Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Sunday, May 26, 2024

British financial watchdog opens enforcement inquiry into LME nickel chaos

British financial watchdog opens enforcement inquiry into LME nickel chaos

The Financial Conduct Authority will investigate the London Metal Exchange’s conduct and controls after last year’s temporary suspension of nickel trading.

Britain’s financial regulator has opened an enforcement investigation into the London Metal Exchange’s (LME) handling of a chaotic period in the nickel market last year that led to a temporary trading suspension and prompted a series of lawsuits from investors.

The Financial Conduct Authority (FCA) said it had reviewed the events that forced the Hong Kong Exchanges and Clearing (HKEX)-owned bourse to halt trading in nickel and cancel thousands of trades in the early hours of March 8, 2022, and would now carry out an inquiry into some of the exchange’s conduct, as well as its systems and controls, between January 1 and March 8, 2022.

“The LME has implemented changes to its control framework and committed to a wider package of market reform, informed by the recommendations of an external review,” the regulator said in a statement. “The FCA is encouraged by the LME’s focus on increasing the transparency of OTC trading to support robust risk management in its on-exchange trading.”

Separately, the Bank of England said that it planned to appoint an independent monitor to assess and report on actions by LME Clear, the bourse’s clearing house, to address shortcomings in its governance and risk management.

“The LME will cooperate fully with this process and will continue to take the appropriate steps to ensure the long-term health, efficiency and resilience of its market,” Matthew Chamberlain, the LME CEO, said in a statement.

The announcements by financial regulators came nearly two months after an independent review by consultant Oliver Wyman recommended the bourse tighten its rules to improve its ability to identify and prevent future market distortions similar to those that triggered the nickel chaos.

The LME is expected to unveil an implementation plan in response to the independent review’s recommendations by the end of the first quarter, including “initiatives that are already under way” to strengthen its business and markets, the bourse said.

Later this month, the bourse is expected to resume trading of nickel during business hours in Asia after a pause of more than a year, which the LME hopes will help with liquidity issues in the market. Trading will be available beginning at 1 am GMT/9 am HKT.

Matthew Chamberlain, CEO of London Metal Exchange, speaks during the LME Asia Week seminar in 2018 at the Hong Kong Convention and Exhibition Centre in Wan Chai.


In early March of last year, nickel prices, alongside other commodities, rose dramatically after Russia’s invasion of Ukraine stoked concerns about supply shortages. Prices surged by as much as 250 per cent in just over 24 hours, squeezing dozens of short-sellers, including the world’s largest stainless steel producer, Tsingshan Holding Group of China.

The bourse has said the nickel market had become “disorderly” in the early hours of March 8, 2022, and the decision was made to cancel trades in order “to take the market back to the last point in time at which the LME could be confident that the market was operating in an orderly way”.

It was only the second time in the 146-year-old bourse’s history that it had cancelled trades in one of its metals. Nickel trading was halted for more than a week and had a chaotic restart.

However, some traders criticised the bourse’s decision, saying the exchange favoured some investors over others by cancelling completed trades that day.

US hedge fund Elliott Management and quantitative investing firm Jane Street Global Trading sued the exchange in London, seeking up to £471 million (US$572 million) in damages.

The Managed Funds Association (MFA), a trade body representing some of the world’s biggest hedge funds, separately filed a formal complaint with the LME in June over the bourse’s handling of the nickel situation and has called for a “robust regulatory review” to address the bourse’s failings.

“Investor confidence in the LME was badly shaken by the crisis and must be rebuilt,” said Jennifer Han, head of global regulatory affairs at the MFA. “Alternative asset managers require sound and predictable markets to deliver reliable returns for institutional investors such as pensions, especially during times of market volatility.”

LME has already introduced a series of measures to try to avoid similar situations in the future, including upper and lower daily price limits for contracts that require metals to be physically delivered when a futures contract expires.

Last summer, the bourse began requiring its members to report their OTC positions on a weekly basis for these metals, including contracts for aluminium, copper, nickel, tin and zinc.

Newsletter

Related Articles

Hong Kong News
0:00
0:00
Close
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
Steve Jobs' Son Launches Venture Capital Firm With $200 Million For Cancer Treatments
Google reshuffles Assistant unit, lays off some staffers, to 'supercharge' products with A.I.
End of Viagra? FDA approved a gel against erectile dysfunction
UK sanctions Russians judges over dual British national Kara-Murza's trial
US restricts visa-free travel for Hungarian passport holders because of security concerns
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Political leader from South Africa, Julius Malema, led violent racist chants at a massive rally on Saturday
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
'I am not your servant': IndiGo crew member, passenger get into row over airline meal
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Spanish Citizenship Granted to Iranian chess player who removed hijab
US Senate Republican Mitch McConnell freezes up, leaves press conference
Speaker McCarthy says the United States House of Representatives is getting ready to impeach Joe Biden.
San Francisco car crash
This camera man is a genius
3D ad in front of Burj Khalifa
Next level gaming
BMW driver…
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The politician and the journalist lost control and started fighting on live broadcast.
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
Joe Biden admitted, in his own words, that he delivered what he promised in exchange for the $10 million bribe he received from the Ukraine Oil Company.
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
×