The report narrates a series of shortcomings at the LME in the run-up to the unforeseen event.
SEATTLE (Scrap Monster): The London Metal Exchange (LME) should tighten its rules and enforcement procedures to prevent any sort of market distortions, says an independent review of the events surrounding the exchange’s nickel crisis in March last year. The report, commissioned by the LME, was carried out by consultancy Oliver Wyman.
Over the course of three trading days in March 2022, the price of nickel on the LME had surged by over 270% from $27,080 per tonne to $101,365 per tonne, before falling to around $80,000 per tonne. Following the price surge on March 8, the LME had suspended the market.
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The report narrates a series of shortcomings at the LME in the run-up to the unforeseen event. It attributes the events to a short squeeze, which it termed as “unprecedented in a major commodity in recent times”. It compares the development to the attempt by Hunt brothers to corner the silver market in 1980.
It recommends several measures including introduction of harsher position limits and strengthening of requirements for clearing members.
Meantime, the report skipped judgment on the exchange’s most controversial decisions such as allowing the market to reopen on March 8, then suspending it and canceling billions of dollars of trades. It also didn’t mention whether it found any manipulative behavior.
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