed in 

the Original Proposal, including 

simplifying the existing Rule by 

reducing the number of minimum 

quotation tiers from nine tiers to six 

tiers and requiring a round lot of one 

hundred shares for all securities priced 

at or above $1.00.17

FINRA is proposing that the proposed 

rule change be implemented for all OTC 

Equity Securities displayed on an interdealer quotation system on a pilot basis 

for a period of one year from the 

effective date. The effective date of the 

minimum quotation size pilot will be 

120 days from Commission approval. 

FINRA will provide the Commission 

with trading data, as necessary, to 

evaluate the impact of the pilot. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended by Amendment No. 

1, is consistent with the Act. Comments 

may be submitted by any of the 

following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2011–058 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2011–058. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. All comments received will be 

posted without change; the Commission 

does not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2011–058 and 

should be submitted on or before May 

7, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9593 Filed 4–19–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66816; File No. SR– 

NYSEArca–2012–28] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade Shares 

of the JPM XF Physical Copper Trust 

Pursuant to NYSE Arca Equities Rule 

8.201 

April 16, 2012. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on April 2, 

2012, NYSE Arca, Inc. (the ‘‘Exchange’’ 

or ‘‘NYSE Arca’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of JPM XF Physical Copper 

Trust (the ‘‘Trust’’) pursuant to NYSE 

Arca Equities Rule 8.201. The text of the 

proposed rule change is available at the 

Exchange, the Commission’s Public 

Reference Room, and www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade JPM XF Physical Copper Shares 

(‘‘Shares’’) of the Trust under NYSE 

Arca Equities Rule 8.201. Under NYSE 

Arca Equities Rule 8.201, the Exchange 

may propose to list and/or trade 

pursuant to unlisted trading privileges 

(‘‘UTP’’) ‘‘Commodity-Based Trust 

Shares.’’ 4 The Commission has 

previously approved listing on the 

Exchange under NYSE Arca Equities 

Rule 8.201 of other issues of 

Commodity-Based Trust Shares. The 

Commission has approved listing on the 

Exchange of the streetTRACKS Gold 

Trust and iShares COMEX Gold Trust.5

The Commission also has approved 

listing of the iShares Silver Trust on the 

Exchange 6 and, previously, listing of 

the iShares Silver Trust on the 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 23773 

7See Securities Exchange Act Release No. 53521 

(March 20, 2006), 71 FR 14967 (March 24, 2006) 

(SR–Amex–2005–72) (approving listing on the 

American Stock Exchange LLC of the iShares Silver 

Trust). 

8See Securities Exchange Act Release Nos. 59781 

(April 17, 2009), 74 FR 18771 (April 24, 2009) (SR– 

NYSEArrca[sic]–2009–28) (order approving listing 

on the Exchange of ETFS Silver Trust); 59895 (May 

8, 2009), 74 FR 22993 (May 15, 2009) (SR– 

NYSEArca–2009–40) (order approving listing on the 

Exchange of ETFS Gold Trust); 61219 (December 

22, 2009), 74 FR 68886 (December 29, 2009) (SR– 

NYSEArca–2009–95) (order approving listing on the 

Exchange of ETFS Platinum Trust); 61220 

(December 22, 2009), 74 FR 68895 (December 29, 

2009) (SR–NYSEArca–2009–94) (order approving 

listing on the Exchange of ETFS Palladium Trust); 

62692 (August 11, 2010), 75 FR 50789 (August 17, 

2010) (SR–NYSEArca–2010–56) (order approving 

listing on the Exchange of ETFS Precious Metals 

Basket Trust); 62875 (September 9, 2010), 75 FR 

56156 (September 15, 2010) (SR–NYSEArca–2010– 

71) (order approving listing on the Exchange of 

ETFS White Metals Basket Trust); 63464 (December 

8, 2010), 75 FR 77926 (December 14, 2010) 

(SR–NYSEArca–2010–95) (order approving listing 

on the Exchange of ETFS Asian Gold Trust). 

9See the registration statement for the J.P. Morgan 

Physical Copper Trust on Amendment No. 5 to 

Form S–1, filed with the Commission on July 12, 

2011 (No. 333–170085) (‘‘Registration Statement’’). 

The descriptions of the Trust, the Shares and the 

copper market contained herein are based, in part, 

on the Registration Statement. 

10Each of Henry Bath & Son Limited, Henry Bath 

LLC, Henry Bath Singapore Pte Limited, Henry Bath 

Italia Sr1 and Henry Bath BV is a member of the 

Henry Bath Group of companies and a wholly 

owned subsidiary of J.P. Morgan Ventures Energy 

Corporation, and is an affiliate of the Sponsor. 

11The Valuation Agent is responsible for 

calculating, on each Business Day (as defined below 

in note 18, infra), the locational premium for each 

permitted warehouse location (as discussed below), 

which is used to determine the net asset value 

(‘‘NAV’’) of the Trust and to make other 

calculations relating to the Trust’s operations. The 

‘‘locational premium’’ for a permitted warehouse 

location is calculated as an amount expressed in 

U.S. dollars that is equal to the average value of 

copper per metric ton in such location minus the 

London Metal Exchange (‘‘LME’’) settlement price 

of copper on such Business Day. 

12With respect to application of Rule 10A–3 (17 

CFR 240.10A–3) under the Act (15 U.S.C. 78a), the 

Trust relies on the exemption contained in Rule 

10A–3(c)(7). 

13Unless otherwise indicated, all market data 

herein was published in December 2011 by Brook 

Hunt, a wholly owned subsidiary of Wood 

Mackenzie that has provided such data to the 

Sponsor for an annual subscription fee. 

American Stock Exchange LLC.7 In 

addition, the Commission has approved 

listing on the Exchange of the following 

issues of Commodity-Based Trust 

Shares: ETFS Silver Trust, the ETFS 

Gold Trust, the ETFS Platinum Trust, 

the ETFS Palladium Trust, the ETFS 

Precious Metals Basket Trust, the ETFS 

White Metals Basket Trust, and the 

ETFS Asian Gold Trust.8

The Trust will issue Shares 

representing units of fractional 

undivided interest in and ownership of 

the net assets of the Trust. The objective 

of the Trust is for the value of the 

Trust’s Shares to reflect, at any given 

time, the value of copper owned by the 

Trust at that time, less the Trust’s 

expenses and liabilities at that time. The 

Trust will not be actively managed and 

will not engage in any activities 

designed to obtain a profit from, or to 

prevent losses caused by, changes in the 

price of copper.9

J.P. Morgan Commodity ETF Services 

LLC is the sponsor of the Trust 

(‘‘Sponsor’’), J.P. Morgan Treasury 

Securities Services, a division of 

JPMorgan Chase Bank, National 

Association, is the administrative agent 

of the Trust (‘‘Administrative Agent’’), 

Wilmington Trust Company is the 

trustee of the Trust (‘‘Trustee’’), and the 

Henry Bath Group is the warehousekeeper of the Trust (‘‘Warehousekeeper’’).10 The Trustee will delegate to 

the Sponsor its duty and authority to 

administer the Trust, as defined and 

limited by the terms of the Trust’s 

‘‘Trust Agreement’’. The Trust’s 

valuation agent (‘‘Valuation Agent’’) is 

Metal Bulletin Ltd., an independent, 

third-party valuation agent that is not 

affiliated with the Sponsor. 11

The Exchange represents that the 

Shares satisfy the requirements of NYSE 

Arca Equities Rule 8.201 and thereby 

qualify for listing on the Exchange.12

According to the Registration 

Statement, the Shares are intended to 

constitute a simple and cost-effective 

means of making an investment similar 

to an investment in copper. Although 

the Shares are not the exact equivalent 

of an investment in copper, they 

provide investors with an alternative 

that allows a level of participation in the 

copper market through the securities 

market. 

Overview of the Copper Industry 

The Registration Statement provides a 

summary of the copper industry by 

looking at some of the key participants 

and detailing the primary sources of 

supply and demand in the market. It 

also provides a description of the 

typical path copper and its alloys take 

from the mine to the customer.13

Copper Basics 

According to the Registration 

Statement, one of the main industrial 

usages for copper is for the production 

of cable, wire and electrical products for 

both the electrical and building 

industries. In the current market, 

approximately three-quarters of copper 

demand is for electrical purposes, 

including power transmission and 

generation, telecommunications and 

electrical and electronic consumer and 

industrial products. The construction 

industry accounts for copper’s second 

largest usage demand in such areas as 

pipes for plumbing, heating and 

ventilating as well as building wire and 

sheet metal facings. Alloyed with other 

metals, such as zinc (to form brass), 

aluminum or tin (to form bronzes), or 

nickel, it can acquire new 

characteristics for use in highly 

specialized applications. Copper’s 

physical, chemical and aesthetic 

properties make it a material of choice 

in a wide range of electrical, electronics 

and communication, construction, 

transportation, industrial machinery 

and equipment and general consumer 

applications, such as coins and keys. 

Copper by-products from manufacturing 

and obsolete copper products are 

readily recycled and contribute 

significantly to copper supply. 

Market Participants 

The participants in the world copper 

market may be classified in the 

following sectors: Primary and 

secondary producers; fabricators, 

manufacturers and end-use consumers; 

the banking sector; and the investment 

sector. A brief description of each 

follows. 

Primary and Secondary Producers. 

Primary and secondary producers are 

generally the market participants that 

bring physical copper supplies to the 

market. This sector is primarily 

comprised of mining companies that 

specialize in copper production, metal 

processors, such as refiners and 

smelters, and scrap recyclers. 

Fabricators, Manufacturers and Enduse Consumers. Consumption of 

extracted resources typically occurs in 

two phases. Refined copper supplies in 

various grades and forms are initially 

demanded by fabricators that convert 

unwrought metals to salable ‘‘semifabricated’’ products such as wire, 

tubing and plates. These semi-fabricated 

products are available for consumption 

by other fabricators and/or 

manufacturers to further upgrade the 

copper product until the material is 

ultimately converted into a final 

saleable product (such as keys, coins 

and air conditioning unit parts). 

Banking Sector. Banks provide a 

variety of services to the copper market 

and its participants, thereby facilitating 

interactions between other parties. 

Services provided by the banking 

community include traditional banking 

products as well as mine financing (both 

secured and unsecured), physical 

copper purchases and sales, hedging 

and risk management and inventory 

management for industrial users and 

consumers. 

Investment Sector. The investment 

sector includes professional and private 


tkelley on DSK3SPTVN1PROD with NOTICES
23774 Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 

14Please note that the figures may not add up to 

equal the totals listed due to independent rounding. 

investors and speculators who are 

involved in investment and trading 

activities related to copper. Participants 

range from large hedge funds and other 

investment vehicles to day-traders on 

futures exchanges. 

Copper Supply Process 

Copper supply generally comes from 

two sources: (1) The extraction and 

processing of copper ore (referred to as 

‘‘primary production’’) and (2) the 

recovery of copper from existing stock 

(referred to as either ‘‘secondary 

copper’’ or ‘‘copper scrap’’). Primary 

production accounts for the majority of 

new global copper supply. However, in 

developed countries with significant 

amounts of copper already in use or in 

the supply chain, secondary copper 

provides a significant portion of new 

supply. 

Primary Copper Production 

According to data provided to the 

Sponsor by Brook Hunt, primary mine 

production in 2011 is expected to have 

reached 16.279 million metric tons, a 

modest 0.53% increase from 2010. That 

primary production has grown only 

modestly in spite of extremely high 

copper prices may reflect, to some 

degree, the entrenched inelasticity of 

supply, as old mines continue to face 

‘‘head grade’’ decline (i.e., a decreasing 

percentage of copper content in copper 

ores, due to factors such as good quality 

copper sources already being exploited) 

and new mine projects encounter 

production delays. There appears, 

however, to be no shortage of 

underlying copper resources. For 

example, the United States Geological 

Service estimates that current reserves— 

both proven and probable—amount to 

around 690 million metric tons (source: 

U.S. Geological Survey published as of 

January 2012). In addition, measured or 

inferred resources may become 

economically viable for extraction to the 

extent that financiers, geologists and 

surveyors increase their estimate for 

long-term copper prices. 

According to the Registration 

Statement and information provided by 

the Sponsor, copper mine supply in 

2005 to 2011 faced a number of 

constraints. Many existing mines are 

struggling to meet targets and, with only 

a few notable exceptions, new projects 

and project upgrades are subject to 

delay, with geo-technical issues being a 

major inhibiting factor. In addition to 

disruptions to existing operations, 

supply growth is dependent on further 

exploitation of copper reserves 

concentrated primarily in Africa and 

Latin America. Latin American 

production is dominated by Chile, 

which is the world’s largest copper 

producer and has the largest proven 

reserve base of economically viable 

copper deposits in the world (source: 

U.S. Geological Survey). Reliable and 

cost-effective power and clean water 

availability represent two large hurdles 

to new primary production in Chile. 

Outside of Chile, Peru remains one of 

South America’s prospective regions 

and is affected by many of the same 

inhibiting factors to new production as 

Chile. In Africa, the two most 

prospective countries are Zambia and 

the Democratic Republic of Congo, 

whose combined production is 

approximately 86.6% of the continent’s 

2011 copper mine supply. Both nations 

have been inconsistent suppliers of 

copper since the mid-1970s due to 

political and social instability causing 

supply risks, including sovereign risk, 

threat of asset expropriation, ownership 

disputes over certain large mines and 

limited infrastructure. 

Secondary Copper Production 

Copper and copper alloys have been 

recycled for hundreds of years and 

secondary copper remains a major 

source of supply in developed 

economies. The copper and copper alloy 

industries rely on the fact that copper 

scrap is easily and economically used 

and reused. Depending on its quality 

and other factors, copper scrap can be 

refined and converted back into cathode 

form for further use, directly melted to 

produce semi-fabricated products or 

used in primary production as a cooling 

additive during the smelting process. 

Copper Consumption 

As highlighted above, copper has 

many uses. From copper derived from 

primary and secondary production, 

fabricators produce semi-fabricated 

products, such as copper wire, copper 

alloys, tube products, rods, bars, 

section, plate, sheets and strips, for 

various applications. For example, tube 

products have many applications, 

including plumbing, heating, 

vacuuming and air conditioning. Copper 

wire accounted for 55% of total copper 

fabrication in 2011. 

Global copper consumption in 2011 is 

estimated to have measured 19.931 

million metric tons, an increase of 

approximately 3.5% from 2010. By 

market sector, copper is equally exposed 

to construction and electrical and 

electronic applications (each 33% of 

total demand in 2010). In 2010, 

significant other sources of demand 

included industrial machinery (13%), 

transportation (13%) and consumer 

products (8%). 

The combination of a Western 

economic recovery and ongoing robust 

demand in emerging markets is 

expected to result in growth of global 

copper demand of close to 3.7% in 

2012. According to projections by Brook 

Hunt, copper demand is likely to 

measure 20.67 million metric tons in 

2012 (excluding the direct use of 

secondary copper by semi-fabricators). 

Current projections for total copper 

consumption in 2012 are at about 25.8 

million metric tons, a number inclusive 

of refined copper from primary and 

secondary production and the direct use 

of secondary copper in the fabrication 

sector. 

World Copper Production and 

Consumption 2000–2011 (in Metric 

Tons) 

The following table sets forth a 

summary of world copper production 

and consumption from 2000 to 2011.14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 

Electro-Refined Copper Production15 ............... 12552 13118 12733 12601 13277 13951 14540 15035 15189 15017 15703 16293 

SX/EW Production16 ......................................... 2291 2538 2619 2676 2658 2644 2755 2990 3071 3289 3309 3401 

Refined Copper Production ............................... 14844 15656 15351 15277 15935 16595 17296 18025 18260 18306 19012 19694

Europe Consumption ........................................ 4584 4539 4437 4498 4736 4607 5023 4787 4482 3536 3861 3994 

Americas Consumption ..................................... 3281 2859 2644 2497 2712 2549 2395 2307 2188 1764 1897 1957 

China Consumption ........................................... 1850 2230 2425 3020 3565 3815 3967 4670 5100 6375 7204 7780 

Japan Consumption .......................................... 1349 1145 1164 1202 1279 1256 1307 1268 1199 876 1060 1038 

Other Consumption ........................................... 4096 4010 4224 4358 4729 4730 4792 4949 4960 4750 5242 5162 

Refined Copper Consumption (1) ..................... 15160 14783 14894 15575 17021 16957 17484 17981 17929 17301 19264 19931 

Refined Metal Balance ...................................... ¥316 873 457 ¥298 ¥1086 ¥362 ¥188 44 331 1005 ¥252 ¥237 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 23775 

15Copper is extracted from copper sulfide ores 

using a multi-step production process. First, a 

‘‘mine production’’ process is used to extract the 

metal. Then, the metal ore is separated from the 

waste. The ore is subsequently crushed and placed 

in flotation cells with chemical reagents, and, using 

a process called froth flotation, a material 

commonly known as ‘‘copper in concentrate’’ is 

extracted. Copper in concentrate is a mixture of 

about 25–35% copper (the rest being various other 

metals and impurities). The copper in concentrate 

then undergoes a ‘‘smelter production,’’ through 

which the copper is processed under high heat (or 

‘‘smelted’’) to remove impurities, such as iron, 

sulfur and oxygen. Finally, the copper is chemically 

leached through an electro-refining process 

(‘‘electro-refined copper production’’), whereby 

copper is placed into a bath of sulfuric acid and 

then an electric current is used to move the copper 

out of the solution onto a stainless steel sheet (an 

‘‘anode’’). This is repeated until the steel sheets are 

covered in copper in cathode form. 

16Copper is extracted from copper oxide ores 

using a chemical leaching process called solvent 

extraction and electrowinning (‘‘SX/EW 

production’’), a process which involves dissolving 

copper into a soluble liquid such as acid, from 

which the copper is later recovered as copper plates 

(‘‘cathodes’’). 

17The ‘‘LME settlement price’’ or ‘‘settlement 

price’’ is, with respect to any Business Day, the 

official cash sellers price per metric ton of Grade 

A Copper on the LME, stated in U.S. dollars, as 

determined by the LME at the end of the morning’s 

second ring session (12:35 p.m. London time) for 

copper on each day that the LME is open for 

trading. The LME settlement price is made publicly 

available in real-time through third-party vendors 

such as Bloomberg and Reuters (on Bloomberg, it 

is currently displayed on Bloomberg page 

‘‘LOCADY <comdty>’’). It is also made publicly 

available on a delayed basis on the LME’s Web site 

at approximately 10 p.m. London time. 

18With respect to the submission of creation and 

redemption orders and the processing of such 

orders, and the calculation of NAV, a ‘‘Business 

Day’’ is a day that the Exchange is open for regular 

trading and that is not a holiday in London, 

England. With respect to the delivery of Creation 

Units of Shares in connection with creations or 

redemptions, a ‘‘Business Day’’ is a day that the 

Exchange is open for regular trading, without regard 

to London holidays. For example, if in a particular 

week Tuesday is a London holiday but not an 

Exchange holiday, a creation or redemption order 

that is placed on Monday will require Shares to be 

delivered on Thursday. If in a particular week 

Tuesday is an Exchange holiday but not a London 

holiday, a creation or redemption order that is 

placed on Monday will require Shares to be 

delivered on Friday. In either case, creation and 

redemption orders would not be accepted on 

Tuesday. 

19According to data sourced from Bloomberg, 

copper futures volume on COMEX for 2011 was 

10,222,548 contracts. As of December 30, 2011, 

COMEX open interest for copper was 120,988 

contracts. Copper futures volume on SHFE for 2011 

was 40,833,743 contracts. As of December 30, 2011, 

SHFE open interest for copper was 429,582 

contracts. Copper futures volume on LME for 2011 

was 34,503,680 contracts. As of December 30, 2011, 

LME open interest for copper was 448,161 

contracts. Turnover (described as the number of 

contracts traded in a year multiplied by the number 

of metric tons per contract) in the calendar year of 

2011 for the LME, COMEX and SHFE was 863 

million metric tons, 141.4 million metric tons and 

204 million metric tons, respectively. 

The Global Copper Market 

Theglobal market in copper consists 

of (i) trading within the physical copper 

market and (ii) financial trading, 

through either (a) the exchange-traded 

futures and options market or (b) the 

over-the-counter (‘‘OTC’’) market. Each 

of these is described below in further 

detail. 

The Physical Copper Market 

Copper, like any other good or 

merchandise, is traded between 

producers (such as mining companies 

and refiners), consumers (such as 

fabricators and manufacturers) and/or 

merchants. Mining companies sell their 

present or future production to refiners 

and smelters that transform the metal 

into shapes or alloys, so that fabricators 

and manufacturers can then transform 

these into different end-use products. 

Copper is used in many different 

industrial processes, which makes its 

location relative to consumption 

demand important, especially given its 

bulk and the cost of transportation. The 

source of copper (i.e., mine location and 

smelters/refineries) is also actively 

tracked by buyers, including fabricators 

and consumers, and affects buying 

behavior. Buyers may require copper 

from very specific sources because both 

the physical shape and chemical 

composition must match the setup of 

their respective production facilities or 

fabrication needs. Copper supply chains 

need to be actively managed on a 

continuous basis because of fluctuating 

demand in the market. 

Depending on the timing of physical 

delivery, the price of copper is usually 

either a function of the cash price 

(specifically, the settlement price, plus 

any contractually agreed upon 

locational premium, if applicable) for 

the present day or the relevant forward 

price for future days. The settlement 

price is the price utilized in a trade for 

physical delivery of copper assuming 

that delivery occurs two business days 

after the price is agreed upon, while a 

forward price is employed when the 

delivery is agreed to take place at a 

specific time in the future. The LME 

provides the global benchmark prices 

for the settlement price and forward 

prices of Grade A Copper. The LME 

settlement price and three-month 

forward price of Grade A Copper are the 

most widely used benchmarks for daily 

prices of physical copper held in 

bonded, customs and duties free zones 

and traded in the international physical 

copper market, and are published by 

various financial information sources. 

Unless otherwise specified, the term 

‘‘copper,’’ as used in the Registration 

Statement, always refers to Grade A 

Copper and the ‘‘settlement price’’ or 

‘‘LME settlement price’’ of copper 17

always refers to the official cash sellers 

price per metric ton in U.S. dollars of 

Grade A Copper as quoted on the LME 

for a particular Business Day.18

According to the Registration 

Statement, in addition to the settlement 

price or forward prices, in order to 

obtain copper of a specific brand that is 

stored at a specific location, consumers 

are prepared to pay an additional 

locational premium. As discussed 

further in ‘‘Locational Premia for 

Copper’’ below, these locational premia 

are based on various supply and 

demand factors, for example, freight 

rates, time to transport and relative 

pricing power of the producers versus 

consumers, which in turn is reflective of 

available sources of copper. A location 

that is low in supply and high in 

demand will generally carry a higher 

locational premium than a location 

where supply is high and demand is 

low. Supply contracts between physical 

market participants are generally annual 

contracts under which the locational 

premium is fixed for the period of the 

contract while the spot or forward price 

is floating and only fixed at the point of 

delivery. This approach ensures that the 

physical aspects of the contract are fixed 

in order to provide both producers and 

consumers certainty but leaves both 

parties exposed to price risk. This price 

risk is managed independently by both 

producers and consumers through 

positions either on futures exchanges or 

in OTC markets. 

The Sponsor represents that, 

according to the Valuation Agent, on 

December 30, 2011, the average 

locational premium per metric ton in 

the physical copper market in the 

permitted warehouse locations (as 

discussed in ‘‘Description of the Trust’’ 

below) ranged from approximately 

$10.00 to $120.54 over an LME 

settlement price of $7,554.00; in 

percentage terms, the average premium 

ranged from 0.1203% to 1.4308% of the 

LME settlement price. 

Futures Exchanges 

The role of a commodity futures 

exchange is to facilitate and make 

transparent the process of determining 

commodity prices. According to the 

Registration Statement, a majority of 

copper trading occurs on three 

commodity exchanges: The LME, 

COMEX (a division of CME Group, Inc.) 

and the Shanghai Futures Exchange 

(‘‘SHFE’’).19 LME members are regulated 

by the Financial Services Authority 

(‘‘FSA’’), the regulator of the financial 

services industry in the UK (as 

discussed below under ‘‘The London 

Metal Exchange’’). COMEX is regulated 


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20 7 U.S.C. 1 et seq. 

21According to the Registration Statement, the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010, passed [sic] on July 21, 

2010, will impose mandatory clearing, exchangetrading, margin and disclosure requirements on 

many derivatives transactions for certain 

participants in the U.S. market, including formerly 

unregulated OTC derivatives. The Commission, the 

CFTC, the Federal Reserve and other regulators are 

currently engaged in rulemaking to determine and 

clarify the details of these requirements. 

by the U.S. Commodity Futures Trading 

Commission (‘‘CFTC’’) under the 

Commodity Exchange Act.20 The SHFE 

is regulated by the Chinese Securities 

Regulatory Commission. 

Futures prices are settled by bid and 

offer, reflecting the market’s perception 

of supply and demand of a commodity 

on a particular day. On the LME, copper 

is traded in 25 metric ton lots and 

quoted in U.S. dollars per metric ton. 

On COMEX, copper is traded in lots of 

25,000 pounds and quoted in U.S. cents 

per pound. On the SHFE, copper is 

traded in lots of five metric tons and 

quoted in Chinese renminbi per metric 

ton. At present, Chinese regulations 

stipulate that only companies or 

organizations organized and registered 

in China or Chinese citizens are allowed 

to participate in trading on the SHFE. 

Exchanges provide for the trading of 

futures and options contracts. These 

contracts allow producers and 

consumers to fix a price in the future, 

thus providing the consumers a hedge 

against price variations. Producers and 

consumers often seek to manage their 

price risk by taking long or short 

positions on the futures exchange. The 

participation of investors, who are ready 

to buy the risk of price variation in 

exchange for potential monetary reward, 

increases liquidity in the market. A 

futures or options contract defines the 

standard of the product, the size of the 

lot, delivery dates and other aspects 

related to the trading process. Contracts 

are unique for each exchange. The 

existence of futures contracts also 

allows producers and their clients to 

agree on different price settling 

arrangements to accommodate different 

interests. 

Over-the-Counter Contracts 

OTC contracts are principal-toprincipal agreements traded and 

negotiated privately between two 

principal parties, without going through 

an exchange or intermediary. Unlike 

exchange contracts, OTC contracts can 

be customized to the counterparty’s 

individual exposures (e.g., through 

changes to the standardized contract 

terms in areas such as settlement dates, 

settlement process, strike, spot or 

averaging settlement calculations, 

underlying currency exposures and 

contract size).21 OTC contracts can also 

be structured similarly to exchange 

contracts such that they are ‘‘lookalikes’’ to underlying exchange 

contracts. In other words, OTC contracts 

can contain the same economic terms as 

exchange contracts, although they are 

not registered with an exchange and are 

settled bilaterally between the parties to 

the contract. At present, a central 

clearing counterparty does not stand 

between OTC counterparties for the 

purpose of insulating counterparties 

from default losses. The underlying 

price risk of OTC contracts is 

determined bilaterally, between a dealer 

or a market maker, acting as a 

counterparty, and another trading 

counterparty, which may be a 

consumer, producer or another dealer. 

Such OTC transactions can be 

documented using negotiated terms and 

references that suit the parties to the 

contract. These can be the same as the 

terms and references of exchange 

contracts (the ‘‘terms of business’’) or 

documentation provided by the 

International Swaps and Derivatives 

Association, Inc. 

The London Metal Exchange 

According to the Registration 

Statement, the most significant copper 

futures exchange is the LME. The LME 

was founded to trade copper in 1877 

and later added the trading of additional 

metals. The LME is a principal-toprincipal market where only eligible 

organizations or ‘‘members’’ are able to 

participate directly in trading. Through 

its members, the LME offers its clients, 

who represent all aspects of the physical 

industry, the opportunity to ‘‘hedge’’ 

their price risk and therefore gain 

protection from future adverse price 

movements. Within the membership 

structure, there are a number of 

categories of membership, and each 

category provides for a different level of 

activity. For example, the trading and 

clearing members can provide their 

clients with access to the market, its risk 

management tools and the LME’s 

delivery mechanism. 

Trading between members takes place 

across three trading platforms: Through 

open-outcry trading in the ‘‘Ring,’’ 

through an inter-office telephone market 

and through LMEselect, the LME’s 

electronic trading platform. The LME is 

a member-owned organization, and 

membership is open to all companies 

that meet the relevant criteria as 

described in the LME’s rules and 

regulations. Membership categories are 

generally divided between broker 

members and trade members. 

Category 1 members are ‘‘Ring Dealing 

Members,’’ currently including twelve 

entities, which are entitled to trade in 

the Ring, on LMEselect and by 

telephone. They may operate a 24-hour 

market by trading through the interoffice telephone market. All Ring 

Dealing Members are also members of 

LCH.Clearnet and hence are entitled to 

clear all transactions with other 

LCH.Clearnet members through the 

independent clearing house. The twelve 

Ring Dealing members of the LME are: 

Amalgamated Metal Trading Limited, 

Barclays Capital, ED & F Man 

Commodity Advisers Limited, INTL 

FCStone (Europe) Ltd., J.P. Morgan 

Securities Ltd., MAREX Financial 

Limited, Metdist Trading Ltd, Natixis 

Commodity Markets Limited, Newedge 

Group (U.K. Branch), Socie ́te ́ Ge ́ne ́rale, 

Sucden Financial Limited, and Triland 

Metals Ltd. 

Category 2 members are ‘‘Associate 

Broker Clearing Members,’’ currently 

including 26 entities, which have all the 

trading rights of the Ring Dealing 

Members, except that they may not 

trade in the Ring. As members of 

LCH.Clearnet, they also have the 

capacity to clear all transactions with 

other LCH.Clearnet members through 

the independent clearing house. 

Category 3 members are ‘‘Associate 

Trade Clearing Members,’’ currently 

including two entities, which cannot 

issue client contracts or trade in the 

Ring. They are typically industrial users 

of the market that are able to clear their 

own transactions through LCH.Clearnet. 

Category 4 members are ‘‘Associate 

Broker Members,’’ currently including 

seven entities, which can issue 

exchange contracts but are not members 

of LCH.Clearnet and hence cannot make 

use of its clearing services. They may 

not trade in the Ring, nor directly on 

LMEselect, and instead trade through 

the 24-hour inter-office telephone 

market. 

Category 5 members, ‘‘Associate 

Trade Members,’’ have no trading rights 

on the LME except as clients. Associate 

Trade Members are typically industrial 

and financial companies with an 

interest in the base metals market. 

According to the Registration 

Statement, the LME provides a 

transparent forum for the trading of 

exchange contracts. As a result of this 

daily trading, prices are ‘‘discovered’’ 

and published by the LME. The prices 

are then used by the international 

physical industry as the basis of price 

negotiations for the physical purchase 

or sale of base metals. As discussed 

above, the LME provides global 


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benchmark prices by publishing the 

settlement price and three-month 

forward price of Grade A Copper. Price 

discovery (i.e., the process of 

establishing these official prices), as 

well as a significant portion of the 

trading volume on the LME, is 

conducted during regular London 

trading hours by open-outcry among the 

twelve Ring Dealing Members in the 

Ring, a circular area in which the LME 

Ring Dealing Members trade. 

Open outcry is the oldest and most 

popular way of trading on the LME and 

consists of a morning session and an 

afternoon session, in which each of the 

different metal contracts traded on the 

LME is traded in a five-minute ring 

session for each contract, and after a 

five-minute interval break, the series is 

repeated. The second ring session in the 

morning session is integral to setting the 

cash buyer price, the cash seller price 

(i.e., the settlement price) and threemonth seller price (which is a threemonth forward price) for Grade A 

Copper. At the end of this ring session, 

the LME determines official prices for 

these contracts from the last bid and 

offer prices, before the bell is sounded 

to signal the session’s end. Ring prices 

are disseminated around the world in 

real time. 

According to the Registration 

Statement, the LME is required by 

statute to ensure that business on its 

markets is conducted in an orderly and 

transparent manner, providing proper 

protection to investors and persons 

looking to manage risk. Regulation of 

the market is largely carried out by the 

LME, while the FSA, the regulator of the 

financial services industry in the United 

Kingdom, is responsible for regulating 

the financial soundness and conduct of 

the business conducted by LME 

members. The FSA was given rulemaking, enforcement, and regulatory 

powers by the Financial Services and 

Markets Act 2000 (the ‘‘FSM Act’’). The 

FSA was granted this authority to fulfill 

four statutory objectives: (1) Market 

confidence, (2) financial stability, (3) 

consumer protection, and (4) reduction 

of financial crime. The LME is approved 

as a Recognised Investment Exchange, 

and, in conformance with U.K. and 

other international regulatory 

requirements, the LME offers, through 

price, volume transparency and audit 

trails, a forum for the trading of base 

metals, including by providing rules for 

arbitration proceedings. LME members 

also operate in a strict regulatory 

environment overseen by the FSA. 

The LME and its members are also 

subject to regulatory controls and input 

from various U.K. government bodies 

and offices, as well as directives from 

the European Union Commission. In 

international trading, rules applied by 

overseas regulatory bodies, such as the 

CFTC, are also taken into account. 

LME Warrants 

According to the Registration 

Statement, all contracts registered with 

the LME are executed on the basis of 

physical settlement by delivery. In order 

to effectuate such physical delivery, the 

LME members are obligated to deliver 

base metal against LME futures 

contracts in the form of LME warrants. 

An ‘‘LME warrant’’ is a bearer document 

evidencing the right of the holder to 

possession of a specified lot of metal at 

a specified LME warehouse location. It 

is the right of the seller of the futures 

contract to select the LME warrant it 

will deliver to the buyer of the futures 

contract. LME warrants are tradable in 

their own right in the OTC market. The 

holder of each LME warrant bears the 

rental payments for storage of the 

underlying copper in an LME-approved 

warehouse location, as well as the risk 

of any changes to the value of the LME 

warrant due to the physical variance of 

the underlying copper and any changes 

in the locational premium or rent. The 

system for recording all pertinent 

information regarding LME warrants is 

called LME Sword and is controlled by 

the LME as part of its custody and 

clearing operations. The LME publishes, 

as a matter of public record (in the form 

of daily stock reports), the number of, 

and tonnage associated with, LME 

warrants (including cancelled LME 

warrants for which copper has yet to be 

delivered out of the relevant LME 

warehouse), as well as other relevant 

information, such as holding reports. 

The LME has become a primary source 

of information regarding the physical 

demand and supply for specific metals, 

such as copper. This is because of the 

perception that it is a ‘‘market of last 

resort’’ for participants to sell excess 

stock in times of oversupply or as a 

source of material in times of extreme 

shortage. 

Physical Variance of Copper 

The LME trades, promotes and 

maintains the standards of quality, 

shape and weight of Grade A Copper, a 

commonly accepted standardized form 

of copper cathode. Grade A Copper 

currently must conform to the standard 

BS EN 1978:1998 (Cu-CATH-1). This 

standard specifies the allowed source, 

shape and chemical composition of the 

cathode. Most copper cathodes are 

99.95% to 99.99% pure copper. The 

chemical composition, and impurities, 

in the cathode depend largely on the 

source of the copper and whether the 

metal has been processed from copper 

sulfide ore or copper oxide ore. Copper 

oxides have a smaller number of 

residual chemical elements in the 

cathode. 

As discussed further below, all copper 

delivered to the LME that underlies an 

LME warrant must be of an acceptable 

weight (with each LME warrant 

representing one lot of copper), 

Acceptable Delivery Brand (as defined 

below) and acceptable chemical 

composition (i.e., Grade A Copper) and 

must be stored in an LME-approved 

warehouse. 

Each cathode varies in size and 

weight, depending on the refining 

process. Cathodes are aggregated into 

‘‘lots’’ of 25 metric tons each, which is 

the standard weight of the physical 

metal underlying each LME futures 

contract traded through the LME 

clearing system and futures market. 

Each LME futures contract provides for 

the delivery of one lot of copper (i.e., 25 

metric tons), and upon the settlement of 

an LME futures contract, a person can 

satisfy the futures contract’s physical 

delivery requirement with the delivery 

of one LME warrant representing one lot 

of copper. Because all physical 

substances vary in weight, the LME 

Rules and Regulations (the ‘‘LME 

Rules’’) provide for a tolerance of plus 

or minus 2% in the weight of a lot of 

copper as represented by an LME 

warrant. 

Similarly, the physical copper market 

also trades most copper based on a 25 

metric ton lot and has also adopted the 

standard tolerance of plus or minus 2% 

in the weight of a lot of copper as set 

by the LME Rules. In practice, this 

means that one lot of copper in the 

physical market generally uses tolerance 

levels similar to the levels applied by 

the LME of plus or minus 2% in weight. 

Therefore, any transaction in physical 

copper, including a transaction by the 

Trust, will need to account for such 

physical tolerances. 

Acceptable Delivery Brands and Good 

Delivery Standards 

Each lot of physical copper has a 

specific brand that is specific to one 

refiner. A lot of copper always has a 

single brand, and there is no 

commingling of brands within an 

individual lot. 

The LME oversees the registration 

process for each refinery seeking to 

register its brand of copper as an 

acceptable delivery brand for LME 

registered transactions. Copper cannot 

be represented by LME warrants unless 

the source refinery has had its brand 

registered with the LME (an 

‘‘Acceptable Delivery Brand’’). 


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Currently, there are 79 brands that are 

Acceptable Delivery Brands. Some 

refineries have more than one smelting 

and refining process, so a refinery may 

register more than one brand, reflecting, 

among other factors, the different 

chemical composition, size, origins and 

bundling of the copper cathodes. The 

country with the largest number of 

Acceptable Delivery Brands is Chile, 

which has 22 Acceptable Delivery 

Brands, followed by Japan, which has 9 

Acceptable Delivery Brands. 

The LME has the authority to deregister brands from the LME from time 

to time. This decision is generally made 

by the LME, on the recommendation of 

the LME’s Copper Committee, when an 

Acceptable Delivery Brand ceases to 

have a proper tradable market, for 

example upon a merger of the refiner 

that causes the brand to be subsumed 

into the surviving entity’s product line, 

upon closure of the refinery or specific 

mining source or due to other 

commercial reasons. An Acceptable 

Delivery Brand may be de-registered 

after the issuance of a notice to LME 

members and other market participants 

indicating that (i) no further deliveries 

of such brand will be accepted for LME 

warranting as of a stated effective date 

and (ii) once the stocks of such brand in 

the LME system are exhausted, the 

brand will be delisted and such copper 

will no longer constitute good delivery 

against LME Grade A Copper contracts. 

The LME attempts to make this process 

occur in an orderly fashion with 

sufficient notice to the market. 

Acceptable Delivery Brands, deregistered brands and unregistered 

brands of copper are traded actively in 

the physical copper market. If a deregistered or unregistered brand has a 

relationship to an Acceptable Delivery 

Brand (e.g., a brand is de-registered and 

phased out due to the merger of the 

refiner, whose copper product is now 

registered under a different Acceptable 

Delivery Brand) it is generally traded in 

the physical copper market at a slight 

discount to the LME price. Generally, 

copper that is not of an Acceptable 

Delivery Brand is worth less than 

copper that is of an Acceptable Delivery 

Brand because of the perceived lower 

liquidity associated with that brand of 

metal. 

The Trust will accept only copper of 

an Acceptable Delivery Brand in 

connection with the creation of Shares. 

Warehousing of Copper 

The warehousing of copper can 

generally be divided into two primary 

systems: the LME-approved 

warehousing system (i.e., for LME 

warrants) and the warehousing of 

copper for the physical market (i.e., any 

copper delivered outside of systems or 

exchanges like the LME). 

Copper represented by an LME 

warrant may be stored only in an LMEapproved warehouse. Each LMEapproved warehouse must comply with 

the LME Rules related to road, rail and 

water access to the specific warehouse. 

LME-approved warehouses are required 

to be in bonded, customs- and dutiesfree zones within a jurisdiction and the 

LME Rules set certain requirements, 

such as mandatory inspections carried 

out by the LME, to ensure that LMEregistered metal is accepted, processed 

and stored in accordance with the LME 

Rules. The LME sets the maximum 

storage and delivery fees a warehouse 

can charge for the delivery of LMEregistered metal into or out of an LMEapproved warehouse. Additionally, the 

LME sets a maximum daily rent charge 

(per metric ton) and the rental payment 

schedule for LME-registered metal 

stored in an LME-approved warehouse. 

Warehouse rental rates as of April 2012 

will range from 39 to 41 cents per metric 

ton per day, with annual payment in 

advance due on March 31 of each 

calendar year. As a result, LME 

Warrants generally trade in between 

these payment dates, inclusive of 

accrued rent. Warehouse rental charges 

are typically revised annually, generally 

in April or May of each calendar year. 

According to the Registration 

Statement, in contrast to the LMEapproved warehousing system, 

warehousing in the physical copper 

market is not subject to regulations like 

the LME Rules, although it has 

developed links, locations and standard 

practices similar to those used by LMEapproved warehouses. These 

warehouses can be established in 

bonded, customs- and duties-free zones 

within a country (as with LMEapproved warehouses), or alternatively 

located in jurisdictions where the 

movement of metal is subject to customs 

and duties charges. Rental rates for the 

storage of non-LME registered copper 

are agreed upon on a bilateral basis 

between the warehouse-keeper and the 

contracting party. 

An LME-approved warehouse can 

reside within the same location as a 

non-LME-approved warehouse. In 

addition, LME-approved warehouses 

may hold copper that is not registered 

with the LME (i.e., not underlying the 

issuance of an LME warrant), although 

the relevant warehouse is obligated to 

identify, record and store copper not 

registered with the LME separately from 

any copper registered with the LME. 

Such metal is not subject to LME 

supervision or the LME Rules. Copper 

held by the Trust can be stored by the 

Warehouse-keeper in both LMEapproved and non-LME-approved 

warehouses and is not subject to 

regulation by the LME. All warehouse 

locations for the Trust will be in 

bonded, customs- and duties-free zones. 

For the avoidance of doubt, the Trust 

will only hold physical copper, not LME 

warrants. 

Locational Premia for Copper 

As noted above, copper is bulky 

relative to precious metals such as gold, 

silver, platinum and palladium. Copper 

is used in many different industrial 

processes, which makes its location 

relative to the place of consumption 

important, especially given its bulk 

relative to its monetary value. The 

settlement price of copper determined 

on the LME is based on a theoretical 

‘‘cheapest-to-deliver’’ LME warrant of 

copper in the LME system (that is, the 

LME warrant of copper with the lowest 

locational premium) because 

determining which copper will be 

delivered is the right of the seller. In 

other words, the settlement price is 

determined by the Ring Dealing 

Members relative to a theoretical 

‘‘cheapest-to-deliver’’ lot because each 

transaction requires only the delivery of 

an LME warrant representing a lot of 

copper in any LME-approved 

warehouse. By virtue of market forces, 

any LME dealer required to deliver 

copper will always, if possible, deliver 

the LME warrant representing the 

‘‘cheapest-to-deliver’’ LME warrant of 

copper it owns. 

LME warrants in the OTC market (i.e., 

not used for the settlement of LME 

registered transactions) may trade at a 

price that is different from the LME 

settlement price. Depending on the 

location and the brand associated with 

a particular LME warrant, the relevant 

premium will differ in amount, 

reflecting the supply and demand 

dynamics of the specific location and 

brand of copper underlying that LME 

warrant. 

Within the physical copper market, 

there is a similar dynamic, with the 

result that copper trades at a locational 

premium (or discount) to the settlement 

price, depending on the grade, brand 

and location of the copper and the terms 

of delivery (which are often based on 

the International Commercial Terms, an 

internationally recognized standard 

used in contracts for the sale of goods 

also referred to as the Incoterms®). All 

other pricing variables being equal (if 

copper is consistently the same grade 

(e.g., Grade A Copper), the same brand 

(e.g., an Acceptable Delivery Brand) and 

delivered under the same International 


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Commercial Terms (e.g., same inwarehouse insurance, transportation 

and/or delivery costs paid, as well as 

similar pre-entry customs, duties and 

taxes)), differences in locational premia 

can reflect various supply and demand 

factors, such as the relative pricing 

power of the producers versus the 

consumers. Currently, warehouse 

locations in Asia, such as Singapore, 

Malaysia and South Korea, due to their 

proximity to China, carry the highest 

locational premia over the LME 

settlement price. Fundamentally, copper 

that is stored in a location that is low 

in supply and high in demand will carry 

a higher premium than copper that is 

stored in a location where supply is 

generally high and demand is low. 

The Trust will hold only copper and 

will not trade in copper futures 

contracts on the LME, COMEX, the 

SHFE or any other futures exchange. 

The Trust will not buy, sell or hold LME 

Warrants. Rather, the Trust will take 

delivery of copper in the form of Grade 

A Copper. According to the Registration 

Statement, the Trust will not be 

regulated by the CFTC under the 

Commodity Exchange Act as a 

‘‘commodity pool,’’ and the Sponsor is 

not subject to regulation by the CFTC as 

a commodity pool operator or a 

commodity trading advisor. Investors in 

the Trust will not receive the regulatory 

protections afforded to investors in 

regulated commodity pools, nor may the 

LME, COMEX, the SHFE or any futures 

exchange enforce its rules with respect 

to the Trust’s activities. 

Description of the Trust 

The Trust will invest in Grade A 

copper in physical form. All copper 

owned by the Trust will be of an 

Acceptable Delivery Brand at the time 

such copper enters the Trust. The Trust 

will store copper in warehouses that are 

maintained by the Warehouse-keeper. 

Initially, the permitted warehouse 

locations are in the Netherlands 

(Rotterdam), Singapore (Singapore), 

South Korea (Busan and Gwangyang), 

China (Shanghai) and the United States 

(Baltimore, Chicago and New Orleans). 

Although the Trust may hold copper in 

warehouses in any of these locations (or 

other locations that may be determined 

from time to time), the locations at 

which copper is actually held will 

depend on (i) the warehouse locations at 

which Authorized Participants have 

actually delivered copper to the Trust 

and (ii) the warehouse locations from 

which copper is or has been delivered 

pursuant to the Trust’s redemption 

procedures. 

As discussed in ‘‘The Physical Copper 

Market’’ above, copper at different 

warehouse locations will trade with 

different locational premia, based on 

supply and demand factors (for 

example, freight rates, insurance costs, 

time to transport and the relative pricing 

power of the producers versus 

consumers). The Trust’s Selection 

Protocol, which is described in 

‘‘Selection Protocol’’ below, is designed 

to ensure that the Trust will always 

deliver copper first from the warehouse 

where it holds available copper that has 

the lowest locational premium at a 

particular time, referred to in the 

Registration Statement as the ‘‘cheapestto-deliver location.’’ The cheapest-todeliver location is determined on each 

Business Day of the Trust by the 

Valuation Agent independently in its 

sole discretion, using the same 

procedure applied by the Valuation 

Agent to determine the locational 

premium of each warehouse location 

where the Trust holds copper. 

The Valuation Agent will be 

responsible for (i) calculating the 

locational premia used to calculate the 

Trust’s NAV and in certain other 

calculations by the Administrative 

Agent and (ii) determining whether the 

cheapest-to-deliver location has 

changed. The locational premium for a 

warehouse location for a Business Day 

will be calculated as an amount 

expressed in U.S. dollars that is equal to 

the average value of copper per metric 

ton in such location minus the LME 

settlement price of copper on such 

Business Day. 

The Valuation Agent will calculate 

the average value of copper per metric 

ton in a location through a combination 

of (i) a weighted calculation (based on 

tonnage) of actual transactions and (ii) 

the indicative prices of market makers. 

Data will be collected primarily by 

phone, but also by email and by direct 

submission. In order to avoid any actual 

or potential conflict of interest, or 

perception of a conflict, the Valuation 

Agent will exclude any information 

provided by any JPMorgan-affiliated 

entity when calculating the locational 

premium of copper in any permitted 

warehouse location. The Valuation 

Agent will record details regarding its 

contacts for reference and internal audit 

purposes. 

When the Valuation Agent collects 

information on actual transactions for 

use in calculating locational premia, the 

Valuation Agent will generally request 

full details regarding such transactions, 

including price, material specifications, 

transaction size, delivery point and 

terms, payment details and other 

factors, all of which may inform the 

Valuation Agent’s assessment of the 

value of the underlying transaction. If a 

particular transaction involves a 

significantly higher or lower price than 

other comparable transactions, the 

Valuation Agent may request proof of 

the transaction price, and if such 

information is not provided, the price 

may be excluded from the assessment. 

Where possible, the Valuation Agent 

will seek to confirm details with the 

parties on both sides of a transaction. 

The Valuation Agent is expected to 

conduct its polling process for each 

permitted warehouse location of the 

Trust for each day that is a regular 

Business Day in such location; if a day 

is not a regular Business Day in a 

permitted warehouse location, the last 

calculated locational premium will be 

used. The Valuation Agent will use a 

combination of actual and indicative 

transaction prices from market 

participants. The number of market 

participants that provide information 

will vary. 

In calculating the locational premia, 

the Valuation Agent will determine in 

its discretion the relative weights that it 

will give to actual transactions as 

compared to indicative prices. The 

Valuation Agent may vary the relative 

weights of the components based on the 

level of physical activity on a particular 

Business Day as well as other factors. 

The use of both actual transaction 

information and indicative pricing 

information is intended to allow 

continuity of pricing and up-to-date 

market quotes for periods when 

physical activity has declined. 

Pursuant to the Valuation Agreement, 

the Valuation Agent has made 

numerous commitments to ensure the 

integrity and objectivity of the 

locational premia: 

• The Valuation Agent will not make 

any locational premia publicly available 

prior to the time such information is 

provided to the Trust, the Sponsor and 

the Administrative Agent on any 

Business Day. 

• The Valuation Agent will maintain 

books and records relating to its 

valuations for at least ten years from the 

end of the period to which they relate, 

and will allow an independent third 

party to inspect such books and records 

upon reasonable notice. 

• The Valuation Agent will at all 

times maintain written policies and 

procedures reasonably designed to: 

(i) Prevent any violation of applicable 

law, including without limitation the 

Securities Act, the Exchange Act and 

the Commodity Exchange Act, in 

connection with its provision of services 

under the Valuation Agreement; and 

(ii) Ensure the Valuation Agent’s 

compliance with, and prevent violations 

of, the Valuation Agreement. 


tkelley on DSK3SPTVN1PROD with NOTICES
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22 ‘‘Other Expenses’’ are expenses of the Trust 

other than the Sponsor’s fee. 

23To be an Authorized Participant, a person 

must: (i) Be a registered broker-dealer or other 

securities market participant such as a bank or other 

financial institution that is not required to register 

as a broker-dealer to engage in securities 

transactions; (ii) be a participant in DTC; (iii) have 

entered into, or had its agent enter into on its 

behalf, an Authorized Participant Warehouse 

Agreement with the Warehouse-keeper establishing 

the Authorized Participant’s Reserve Account and 

Private Account; (iv) have entered into an 

Authorized Participant Agreement with the Sponsor 

on behalf of the Trust, which among other things 

grants express authority to the Administrative 

Agent to instruct the Warehouse-keeper to transfer 

whole lots and/or fractional lots of copper 

(including creation overweight and creation 

underweight amounts of copper associated with any 

creation order and redemption underweight 

amounts of copper associated with any redemption 

order) between the Trust Account and such 

Authorized Participant’s Private Account and 

Reserve Account; and (v) have delivered at least 

25.0 metric tons of copper to the Warehouse-keeper 

at a permitted warehouse location of the Trust to 

establish its Reserve Account (and thereafter 

maintain at least 15.0 metric tons of copper in its 

Reserve Account at any permitted warehouse 

location of the Trust). In general, in order to create 

Shares, an Authorized Participant must own copper 

that is held in a permitted warehouse location of 

the Warehouse-keeper prior to the submission of a 

creation order. 

• The Valuation Agent will designate 

a chief compliance officer who is 

responsible for administering the 

Compliance Policies and Procedures. 

The chief compliance officer must: 

(i) Review on an ongoing basis the 

adequacy of the Compliance Policies 

and Procedures and the effectiveness of 

their implementation; 

(ii) Provide a report to the Sponsor, at 

least annually, on the adequacy of the 

Compliance Policies and Procedures 

and the effectiveness of their 

implementation; and 

(iii) Report promptly to the Sponsor 

(A) any violation of the Compliance 

Policies and Procedures and (B) any 

material weakness or inadequacy in the 

Compliance Policies and Procedures 

and the steps taken or to be taken to 

remedy any such weakness. 

• The Valuation Agent must provide 

to the Sponsor: 

(i) For each fiscal year of the Trust, 

within 30 days of the end of such fiscal 

year, a certification that (A) during such 

fiscal year the Valuation Agent has 

complied with the terms and conditions 

of the Valuation Agreement and its 

valuation methodology and (B) the 

Valuation Agent’s representations and 

warranties in the Valuation Agreement 

continue to be materially true and 

correct; 

(ii) For each calendar quarter, reports 

or certifications requested by the 

Sponsor relating to the valuation data, 

valuation methodology and related 

services; and 

(iii) Such other reports or 

certifications at such other times as the 

Sponsor may reasonably request from 

time to time in response to an 

articulated, identifiable concern, 

including reports or certifications 

required to be delivered to a 

governmental agency or regulatory 

body. 

• The Valuation Agent may not 

purchase or sell, and must instruct its 

officers, directors, employees and agents 

not to purchase or sell, any securities of 

the Trust or futures, options or other 

derivative instruments on securities of 

the Trust, and must maintain 

compliance policies and procedures 

reasonably designed to promote and 

monitor compliance with such 

instruction by the foregoing persons. 

• The Valuation Agent must take 

specific security measures when 

collecting, storing, processing, archiving 

and disposing of information used to 

derive locational premia. 

The Sponsor has represented that it 

believes that the Valuation Agent’s 

independence, valuation methodology 

and other commitments will ensure the 

integrity and objectivity of the pricing 

information, and that such pricing 

information, together with the 

procedures for transparency and public 

availability of information set forth 

below, will produce a robust arbitrage 

mechanism that will (i) align the 

secondary market price per Share to the 

NAV per Share and (ii) facilitate having 

creation and redemptions occur at a 

value close to the NAV per Share. 

The Sponsor has further represented 

that, because the Trust will create and 

redeem Shares based solely on a weight 

of copper, rather than a price of copper 

(as described below), the locational 

premia will be used primarily for (i) 

informational purposes, such as 

calculating intraday indicative values 

that are published in order to facilitate 

arbitrage activity, and (ii) making other 

determinations, such as whether and 

when copper will be sold in order to 

pay the Trust’s expenses, that bear little 

relationship to creation and redemption 

activity. 

Daily Operations of the Trust 

According to the Registration 

Statement, on each Business Day, after 

4 p.m. Eastern Time (‘‘E.T.’’) (unless 

otherwise indicated below), the 

following activities, each of which is 

described in more detail below, will be 

taken by or on behalf of the Trust, in the 

order indicated: 

• First, if the Valuation Agent has 

determined and informed the 

Administrative Agent by 5 p.m. London 

time on any such Business Day, that the 

cheapest-to-deliver location has 

changed, the Administrative Agent and 

the Warehouse-keeper will follow the 

procedures described in the Registration 

Statement relating to a change in the 

cheapest-to-deliver location. 

• Second, the Administrative Agent 

will (A) process any creation orders 

successively, in the order that they were 

submitted in completed form to the 

Administrative Agent, (B) instruct the 

Warehouse-keeper to give effect to 

changes in the ownership of copper as 

a result of processing any such creation 

orders and (C) cause the Trust to create 

Shares to effect any such creation 

orders. 

• Third, the Administrative Agent 

will (A) process any redemption orders 

successively, in the order that they were 

submitted in completed form to the 

Administrative Agent, (B) instruct the 

Warehouse-keeper to give effect to 

changes in the ownership of copper as 

a result of processing any such 

redemption orders and (C) cause the 

Trust to redeem Shares to effect any 

such redemption orders. 

• Fourth, the Administrative Agent 

will calculate the Trust’s NAV, NAV per 

Share, Creation Unit Ratio and Creation 

Unit Weight effective for the next 

Business Day. 

• Fifth, if the Trust’s procedure for 

paying the Sponsor’s fee (as described 

in the Registration Statement) requires 

copper to be transferred on such 

Business Day, the Administrative Agent 

will instruct the Warehouse-keeper to 

effectuate a book-entry transfer of the 

ownership of such copper to the 

Sponsor for payment of any accrued 

unpaid Sponsor’s fee. 

• Sixth, if the Trust’s procedure for 

paying Other Expenses 22 (as discussed 

in the Registration Statement) requires 

copper to be transferred on such 

Business Day, the Administrative Agent 

will instruct the Warehouse-keeper to 

effectuate the book-entry transfer of 

such copper from the Trust to the 

Sponsor for sale and the application of 

the proceeds toward payment of accrued 

unpaid Other Expenses. 

Creations and Redemptions of Shares 

Shares of the Trust are created when 

an Authorized Participant transfers 

copper having a weight equal to the 

Creation Unit Weight (as described 

below) to the Trust and the Trust, in 

return for such copper, delivers a 

Creation Unit of Shares to the 

Authorized Participant.23 Shares of the 

Trust are redeemed when an Authorized 

Participant transfers a Creation Unit of 

Shares to the Trust and the Trust, in 

return for such Shares, delivers copper 

having a weight equal to the Creation 


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24Creation orders submitted to the 

Administrative Agent must contain the following 

information: (i) The number of Creation Units 

expected to be created; (ii) the amount of the 

transaction fee due for such creation order; (iii) the 

warehouse location for each whole lot proposed to 

be transferred to the Trust; (iv) the specific 

identification number for each whole lot proposed 

to be transferred to the Trust; (v) the exact weight, 

expressed in metric tons, of each whole lot 

proposed to be transferred to the Trust; and (vi) the 

brand of each whole lot to be transferred to the 

Trust, which must be an Acceptable Delivery 

Brand. Creation orders will be given effect in the 

order accepted by the Administrative Agent, after 

the implementation of any change in the cheapestto-deliver location on a particular Business Day, but 

before giving effect to any redemptions or the 

payment of any accrued unpaid Sponsor’s fee or 

accrued unpaid Other Expenses on such Business 

Day. The amount of copper required to be 

transferred from the Authorized Participant to the 

Trust Account will be determined using the 

Creation Unit Ratio calculated on the immediately 

prior Business Day. All weights will be calculated 

to the nearest 0.001 metric ton. 

25References in the Registration Statement to the 

‘‘weight’’ of copper refer to the net weight of copper 

in metric tons. This means, with respect to any lot, 

the weight of the actual copper in the lot and does 

not include the weight of any bindings, straps, 

wooden platforms (pallets), or of any temporary or 

permanent storage mechanisms. 

26The Warehouse-keeper will maintain a bookentry account at each warehouse location to record 

all of the copper that is owned by the Trust. 

Collectively, such book-entry accounts are referred 

to as the ‘‘Trust Account.’’ The Trust’s ownership 

of whole lots and fractional lots of copper will be 

recorded in the Trust Account. Copper that is 

transferred to the Trust in connection with creation 

orders will be recorded by the Warehouse-keeper, 

upon instruction from the Administrative Agent, as 

an addition to the Trust Account, and copper that 

is transferred from the Trust in connection with 

redemption orders or the payment of Trust 

expenses will be recorded by the Warehousekeeper, upon instruction from the Administrative 

Agent, as a removal from the Trust Account. In 

consideration for its Sponsor’s Fee, the Sponsor 

will pay all expenses associated with the storage of 

copper owned by the Trust and recorded in the 

Trust Account, including both whole and fractional 

lots. 

27The Warehouse-keeper will maintain at each 

warehouse location a book-entry account to record 

the private ownership interest in copper held by an 

Authorized Participant at such warehouse location. 

These book-entry accounts with respect to an 

Authorized Participant are collectively referred to 

herein as the ‘‘Reserve Account’’ of such 

Authorized Participant. A Reserve Account serves 

two primary purposes. First, in order to reduce the 

risk that creation orders will fail as a result of an 

insufficient amount of copper being transferred 

from an Authorized Participant’s Private Account 

(as discussed below) to the Trust in connection 

with a creation order, each Authorized Participant 

will be required to hold an excess amount of copper 

that meets a minimum requirement in order to 

satisfy any underweight amounts remaining from a 

creation order. This copper will be held in the 

Reserve Account so that it is separately identifiable 

from the copper owned by the same Authorized 

Participant through its Private Account. Second, a 

Reserve Account will be used to record any 

fractional lot of copper that an Authorized 

Participant may hold at a warehouse location as a 

result of the processing of creation or redemption 

orders. A fractional lot can be created when the 

weight of copper needed to create or redeem a 

Creation Unit of Shares is more or less than the 

weight of the whole lots of copper delivered. 

28The Warehouse-keeper will maintain at each 

warehouse location book-entry accounts to record 

the private ownership interest in copper held by 

each of the Sponsor and each Authorized 

Participant, as applicable. These book-entry 

accounts of the Sponsor or an Authorized 

Participant, as applicable, are collectively referred 

to herein for any single owner as the ‘‘Private 

Account’’ of such owner. As part of a creation or 

redemption, an Authorized Participant will use its 

Private Account to facilitate movements of copper 

between itself and the Trust. Each Authorized 

Participant or the Sponsor can add or remove 

copper from its respective Private Account by 

adding copper to, or removing copper from, a 

warehouse location. 

Unit Weight to the Authorized 

Participant.24

A Creation Unit of Shares is a block 

of 2,500 Shares. The Creation Unit 

Weight for a particular day is equal to 

25.0 metric tons multiplied by the 

Creation Unit Ratio in effect for such 

day. The Creation Unit Ratio is initially 

equal to 1.0, but declines gradually over 

time, reflecting the payment of expenses 

by the Trust. As a result, the Creation 

Unit Weight will decline gradually over 

time as well. The Creation Unit Weight 

and Creation Unit Ratio in effect on any 

Business Day will have been calculated 

on the prior Business Day, after the 

calculation of the Trust’s NAV on such 

Business Day.25

Holding and Transferring Copper in 

Whole Lots and Fractional Lots 

In connection with a creation order or 

a redemption order, an Authorized 

Participant must transfer to the Trust, or 

the Trust must transfer to the 

Authorized Participant, as applicable, 

copper having an aggregate weight equal 

to the number of Creation Units being 

created or redeemed, multiplied by the 

Creation Unit Weight in effect for such 

day. The copper that the Trust holds 

normally trades in standardized lots, 

each of which weighs between 24.5 

metric tons and 25.5 metric tons. These 

lots (referred to in the Registration 

Statement as ‘‘whole lots’’) will not be 

physically divisible in connection with 

the Trust’s activities, and consequently 

the exact weight of copper required for 

a creation or a redemption generally 

cannot be transferred using only whole 

lots. 

As a result, the creation and 

redemption of shares in the manner 

contemplated by the Trust’s operations 

requires a means of owning and 

transferring not only whole lots of 

copper, but also ‘‘fractional lots,’’ i.e., 

interests that represent a fractional 

portion of a whole lot, in order to 

resolve any overweight amounts or 

underweight amounts. 

Therefore, the Warehouse-keeper will 

establish and utilize a book-entry 

procedure to record ownership by the 

Trust, the Sponsor or an Authorized 

Participant of specific whole and 

fractional lots of copper held in the 

warehouse locations. The Warehousekeeper’s book-entry system will use 

three different types of accounts, 

referred to in the Registration Statement 

as the Trust Account,26 the Reserve 

Accounts 27 and the Private Accounts.28

The Warehouse-keeper will record in 

these accounts the warehouse receipts it 

issues representing the ownership of 

specific whole and fractional lots of 

copper by the Trust, the Sponsor and 

each Authorized Participant. An 

overview of each of these types of 

accounts and the operation of the 

accounts in connection with creations 

and redemptions of Creation Units is 

described further in the Registration 

Statement. 

Selection Protocol 

The operation of the Trust requires 

the Administrative Agent to follow a 

prescribed procedure to identify specific 

lots of copper to be used for (i) the 

reconciliation of any creation 

overweight and creation underweight 

amounts when the Trust issues Creation 

Units of Shares; (ii) the satisfaction of 

any redemption orders accepted on any 

Business Day; (iii) the reconciliation of 

any redemption underweight amounts 

when the Trust redeems Creation Units 

of Shares; (iv) the calculation and 

payment of Trust expenses; and (v) the 

reallocation of ownership interests in 

copper to the extent required in 

connection with a change in the 

cheapest-to-deliver location, as 

described in the Registration Statement. 

The ‘‘Selection Protocol’’ is the 

procedure used by the Administrative 

Agent whenever it needs to select lots 

for these purposes. 

The Selection Protocol is intended to 

provide a consistent and transparent 

method of selecting lots, by requiring 

the Administrative Agent to select lots 

in the following manner: 

• Lots will be selected first from the 

cheapest-to-deliver location, and then 

from other warehouse locations 

successively based on a ranking of their 

respective locational premia from 

lowest to highest. 

• If there are multiple lots in the same 

warehouse location specified by the first 

step, lots in such warehouse location 

will be selected based on the date such 

lots were first delivered to the relevant 

account, with the earliest delivered lot 

being selected first. 

• If there are multiple lots in the same 

warehouse location that were first 

delivered to the relevant account on the 


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23782 Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 

29The Authorized Participant chooses the 

location from which whole lots of metal will be 

transferred to the Trust for a creation. This can 

include the potential that whole lots specified in a 

creation order will be from more than one location. 

This provides Authorized Participants with greater 

flexibility in order to fulfill a creation order. In 

addition, the Trust does not know at all times 

where an Authorized Participant will have 

sufficient stock available for creations at any given 

time. Although the Authorized Participant will 

choose which location(s) to which to deliver, the 

metal must be Grade A Copper of an acceptable 

LME brand (at such time) and the location(s) must 

be acceptable warehouse locations for the Trust (at 

such time). 

30According to the Registration Statement, The 

Henry Bath Group, the Warehouse-keeper, is a 

warehousing services provider specializing in the 

storage and shipping of exchange-traded metals and 

soft commodities around the world. The Henry Bath 

Group operates a global platform of exchangeapproved storage warehouses for holding, making 

and taking delivery of physical commodity 

products and is licensed by the LME, the London 

International Financial Futures and Options 

Exchange, the COMEX (a division of the CME 

Group), the Intercontinental Exchange and the 

Dubai Copper & Commodities Exchange to store and 

issue exchange-traded warrants for various 

commodities including copper, aluminum, zinc, 

lead, nickel, tin, aluminum alloy, steel billets, 

cocoa, robusta coffee, arabica coffee and plastics. 

same date, lots will be selected based on 

the actual weight of the lot, with the lot 

having the lowest actual weight being 

selected first. 

The Sponsor represents that, in 

addition to providing an objective 

selection protocol, these selection 

methods make it more likely that 

‘‘older’’ lots of copper will be redeemed 

and potentially used for industrial 

purposes rather than held indefinitely 

by the Trust. 

Creation of Shares 

In connection with any creation order 

on any Business Day, an Authorized 

Participant will be required to transfer 

to the Trust copper having an aggregate 

weight equal to the number of Creation 

Units being created multiplied by the 

Creation Unit Weight in effect for such 

Business Day. When an Authorized 

Participant submits a creation order it 

must specify, among other things, the 

specific whole lot(s) in its Private 

Account to be transferred to the Trust 

Account for such creation order (using 

the unique identification number(s) of 

such lot(s)), as well as the warehouse 

location and weight of each such lot 

(calculated to the nearest 0.001 metric 

ton).29 In order to assure that the exact 

required amount of copper is transferred 

to the Trust Account, in connection 

with any creation order, the 

Administrative Agent will calculate the 

amount by which the aggregate actual 

weight of the whole lots to be 

transferred by the Authorized 

Participant falls short of (a ‘‘creation 

underweight’’) or exceeds (a ‘‘creation 

overweight’’) the aggregate Creation 

Unit Weight for such creation order, and 

will instruct the Warehouse-keeper to 

adjust for any such overweight or 

underweight amount for such creation 

order by transferring ownership of 

copper between the Authorized 

Participant’s Reserve Account and the 

Trust Account, pursuant to specific 

procedures set forth in the Registration 

Statement. 

Redemption of Shares 

In connection with any redemption 

order on any Business Day, the Trust 

will be required to transfer to the 

redeeming Authorized Participant 

copper having an aggregate weight equal 

to the number of Creation Units being 

redeemed multiplied by the Creation 

Unit Weight in effect for such Business 

Day (calculated to the nearest 0.001 

metric ton). In order to assure that the 

exact required amount of copper is 

delivered from the Trust to the 

redeeming Authorized Participant in 

connection with any redemption order, 

the Administrative Agent will select, in 

accordance with the Selection Protocol, 

specific whole lots to be transferred 

from the Trust to the redeeming 

Authorized Participant, and will 

instruct the Warehouse-keeper to 

transfer such selected whole lots to such 

Authorized Participant’s Private 

Account, until the aggregate weight of 

whole lots transferred in connection 

with the redemption order is less than 

the aggregate Creation Unit Weight of 

such redemption order and the 

remaining weight of copper needed to 

satisfy the redemption order is less than 

the weight of the next whole lot that 

would be selected pursuant to the 

Selection Protocol. 

The remaining weight by which the 

aggregate weight of the transferred 

whole lots (calculated to the nearest 

0.001 metric ton) falls short of the 

aggregate weight of the copper required 

to be transferred from the Trust to the 

Authorized Participant is the 

‘‘redemption underweight.’’ Following 

the transfer of whole lots of copper, the 

Administrative Agent will instruct the 

Warehouse-keeper to adjust for any 

redemption underweight by transferring 

ownership of copper recorded in the 

Trust Account to the relevant 

Authorized Participant’s Reserve 

Account, pursuant to specific 

procedures set forth in the Registration 

Statement. 

When copper is redeemed in the 

foregoing manner, the amount of copper 

received by the Authorized Participant 

will equal a pro rata share of the copper 

held by the Trust based on the weight 

of the Trust’s aggregate copper holdings 

immediately prior to the processing of 

redemptions. However, because the 

copper held by the Trust in different 

locations may vary in value based on 

the applicable locational premium, the 

value of the copper actually received by 

the Authorized Participant will depend 

on the location of the specific whole 

lot(s) and fractional lots, if any, of 

copper that were transferred to the 

Authorized Participant. 

The cut-off time for placing creation 

orders or redemption orders for a 

Business Day is 4 p.m. E.T. Creation 

orders and redemption orders will be 

processed on each Business Day after 4 

p.m., in the order that such orders have 

been received in satisfactory form by the 

Administrative Agent. Redemption 

orders will be processed individually 

following the processing of all creation 

orders on such day but prior to the 

calculation of the Trust’s NAV and any 

payment of accrued expenses on such 

day. 

The Valuation Agent will generally be 

responsible for (i) calculating the 

locational premia used in connection 

with the determination of the NAV, the 

NAV per Share, the Creation Unit Ratio 

and other calculations by the 

Administrative Agent, and (ii) 

determining whether the cheapest-todeliver location has changed. 

The Warehouse-Keeper’s Role 

The Warehouse-keeper is responsible 

for the day-to-day storage of the copper 

held by the Authorized Participants and 

the Trust and the accurate 

recordkeeping of these inventories of 

copper.30 The Warehouse-keeper’s 

principal responsibilities include: 

(a) Facilitating the delivery of copper 

in and out of each Authorized 

Participant’s Private Account and 

Reserve Account; 

(b) Storing the copper of the Trust, the 

Authorized Participants and the 

Sponsor in its warehouse locations; 

(c) Effectuating the transfers or 

allocations of copper between the Trust 

Account and each Authorized 

Participant’s Private Account and 

Reserve Account; 

(d) Effectuating the transfers or 

allocations of copper between the Trust 

Account and the Sponsor’s Private 

Account; 

(e) Confirming the executability of 

creation orders and redemption orders 

and cooperating with the 

Administrative Agent to resolve any 

discrepancies, errors or any other issues 

affecting a creation order or redemption 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 23783 

31The Liquidation IIV is the Indicative Trust 

Value for purposes of NYSE Arca Equities Rule 

8.201(e)(2)(v). 

order prior to acceptance or rejection; 

and 

(f) Electing sub-contractors for 

warehousing. 

The Henry Bath Group warehouse 

locations utilized by the Trust will 

consist of both LME-approved and nonLME-approved warehouses. With 

respect to LME-approved warehouses, 

the LME sets minimum security 

standards for all such member 

warehouse facilities, including but not 

limited to scheduled inspections of 

premises, visual inspection of all metal 

in storage, quarterly inspection of all 

weighing equipment by an institution 

unaffiliated with the warehouse and 

review of all records and supporting 

documentation. 

Reporting and Valuation 

According to the Registration 

Statement, on each Business Day, as 

promptly as practicable after 4 p.m. 

E.T., the following will be published on 

the Trust’s Web site: 

• The number of outstanding Shares 

of the Trust as of the beginning of the 

Business Day; 

• The Trust’s NAV; 

• The NAV per Share; 

• The locational premium for each 

warehouse location, as calculated by the 

Valuation Agent at 5 p.m. London time, 

quoted both in U.S. dollars and as a 

percentage premium relative to the LME 

settlement price; 

• The price per metric ton of copper 

in each warehouse location where the 

Trust is permitted to hold copper; 

• The aggregate weight in metric tons 

of all copper owned by the Trust; 

• The aggregate weight in metric tons 

of the copper owned by the Trust in 

each warehouse location; 

• The gross value in U.S. dollars of 

the copper owned by the Trust in each 

warehouse location; 

• The Creation Unit Ratio; and 

• The Creation Unit Weight. 

On each Business Day, as promptly as 

practicable after 4 p.m. E.T., a 

downloadable file will be made 

available on the Trust’s Web site with 

the following information relating to 

each lot of copper owned by the Trust: 

• The unique identification number 

of such lot; 

• The warehouse location in which 

such lot is held; 

• The brand of such lot and, if such 

brand of copper is not an Acceptable 

Delivery Brand, an indication that such 

lot consists of a brand of copper that has 

been de-registered; 

• The weight in metric tons of such 

lot; and 

• The date upon which such lot was 

delivered to the Trust. 

In addition, during the NYSE Arca 

Core Trading Session from 9:30 a.m. to 

4 p.m. E.T., NYSE Arca will calculate 

and publish: 

• The ‘‘First-Out IIV,’’ an intraday 

indicative value per Share disseminated 

approximately every 15 seconds that 

represents, as of the time of such 

calculation, the hypothetical U.S. dollar 

value per Share of the copper that 

would need to be transferred to or from 

the Trust to create or redeem one Share 

included in a Creation Unit, assuming 

that copper in cheapest-to-deliver 

location was used for such creation or 

redemption; and 

• The ‘‘Liquidation IIV,’’ an intraday 

indicative value per Share disseminated 

approximately every 15 seconds that 

represents, as of the time of such 

calculation, the hypothetical U.S. dollar 

value per Share of all of the copper 

owned by the Trust divided by the 

number of Shares then outstanding.31

The Valuation Agent will calculate 

the average value of copper per metric 

ton in a location through a combination 

of (i) a weighted calculation (based on 

tonnage) of actual transactions and (ii) 

the indicative prices of market makers. 

Data will be collected primarily by 

phone, but also by email and by direct 

submission. In order to avoid any actual 

or potential conflict of interest, or 

perception of a conflict, the Valuation 

Agent will exclude any information 

provided by any JPMorgan-affiliated 

entity when calculating the locational 

premium of copper in any permitted 

warehouse location. The Valuation 

Agent will record details regarding its 

contacts for reference and internal audit 

purposes. 

When the Valuation Agent collects 

information on actual transactions for 

use in calculating locational premia, the 

Valuation Agent will generally request 

full details regarding such transactions, 

including price, material specifications, 

transaction size, delivery point and 

terms, payment details and other 

factors, all of which may inform the 

Valuation Agent’s assessment of the 

value of the underlying transaction. If a 

particular transaction involves a 

significantly higher or lower price than 

other comparable transactions, the 

Valuation Agent may request proof of 

the transaction price, and if such 

information is not provided, the price 

may be excluded from the assessment. 

Where possible, the Valuation Agent 

will seek to confirm details with the 

parties on both sides of a transaction. 

The tonnage weighting of copper for 

indicative prices will be set at the 

equivalent of 10 lots, or approximately 

250 metric tons, of copper. 

In calculating the locational premia, 

the Valuation Agent will determine in 

its discretion the relative weights that it 

will give to actual transactions as 

compared to indicative prices. The 

Valuation Agent may vary the relative 

weights of the components based on the 

level of physical activity on a particular 

Business Day, as well as other factors. 

The use of both actual transaction 

information and indicative pricing 

information is intended to allow 

continuity of pricing and up-to-date 

market quotes when physical activity 

falls. 

In conducting its valuation process, 

the Valuation Agent generally aims to 

speak to market participants from both 

sides of the market. The Valuation 

Agent seeks to maintain an open process 

that allows any participants who are 

conducting business in a market to 

contribute information to the Valuation 

Agent. The Valuation Agent may, 

however, disregard data that it believes 

is incorrect or unrepresentative of the 

market. There is no set parameter to 

decide whether a particular data point 

will be excluded as an outlier, as such 

a determination will depend 

significantly on prevailing market 

conditions. 

On each Business Day, the Valuation 

Agent will provide locational premia to 

the Administrative Agent at or before 5 

p.m. London time. 

Net Asset Value 

The Administrative Agent will 

calculate the NAV of the Trust on each 

Business Day as promptly as practicable 

after 4 p.m. E.T. 

To calculate the NAV of the Trust, the 

Administrative Agent will first calculate 

the Trust’s gross asset value. The Trust’s 

gross asset value, with respect to any 

Business Day, will be equal to the 

aggregate value in U.S. dollars of all 

whole lots and fractional lots of copper 

held by the Trust in each warehouse 

location, calculated using the LME 

settlement price as of such Business Day 

plus the applicable locational premia, 

after giving effect to, as applicable, (i) 

any change in the cheapest-to-deliver 

location (as discussed below), (ii) any 

creation orders and (iii) any redemption 

orders, but before the selection of lots of 

copper for the purpose of paying any 

accrued unpaid Trust expenses on such 

Business Day. 

After the Administrative Agent 

calculates the gross asset value, the 

Administrative Agent will calculate the 

Trust’s NAV, with respect to any 


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32Currently the three-month copper contract is 

the most liquid intraday contract, with live ticking 

prices every second. It is therefore the most 

accurate reflection of intraday price activity and, 

hence, the current best method to derive an IIV 

price for copper. At some point in the future, the 

intraday activity for the cash price of copper (i.e., 

copper to be settled two days from trade date) might 

become a deeper and more liquid market. This 

would allow the Exchange to switch from using the 

three-month copper price plus a cash-to-three 

month spread conversion to simply applying the 

intraday cash price traded. If the Sponsor instructs 

the Exchange to make the change described above 

to the method of deriving the IIV price for copper, 

the Sponsor will notify the market of such change 

by causing the Trust to make a public filing to that 

effect (i.e., a press release that would be filed on 

Form 8–K and, if required, an amendment to the 

Trust’s Registration Statement). See email from 

Michael Cavalier, Chief Counsel, NYSE Euronext, to 

Christopher W. Chow, Special Counsel, and Brian 

J. Baltz, Attorney-Advisor, Commission, dated April 

11, 2012. 

Business Day, as an amount equal to (x) 

the gross asset value of the Trust as of 

such Business Day minus (y) the Trust’s 

accrued unpaid expenses (i.e., the total 

amount of any accrued unpaid 

Sponsor’s fee and accrued unpaid Other 

Expenses) as of such Business Day. 

NAV Per Share 

On any Business Day, as promptly as 

practicable following the calculation of 

the Trust’s NAV as set forth above, the 

Administrative Agent will calculate the 

NAV per Share by dividing (x) the 

Trust’s NAV for such Business Day by 

(y) the number of Shares of the Trust 

outstanding on such Business Day, after 

accounting for any creations or 

redemptions of Shares for such Business 

Day. 

Creation Unit Ratio and Creation Unit 

Weight 

On each Business Day, as promptly as 

practicable after 4 p.m. E.T., the 

Administrative Agent will calculate the 

Creation Unit Ratio that will be effective 

for the next Business Day. The 

Administrative Agent will use the 

Creation Unit Ratio to determine the 

Creation Unit Weight, which is the 

weight of copper that an Authorized 

Participant or the Trust is obligated to 

transfer in connection with a creation or 

redemption, as applicable, of a Creation 

Unit of Shares for the applicable 

Business Day. 

The Creation Unit Ratio will be 

determined by the Administrative Agent 

as follows: 

• First, the Administrative Agent will 

calculate the aggregate weight in metric 

tons of all the copper owned by the 

Trust, after giving effect to (i) any 

creation orders and (ii) any redemption 

orders, but before the selection of any 

lots of copper for the purpose of paying 

accrued unpaid Trust expenses on such 

Business Day. 

• Second, the Administrative Agent 

will calculate the accrued unpaid 

Sponsor’s fee, expressed in metric tons, 

owed by the Trust. The Administrative 

Agent will do so by (i) first, calculating 

the accrued unpaid Sponsor’s fee in 

U.S. dollars, (ii) second, selecting 

pursuant to the Selection Protocol (from 

a population of whole lots available in 

the Trust Account) and taking into 

account their value (including any 

locational premia), the lots that would 

need to be transferred to pay such 

accrued unpaid Sponsor’s fee in full 

(including any portion of a whole lot, as 

applicable) and (iii) third, calculating 

the aggregate weight in metric tons of 

such lots identified in (ii). 

• Third, the Administrative Agent 

will calculate all accrued unpaid Other 

Expenses, expressed in metric tons, 

owed by the Trust. The Administrative 

Agent will proceed in so doing by (i) 

first, calculating the accrued unpaid 

Other Expenses in U.S. dollars, (ii) 

second, selecting pursuant to the 

Selection Protocol (from a population of 

whole lots available in the Trust 

Account, excluding for such purposes 

any lots used, either in whole or in part, 

in the calculation described in step two 

above) and taking into account their 

value (including any locational premia), 

the lots that would need to be 

transferred or sold to pay such accrued 

unpaid Other Expenses in full 

(including any portion of a whole lot, as 

applicable) and (iii) third, calculating 

the aggregate weight in metric tons of 

such lots identified in (ii). 

• Fourth, the Administrative Agent 

will subtract the weights determined 

pursuant to the second and third steps 

above from the aggregate weight in 

metric tons of all of the Trust’s copper 

(i.e., the amount determined in the first 

step above). This process represents a 

calculation of the Trust’s NAV, but 

expressed in metric tons of copper 

instead of U.S. dollars. 

• Finally, the Administrative Agent 

will calculate the Creation Unit Ratio by 

dividing (x) the weight derived pursuant 

to the fourth step above by (y) onehundredth (1/100) multiplied by the 

number of Shares of the Trust then 

outstanding. (The divisor in this step 

reflects the fact that each Share of the 

Trust included in the initial Creation 

Unit will have, a value equal to onehundredth (1/100) of one metric ton of 

copper, because the initial Creation Unit 

of Shares will be issued in exchange for 

25 metric tons of copper and a Creation 

Unit will consist of 2,500 Shares of the 

Trust.) 

On each Business Day, as soon as 

practicable following the calculation of 

the Creation Unit Ratio, the 

Administrative Agent will calculate the 

Creation Unit Weight that will be 

effective for the next Business Day. The 

Creation Unit Weight for any Business 

Day will be equal to 25.0 metric tons of 

copper multiplied by the Creation Unit 

Ratio in effect for the next Business Day, 

as calculated pursuant to the process 

described above. The Creation Unit 

Weight is the weight of copper that an 

Authorized Participant or the Trust 

would be obligated to transfer in 

connection with a creation order or a 

redemption order in respect of one 

Creation Unit on such Business Day. 

Intraday Indicative Values 

The Administrative Agent will 

calculate the NAV of the Trust and the 

NAV per Share only once each day. In 

order to provide market participants 

with an indication of the underlying 

value of the Trust’s Shares during the 

during the [sic] trading day, on each day 

on which NYSE Arca is open for 

business, NYSE Arca will disseminate, 

approximately every 15 seconds, two 

different intraday indicative values for 

the Trust’s Shares, referred to in the 

Registration Statement as the ‘‘First-Out 

IIV’’ and the ‘‘Liquidation IIV.’’ Both the 

First-Out IIV and the Liquidation IIV 

will incorporate the price of copper as 

well as the previous day’s locational 

premia, as discussed further below. 

The objective is that the First-Out IIV 

and the Liquidation IIV reflect the 

intraday cash settlement price of copper 

throughout the day. The First-Out IIV 

and the Liquidation IIV can incorporate 

one of two values: (1) The ‘‘Last 

Traded’’ price from LMEselect of the 

cash price of copper at such point; or (2) 

the ‘‘Last Traded’’ price from LMEselect 

of the three-month copper price at such 

point, and using the previous day’s 

cash-to-three month spread fixed at the 

auction, convert the intraday threemonth price of copper to an indicative 

intraday cash equivalent.32

First-Out IIV 

The Sponsor expects that, because of 

the Selection Protocol, Authorized 

Participants generally will expect to 

receive copper from the cheapest-todeliver location whenever they redeem 

Creation Units of Shares. The Sponsor 

also expects that, because an Authorized 

Participant will not expect that the 

copper it will receive upon redeeming a 

Creation Unit will be more valuable 

(i.e., have a higher locational premium) 

than the copper it delivers to the Trust 

when creating a Creation Unit of Shares, 

the Authorized Participant will tend to 

deliver copper in exchange for Creation 

Units of Shares only from the cheapestVerDate Mar<15>2010 18:17 Apr 19, 2012 Jkt 226001 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 E:\FR\FM\20APN1.SGM 20APN1

tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 23785 

33The locational premia will not change in the 

generation of the IIV associated with the pricing for 

such day. These published locational premia will 

be published by the Valuation Agent in U.S. dollars 

per metric ton. These levels will be converted into 

a Share equivalent as a function of the Creation 

Unit Weight applicable on such day for a Creation 

Unit of Shares and the number of Shares within a 

Creation Unit. 

34As noted above, the Liquidation IIV is the 

Indicative Trust Value for purposes of NYSE Arca 

Equities Rule 8.201(e)(2)(v). 

to-deliver location at which the 

Authorized Participant holds copper. 

Because of the foregoing dynamic and 

the arbitrage mechanism described 

below, the Sponsor expects that the 

Shares will trade with a market price 

that is within a limited range, with the 

lower end of that range approximating 

the value of copper in the cheapest-todeliver location and the higher end of 

that range approximating the value of 

copper in the cheapest-to-deliver 

location at which the Authorized 

Participants have copper available. 

The ‘‘First-Out IIV’’ is an intraday 

indicative value disseminated every 15 

seconds during the Exchange trading 

day that represents, as of the time of 

such calculation, the hypothetical U.S. 

dollar value per Share of the copper that 

would need to be transferred to or from 

the Trust to create or redeem one Share 

included in a Creation Unit, assuming 

that copper in the cheapest-to-deliver 

location was used for such creation or 

redemption. The First-Out IIV will be 

calculated and published by NYSE 

Arca. 

The Exchange will calculate the FirstOut IIV as follows: 

• First, NYSE Arca will calculate an 

indicative price per metric ton of copper 

in the cheapest-to-deliver location, 

which will be the sum of (x) a deemed 

intraday indicative cash price per metric 

ton of copper in U.S. dollars based on 

either a live cash price or a combination 

of basis swaps and live intraday futures 

prices, as of the time of such First-Out 

IIV calculation, derived by methods and 

means established by the Exchange, and 

(y) the last available locational premium 

calculated by the Valuation Agent for 

copper in the cheapest-to-deliver 

location on such Business Day (which 

will have been provided to Arca by the 

Administrative Agent); 33

• Second, NYSE Arca will calculate 

an indicative value for a Creation Unit 

Weight of copper in the cheapest-todeliver location, by multiplying the 

value calculated in the first step by the 

Creation Unit Weight in effect for such 

Business Day (which will have been 

provided to NYSE Arca by the 

Administrative Agent). The calculation 

in this step represents an indicative 

value in U.S. dollars, as of the time of 

calculation, of the amount of copper in 

the cheapest-to-deliver location that 

would need to be delivered by an 

Authorized Participant for a Creation 

Unit of Shares; and 

• Third, NYSE Arca will convert the 

value obtained in the second step to a 

U.S. dollar value per Share by dividing 

the value obtained in the second step by 

2,500 (the number of Shares in a 

Creation Unit). The result of this 

calculation is the First-Out IIV. 

The First-Out IIV is intended to 

facilitate arbitrage activity by 

Authorized Participants by serving as an 

indicator of whether the Trust’s Shares 

are trading at a discount or premium 

during the Exchange trading day. If an 

Authorized Participant views the FirstOut IIV as an estimate of the underlying 

value of copper per Share in U.S. dollars 

of the Shares it could create or redeem 

on any Business Day, an Authorized 

Participant may seek to create Shares 

when the market price exceeds the FirstOut IIV (if the Authorized Participant 

has copper lots available for delivery to 

the Trust in the cheapest-to-deliver 

location), and may seek to redeem 

Shares when the market price is less 

than the First-Out IIV, because: 

• If the market price per Share is 

greater than the underlying value of 

copper per Share in U.S. dollars, an 

Authorized Participant could create a 

Creation Unit of Shares by delivering 

the Creation Unit Weight of copper in 

the cheapest-to-deliver location to the 

Trust, and may be able to sell such 

Shares on the NYSE Arca for an 

aggregate amount that is greater than the 

value of the copper used to create the 

Shares; and 

• If the underlying value per Share in 

U.S. dollars is greater than the market 

price per Share, an Authorized 

Participant could redeem a Creation 

Unit of Shares by delivering the 

Creation Unit to the Trust and receiving 

a Creation Unit Weight of copper in the 

cheapest-to-deliver location, and may be 

able to sell the copper for an aggregate 

amount that is greater than [sic] amount 

it paid to acquire the Shares. 

Liquidation IIV 

The ‘‘Liquidation IIV’’ is an intraday 

indicative value disseminated every 15 

seconds during the NYSE Arca Core 

Trading Session that represents, as of 

the time of the calculation, the 

hypothetical U.S. dollar value per Share 

of all of the copper owned by the Trust 

divided by the number of Shares then 

outstanding.34

The Exchange will calculate the 

Liquidation IIV as follows: 

• First, NYSE Arca will determine an 

indicative price per metric ton of copper 

reflecting the weighted average price of 

copper held in the Trust, calculated as 

the sum of (a) a deemed intraday 

indicative cash price per metric ton of 

copper in U.S. dollars based on either a 

live cash price or a combination of basis 

swaps and live intraday futures prices, 

as of the time of such Liquidation IIV 

calculation, derived by methods and 

means established by the Exchange, and 

(b) the weighted average locational 

premium per metric ton, calculated 

using the locational premium calculated 

by the Valuation Agent for each 

warehouse location in effect for such 

time for such Business Day, and the 

number of metric tons of copper held by 

the Trust at each warehouse location on 

such Business Day (which will have 

been provided to the NYSE Arca by the 

Administrative Agent); 

• Second, NYSE Arca will calculate 

an indicative value for a Creation Unit 

Weight of copper in the Trust by 

multiplying the value calculated in the 

first step by the Creation Unit Weight in 

effect for such Business Day (which will 

have been provided to NYSE Arca by 

the Administrative Agent). The 

calculation in this step represents an 

indicative average value in U.S. dollars, 

as of the time of calculation, of the 

amount of copper in the Trust 

(including both whole and fractional 

lots of copper) corresponding to a 

Creation Unit of Shares; and 

• Third, NYSE Arca will convert the 

value obtained in the second step to a 

U.S. dollar value per Share by dividing 

the value obtained in the second step by 

2,500 (the number of Shares in a 

Creation Unit). The result of this 

calculation is the Liquidation IIV. 

Additional Information Relating to the 

Trust 

While the Trust’s investment 

objective is for the value of the Shares 

to reflect, at any given time, the value 

of the copper owned by the Trust at that 

time, less the Trust’s expenses and 

liabilities, the Shares may trade in the 

secondary market on NYSE Arca at 

prices that are lower or higher than the 

NAV per Share. The amount of the 

discount or premium in the trading 

price relative to the NAV per Share may 

be influenced by, among other things, 

non-concurrent trading hours between 

NYSE Arca and the LME. While the 

Shares will trade on NYSE Arca until 

the market closes (generally 4 p.m. E.T.), 

liquidity in the global copper market 

will be reduced after the close of copper 

trading on the LME (generally 4:55 p.m. 

London time, or 11:55 a.m. E.T.). As a 

result, during the time after the close of 


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23786 Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 

35FastMarkets Ltd. and Platts may not publish 

prices based on exactly the same warehouse 

locations as the Valuation Agent. 

36See note 17, supra. 

37NYSE Arca Equities Rule 8.201(e)(2)(iv) 

provides that the Exchange will consider the 

suspension or removal from listing of an issue of 

Commodity-Based Trust Shares if the Exchange 

stops providing a hyperlink on its Web site to the 

value of the underlying commodity from a source 

unaffiliated with the sponsor for such issue. 

trading on the LME, trading spreads, 

and the resulting premium or discount 

on the Shares, may widen. In addition, 

the NAV per Share includes a locational 

premium for the Trust’s copper in each 

warehouse location, which will not be 

reflected in the price of copper that is 

traded on the LME. Creations and 

redemptions of Creation Units are not 

executed at the NAV per Share, but 

rather occur based on a specified weight 

of copper required to create or redeem 

Shares on a particular day, which may 

contribute to disparities between the 

NAV per Share and the secondary 

market price of Shares. 

Additional information regarding the 

world copper market, the Shares and the 

operation of the Trust, including 

termination events, risks, Trust 

expenses, Sponsor fees, and creation 

and redemption procedures, are 

described in the Registration Statement. 

Availability of Information Regarding 

Copper Prices 

Currently, the Consolidated Tape Plan 

does not provide for dissemination of 

the spot price of a commodity, such as 

copper, over the Consolidated Tape. 

However, there will be disseminated 

over the Consolidated Tape the last sale 

price for the Shares, as is the case for 

all equity securities traded on the 

Exchange (including exchange-traded 

funds). In addition, there is a 

considerable amount of copper price 

and copper market information 

available on public Web sites and 

through professional and subscription 

services. 

Investors may obtain almost on a 24- 

hour basis copper pricing information 

based on the spot price for an ounce of 

copper from various financial 

information service providers, such as 

Reuters and Bloomberg. Reuters and 

Bloomberg provide at no charge on their 

Web sites delayed information regarding 

the spot price of copper and last sale 

prices of copper futures, as well as 

information about news and 

developments in the copper market. 

Reuters and Bloomberg also offer a 

professional service to subscribers for a 

fee that provides information on copper 

prices directly from market participants. 

Complete real-time data for copper 

futures and options prices traded on the 

COMEX are available by subscription 

from Reuters and Bloomberg. The 

COMEX also provides delayed futures 

and options information on current and 

past trading sessions and market news 

free of charge on its Web site 

(www.cmegroup.com). There are a 

variety of other public Web sites 

providing information on copper, 

ranging from those specializing in 

precious metals to sites maintained by 

major newspapers, such as The Wall 

Street Journal. 

The locational premia will be 

available on the Trust’s Web site and 

from various financial information 

service providers, such as Reuters and 

Bloomberg. While the Valuation Agent 

is the only entity that will provide 

locational premia information for each 

location, other information vendors 

provide periodic information relating to 

copper pricing in various warehouses. 

For example, FastMarkets Ltd. provides 

weekly premium reports for all primary 

base metals, including copper, on an inwarehouse and cost-insurance-freight 

(‘‘CIF’’) basis, based on information 

collected directly from a large number 

of market participants on all sides of the 

physical market. In addition, Platts, a 

division of The McGraw-Hill 

Companies, Inc., provides weekly prices 

for all primary base metals in the 

weekly ‘‘Platts Metal Week’’ 

publications.35 It is not expected that 

the weekly price in the FastMarkets Ltd. 

and Platts publications generally will 

differ significantly from the daily price 

provided by the Valuation Agent. The 

LME settlement price will be available 

from Bloomberg.36

The Trust’s Web site 

(www.jpmxf.com) will provide ongoing 

pricing information for copper spot 

prices and the Shares. Market prices for 

the Shares will be available from a 

variety of sources including brokerage 

firms, information Web sites and other 

information service providers. The Net 

Asset Value will be published by the 

Sponsor on each Warehouse Business 

Day and will be posted on the Trust’s 

Web site. The Exchange will provide on 

its Web site (www.nyx.com) a link to the 

Trust’s Web site.37 In addition, the 

Exchange will make available over the 

Consolidated Tape quotation 

information, trading volume, closing 

prices and NAV for the Shares from the 

previous day. 

Criteria for Initial and Continued Listing 

The Trust will be subject to the 

criteria in Rule 8.201(e) for initial and 

continued listing of the Shares. 

It is anticipated that a minimum of 

100,000 Shares will be required to be 

outstanding at the start of trading. The 

minimum number of Shares required to 

be outstanding is comparable to 

requirements that have been applied to 

previously listed Shares of the 

streetTRACKS Gold Trust, the iShares 

Gold Trust, the iShares Silver Trust and 

exchange-traded funds. The Exchange 

believes that the anticipated minimum 

number of Shares outstanding at the 

start of trading is sufficient to provide 

adequate market liquidity. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Fund subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Trading in the Shares 

on the Exchange will occur in 

accordance with NYSE Arca Equities 

Rule 7.34(a). The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in NYSE 

Arca Equities Rule 7.6, Commentary .03, 

the minimum price variation (‘‘MPV’’) 

for quoting and entry of orders in equity 

securities traded on the NYSE Arca 

Marketplace is $0.01, with the exception 

of securities that are priced less than 

$1.00 for which the MPV for order entry 

is $0.0001. 

Further, NYSE Arca Equities Rule 

8.201 sets forth certain restrictions on 

ETP Holders acting as registered Market 

Makers in the Shares to facilitate 

surveillance. Pursuant to NYSE Arca 

Equities Rule 8.201(g), an ETP Holder 

acting as a registered Market Maker in 

the Shares is required to provide the 

Exchange with information relating to 

its trading in the underlying copper, 

related futures or options on futures, or 

any other related derivatives. 

Commentary .04 of NYSE Arca Equities 

Rule 6.3 requires an ETP Holder acting 

as a registered Market Maker, and its 

affiliates, in the Shares to establish, 

maintain and enforce written policies 

and procedures reasonably designed to 

prevent the misuse of any material 

nonpublic information with respect to 

such products, any components of the 

related products, any physical asset or 

commodity underlying the product, 

applicable currencies, underlying 

indexes, related futures or options on 

futures, and any related derivative 

instruments (including the Shares). 

As a general matter, the Exchange has 

regulatory jurisdiction over its ETP 

Holders and their associated persons, 

which include any person or entity 

controlling an ETP Holder, as well as a 

subsidiary or affiliate of an ETP Holder 

that is in the securities business. A 

subsidiary or affiliate of an ETP Holder 

that does business only in commodities 

or futures contracts would not be 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 23787 

38See NYSE Arca Equities Rule 7.12. 

39A list of ISG members is available at http:// 

www.isgportal.org. The Exchange does not have 

access to information regarding copper-related OTC 

transactions in spot, forwards, options or other 

derivatives. 40 15 U.S.C. 78f(b)(5). 

subject to Exchange jurisdiction, but the 

Exchange could obtain information 

regarding the activities of such 

subsidiary or affiliate through 

surveillance sharing agreements with 

regulatory organizations of which such 

subsidiary or affiliate is a member. 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares. 

Trading on the Exchange in the Shares 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. These may 

include: (1) The extent to which 

conditions in the underlying copper 

market have caused disruptions and/or 

lack of trading, or (2) whether other 

unusual conditions or circumstances 

detrimental to the maintenance of a fair 

and orderly market are present. In 

addition, trading in Shares will be 

subject to trading halts caused by 

extraordinary market volatility pursuant 

to the Exchange’s ‘‘circuit breaker’’ 

rule.38

Surveillance 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products 

(including Commodity-Based Trust 

Shares) to monitor trading in the Shares. 

The Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

The Exchange’s current trading 

surveillance focuses on detecting 

securities trading outside their normal 

patterns. When such situations are 

detected, surveillance analysis follows 

and investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. Also, pursuant to 

NYSE Arca Equities Rule 8.201(g), the 

Exchange is able to obtain information 

regarding trading in the Shares and the 

underlying copper, copper futures 

contracts, options on copper futures, or 

any other copper derivative, through 

ETP Holders acting as registered Market 

Makers, in connection with such ETP 

Holders’ proprietary or customer trades 

through ETP Holders which they effect 

on any relevant market. In addition, the 

Exchange may obtain trading 

information via the Intermarket 

Surveillance Group (‘‘ISG’’) from other 

exchanges who are members of the 

ISG,39 including COMEX. In addition, 

the Exchange has entered into a 

comprehensive surveillance sharing 

agreement with LME that applies with 

respect to trading in copper. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in the Creation 

Unit (including noting that Shares are 

not individually redeemable); (2) NYSE 

Arca Equities Rule 9.2(a), which 

imposes a duty of due diligence on its 

ETP Holders to learn the essential facts 

relating to every customer prior to 

trading the Shares; (3) how information 

regarding the IIV is disseminated; (4) the 

requirement that ETP Holders deliver a 

prospectus to investors purchasing 

newly issued Shares prior to or 

concurrently with the confirmation of a 

transaction; (5) the possibility that 

trading spreads and the resulting 

premium or discount on the Shares may 

widen as a result of reduced liquidity of 

physical copper trading during the Core 

and Late Trading Sessions after the 

close of the major world copper 

markets; and (6) trading information. 

For example, the Information Bulletin 

will advise ETP Holders, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Trust. The Exchange 

notes that investors purchasing Shares 

directly from the Trust (by delivery of 

the Creation Deposit) will receive a 

prospectus. ETP Holders purchasing 

Shares from the Trust for resale to 

investors will deliver a prospectus to 

such investors. 

In addition, the Information Bulletin 

will reference that the Trust is subject 

to various fees and expenses described 

in the Registration Statement. The 

Information Bulletin will also reference 

the fact that there is no regulated source 

of last sale information regarding 

physical copper, that the Commission 

has no jurisdiction over the trading of 

copper as a physical commodity, and 

that the CFTC has regulatory 

jurisdiction over the trading of copper 

futures contracts and options on copper 

futures contracts. 

The Information Bulletin will also 

discuss any relief, if granted, by the 

Commission or the staff from any rules 

under the Act. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 40 that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Equities 

Rule 8.201. The Exchange has in place 

surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. The Exchange may obtain 

information via ISG from other 

exchanges that are members of ISG, 

including COMEX. In addition, the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement with LME that applies with 

respect to trading in copper. On each 

day on which NYSE Arca is open for 

business, the last sale price for the 

Shares will be disseminated over the 

Consolidated Tape. In addition, there is 

a considerable amount of copper price 

and copper market information 

available on public Web sites and 

through professional and subscription 

services. Investors may obtain almost on 

a 24-hour basis copper pricing 

information based on the spot price for 

an ounce of copper from various 

financial information service providers. 

NYSE Arca will disseminate, 

approximately every 15 seconds, two 

different intraday indicative values for 

the Trust’s Shares—the First-Out IIV 

and the Liquidation IIV. The Trust’s 

Web site will provide ongoing pricing 

information for copper spot prices and 

the Shares. Complete real-time data for 

copper futures and options prices traded 

on the COMEX are available by 

subscription from Reuters and 

Bloomberg. The COMEX also provides 

delayed futures and options information 

on current and past trading sessions and 

market news free of charge on its Web 

site. Market prices for the Shares will be 

available from a variety of sources 

including brokerage firms, information 


tkelley on DSK3SPTVN1PROD with NOTICES
23788 Federal Register / Vol. 77, No. 77 / Friday, April 20, 2012 / Notices 

41 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Web sites and other information service 

providers. The NAV will be published 

by the Sponsor on each Warehouse 

Business Day and will be posted on the 

Trust’s Web site. The Exchange will 

provide on its Web site a link to the 

Trust’s Web site. In addition, the 

Exchange will make available over the 

Consolidated Tape quotation 

information, trading volume, closing 

prices and NAV for the Shares from the 

previous day. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that a large amount of 

information is publicly available 

regarding the Trust and the Shares, 

thereby promoting market transparency. 

The Trust’s Web site will provide 

ongoing pricing information for copper 

spot prices and the Shares. Investors 

may obtain almost on a 24-hour basis 

copper pricing information based on the 

spot price for an ounce of copper from 

various financial information service 

providers. NYSE Arca will disseminate, 

approximately every 15 seconds, two 

different intraday indicative values for 

the Trust’s Shares—the First-Out IIV 

and the Liquidation IIV. Market prices 

for the Shares will be available from a 

variety of sources including brokerage 

firms, information Web sites and other 

information service providers. The NAV 

will be published by the Sponsor on 

each warehouse Business Day and will 

be posted on the Trust’s Web site. The 

Exchange will provide on its Web site 

a link to the Trust’s Web site. In 

addition, the Exchange will make 

available over the Consolidated Tape 

quotation information, trading volume, 

closing prices and NAV for the Shares 

from the previous day. Trading in 

Shares of the Trust will be halted if the 

circuit breaker parameters in NYSE Arca 

Equities Rule 7.12 have been reached or 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. Moreover, prior to the 

commencement of trading, the Exchange 

will inform its ETP Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of CommodityBased Trust Shares that will enhance 

competition among market participants, 

to the benefit of investors and the 

marketplace. As noted above, the 

Exchange has in place surveillance 

procedures relating to trading in the 

Shares and may obtain information via 

ISG from other exchanges that are 

members of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2012–28 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2012–28. This 

file number should be included on the 

subject line if email is used. 

To help the Commission process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/sro.shtml). 

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2012–28, and should be 

submitted on or before May 11, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.41

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9528 Filed 4–19–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66817; File No. SR– 

NASDAQ–2012–050] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Routing Fees 

April 16, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 11, 

2012, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 


tkelley on DSK3SPTVN1PROD with NOTICES