Inquiry into nickel market meltdown

THE City watchdog has launched a rare enforcement investigation into the London Metal Exchange (LME) over a meltdown in the nickel market.

The Financial Conduct Authority said the inquiry, its first ever launched against an exchange, would include monitoring the LME’S efforts to improve its conduct, controls and governance.

It will focus on the LME’S actions, systems and controls in the run-up to the suspension of nickel trading on March 8 last year.

The 145-year-old exchange was forced to stop trading its benchmark nickel contract for more than a week and cancelled billions of pounds of trades when the market was upended by Russia’s invasion of Ukraine.

The LME faced a backlash from members over claims of unfair treatment, as well as favouritism by its Chinese owners. At the centre of the debacle was Xiang “Big Shot” Guangda, the Chinese industrialist and self-made billionaire, whose company, Tsingshan Holding Group – the world’s biggest nickel and stainless steel producer – had built up a colossal bet that nickel’s price would fall.

The FCA said: “Since the suspension, the FCA has made clear its expectation that the LME should consider carefully how the events of March 2022 should shape its future approach on market structure, including the role of transparency in effective risk management.”

The LME said it will cooperate with the FCA’S enforcement investigation and “will continue to take the appropriate steps to ensure the long-term health, efficiency and resilience of its market”.