Murphy: Will a physical copper fund have a predictable impact on the spot price of copper? Could it cause it to automatically go higher?

Hyland: Anybody who tells you that has no real evidence for their opinion. I can give you reasons why it could cause prices to trend a bit higher, if the fund was large, but I can also give you reasons why it could cause copper prices to go lower.

A lot of it will depend on not only the size of the fund, but on how its exact creation/redemption procedures will work in practice. Remember, at any given time there are hundreds of thousands of tons in LME warehouses anyway. There are millions of tons worldwide in non-LME inventory.

It is not clear that the copper owned by this fund, that must "sell it" to anybody who wants to do a redemption on any given day, will automatically push the price up—as opposed to if the exact same copper was owned by Glencore or General Electric, kept in the exact same warehouse, but only sold when Glencore or GE felt like it.

My best guess is that most likely it will have little or no effect on spot copper prices.

Murphy: Notwithstanding the fact that the NYSE has filed a 19b-4 on this fund, is it actually anywhere near being close to launch?

Hyland: I don't think so. The most recent updated draft prospectus for this fund was filed on July 12, 2011. That draft did not include minor details like the ticker symbol, the CUSIP number, or any disclosure at all about the levels of fees and expenses. Until J.P. Morgan files a draft that does include that info, assume this thing is months and months away from launching.

Murphy: Why do you think the firms who filed this comment letter have done so?

Hyland: Do not automatically assume that they are concerned about the integrity of the copper market. That could be true. It could be that they just do not know how to read a prospectus or do not understand how ETFs work.

However, putting on my cynical hat, it could also be the case that they just do not want a transparent, public player that’s always willing to buy copper every day, at the market price via the creation process, and always willing to sell physical copper every day, at the market price via the redemption process, shining any light on their little corner of the world.

The first rule of big players in any nonpublic market, like physical copper, is to keep everybody else in the dark for your own benefit.

At its heart, GLD—the physical gold ETF—is not really a fund. It is a highly public gold-bullion-trading platform.

The same would be true of a large physical copper ETF. That may be good for the copper market in general, while at the same time being bad for certain large players who like being able to dominate a market. Their motives may be much less pure than their comment letter would suggest.

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