We’ve reported on ETFs and ETNs before here. The products are the new hot instruments on Wall Street and despite their instability and their lack of a real history investors are flocking to them. In the wake of the financial crisis regulators have been more and more wary of certain types on instruments. Exchange traded notes have been too often ignored in these deliberations. They haven’t caused any huge problems yet. That doesn’t meant they should be traded unchecked.

JPMorgan Chase & Co. (NYSE:JPM) already offers several ETF products and is one of the leading innovators in the space. A new fund they plan on launching has come under severe criticism from both industry and hedge fund sector. For two yeaqrs JpMorgan have been planning an ETF based on physical copper.

RK Capital Management, a hedge fund based in London and led by Michael Farmer, has complained about the ETF to the SEC suggetsting it would turn the copper market upside down. The hedge fund wrote a letter to the regulator alledging that the product would remove up to one third of copper stocks of the London Metal exchange and reak havok on the global economy.

Red Kite believes the instrument will result in price fixing and was joined by Southwire Company, a US manufacturer of cable and wires that constitutes one of the country’s largest buyers of copper. RK Capital Management is one of the world’s biggest hedge funds dealing in metals. The funds manager is often known as Mr. Copper in the industry.

The actual effects of an ETF dealing in physical copper are difficult to predict. There is simply no real precedent for the long term pattern or the possibilities of such an index. The biggest copper dealers in the industry may not be the most credible voice, as anyone outside the industry couldn’t possibly enumerate the plausible effect on the commodity, but they are certainly at least as credible as JPMorgan in this decision.

An ETF in copper could be dangerous. One thing is certain, it will be unpredictable. The most well known ETF are those operating on volatility indexes like the TVIX. That one in particular is operated by Credit Suisse (NYSE:CS) and is the subject of inquiry by the SEC. It was supposed to follow the CBOE volatility Index the VIX giving 2X returns every day. The instrument abjectly failed to do that.

A Copper EFT will be just as unpredictable.