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UK financial regulators to review LME’s handling of nickel-trading suspension

  • Financial Conduct Authority, Bank of England to see what lessons can be learned from unprecedented suspension of trading in March
  • LME plans to conduct a separate independent review in the matter

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Traders on the London Metal Exchange’s open outcry ring in February. Photo: Bloomberg
Chad Brayin London
Britain’s financial regulators plan to conduct a review of the London Metal Exchange’s handling of an unprecedented suspension of nickel trading amid a short squeeze last month and its chaotic resumption a week later.
The metals bourse, which is owned by Hong Kong Exchanges & Clearing (HKEX), suspended nickel trading and cancelled all transactions on March 8 after prices surged 250 per cent in just over 24 hours, threatening dozens of short sellers, including the world’s largest stainless steel producer Tsingshan Holding Group.
On Monday, the Financial Conduct Authority said it would conduct a review of the exchange’s handling of the situation to “determine what lessons might be learned in relation to the LME’s governance and market oversight arrangements”.

The Bank of England said it would undertake a similar review of the operations of the bourse’s clearing house, LME Clear, to determine whether any lessons might be learned related to its governance and risk management.

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The exchange also said on Monday it would conduct an independent review of the matter, with “sizeable positions in the OTC market and the LME’s lack of direct visibility of such activity” contributing to instability in the market.

“The LME fully recognises the impact of these events on a broad spectrum of market participants, and understands that not all participants agreed with the course of action undertaken,” the bourse said. “The LME sought to act in the interests of the market as a whole and acknowledges the concerns expressed by some market participants.”

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