[Federal Register Volume 77, Number 77 (Friday, April 20, 2012)]
[Notices]
[Pages 23772-23788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9528]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

[[Page 23773]]

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\
---------------------------------------------------------------------------

    \4\ Commodity-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.
    \5\ See 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).
    \6\ See 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).
    \7\ See 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).
    \8\ See 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \9\ See 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.
---------------------------------------------------------------------------

    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 
warehouse-keeper of the Trust (``Warehouse-keeper'').\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\
---------------------------------------------------------------------------

    \10\ Each 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.
    \11\ The 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \12\ With 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \13\ Unless 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.
---------------------------------------------------------------------------

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 End-use 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 ``semi-
fabricated'' 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

[[Page 23774]]

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\
---------------------------------------------------------------------------

    \14\ Please note that the figures may not add up to equal the 
totals listed due to independent rounding.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                2000     2001     2002     2003     2004     2005     2006     2007     2008     2009     2010     2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Electro-Refined Copper Production\15\.......    12552    13118    12733    12601    13277    13951    14540    15035    15189    15017    15703    16293
SX/EW Production\16\........................     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
--------------------------------------------------------------------------------------------------------------------------------------------------------

E
[[Page 23775]]

The Global Copper Market
    The global 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.
---------------------------------------------------------------------------

    \15\ Copper 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.
    \16\ Copper 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'').
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \17\ The ``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.
    \18\ With 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.
---------------------------------------------------------------------------

    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

[[Page 23776]]

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.
---------------------------------------------------------------------------

    \19\ According 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.
    \20\ 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------

    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-to-principal 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 ``look-alikes'' 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.
---------------------------------------------------------------------------

    \21\ According 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, exchange-trading, 
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.
---------------------------------------------------------------------------

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-to-principal 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 inter-office 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), 
Soci[eacute]t[eacute] G[eacute]n[eacute]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

[[Page 23777]]

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 three-month seller 
price (which is a three-month 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 rule-making, 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'').

[[Page 23778]]

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 de-register 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, de-registered brands and unregistered 
brands of copper are traded actively in the physical copper market. If 
a de-registered 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 LME-
approved warehouse. Each LME-approved 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 duties-free zones within a jurisdiction and the LME Rules 
set certain requirements, such as mandatory inspections carried out by 
the LME, to ensure that LME-registered 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 
LME-registered metal into or out of an LME-approved 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 LME-
approved 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 LME-approved warehouses. These warehouses can be established in 
bonded, customs- and duties-free zones within a country (as with LME-
approved 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 LME-approved 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[supreg]). 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

[[Page 23779]]

Commercial Terms (e.g., same in-warehouse 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 
``cheapest-to-deliver location.'' The cheapest-to-deliver 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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.

[[Page 23780]]

    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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:
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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.
---------------------------------------------------------------------------

    \22\ ``Other Expenses'' are expenses of the Trust other than the 
Sponsor's fee.
---------------------------------------------------------------------------

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

[[Page 23781]]

Unit Weight to the Authorized Participant.\24\
---------------------------------------------------------------------------

    \23\ To 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.
    \24\ Creation 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 cheapest-to-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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \25\ References 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.
---------------------------------------------------------------------------

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 Warehouse-keeper'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.
---------------------------------------------------------------------------

    \26\ The Warehouse-keeper will maintain a book-entry 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 Warehouse-keeper, 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.
    \27\ The 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.
    \28\ The 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.
---------------------------------------------------------------------------

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:
    <bullet> 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.
    <bullet> 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.
    <bullet> If there are multiple lots in the same warehouse location 
that were first delivered to the relevant account on the

[[Page 23782]]

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.
---------------------------------------------------------------------------

    \29\ The 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).
---------------------------------------------------------------------------

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-to-deliver 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:
---------------------------------------------------------------------------

    \30\ According 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 exchange-approved 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.
---------------------------------------------------------------------------

    (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

[[Page 23783]]

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 non-LME-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:
    <bullet> The number of outstanding Shares of the Trust as of the 
beginning of the Business Day;
    <bullet> The Trust's NAV;
    <bullet> The NAV per Share;
    <bullet> 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;
    <bullet> The price per metric ton of copper in each warehouse 
location where the Trust is permitted to hold copper;
    <bullet> The aggregate weight in metric tons of all copper owned by 
the Trust;
    <bullet> The aggregate weight in metric tons of the copper owned by 
the Trust in each warehouse location;
    <bullet> The gross value in U.S. dollars of the copper owned by the 
Trust in each warehouse location;
    <bullet> The Creation Unit Ratio; and
    <bullet> 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:
    <bullet> The unique identification number of such lot;
    <bullet> The warehouse location in which such lot is held;
    <bullet> 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;
    <bullet> The weight in metric tons of such lot; and
    <bullet> 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:
    <bullet> 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
    <bullet> 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\
---------------------------------------------------------------------------

    \31\ The Liquidation IIV is the Indicative Trust Value for 
purposes of NYSE Arca Equities Rule 8.201(e)(2)(v).
---------------------------------------------------------------------------

    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

[[Page 23784]]

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:
    <bullet> 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.
    <bullet> 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).
    <bullet> 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).
    <bullet> 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.
    <bullet> Finally, the Administrative Agent will calculate the 
Creation Unit Ratio by dividing (x) the weight derived pursuant to the 
fourth step above by (y) one-hundredth (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 one-hundredth (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 three-month price of copper to an indicative intraday cash 
equivalent.\32\
---------------------------------------------------------------------------

    \32\ Currently 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.
---------------------------------------------------------------------------

First-Out IIV
    The Sponsor expects that, because of the Selection Protocol, 
Authorized Participants generally will expect to receive copper from 
the cheapest-to-deliver 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 cheapest-

[[Page 23785]]

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-to-deliver 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 First-Out IIV as follows:
    <bullet> 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\
---------------------------------------------------------------------------

    \33\ The 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.
---------------------------------------------------------------------------

    <bullet> Second, NYSE Arca will calculate an indicative value for a 
Creation Unit Weight of copper in the cheapest-to-deliver 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
    <bullet> 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 First-Out 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 
First-Out 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:
    <bullet> 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
    <bullet> 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\
---------------------------------------------------------------------------

    \34\ As noted above, the Liquidation IIV is the Indicative Trust 
Value for purposes of NYSE Arca Equities Rule 8.201(e)(2)(v).
---------------------------------------------------------------------------

    The Exchange will calculate the Liquidation IIV as follows:
    <bullet> 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);
    <bullet> 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
    <bullet> 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

[[Page 23786]]

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 in-warehouse 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\
---------------------------------------------------------------------------

    \35\ FastMarkets Ltd. and Platts may not publish prices based on 
exactly the same warehouse locations as the Valuation Agent.
    \36\ See note 17, supra.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \37\ NYSE 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.
---------------------------------------------------------------------------

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

[[Page 23787]]

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\
---------------------------------------------------------------------------

    \38\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \39\ A 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

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

    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

[[Page 23788]]

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 Commodity-Based 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4032352c256d232f2d2d252e3433003325236e272f36"><span class="__cf_email__" data-cfemail="ccbeb9a0a9e1afa3a1a1a9a2b8bf8cbfa9afe2aba3ba">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2012-28 on the subject line.

Paper Comments

    <bullet> 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\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9528 Filed 4-19-12; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>