Questions for the London Metal Exchange to answer over nickel market chaos

·2-min read
The London Metal Exchange was forced to intervene in the nickel market (PA)
The London Metal Exchange was forced to intervene in the nickel market (PA)

LAST Tuesday Xiang Guangda, the Steve Jobs of metals — a visionary, they say — found himself in a fix.

The nickel market was crazy-go-nuts, the price doubling in minutes to $100,000 a tonne.

His TsingShan Holdings, the world’s biggest nickel producer, was short the market — betting it would fall, in other words.

By some estimates he was on the wrong end of a $2 billion punt. At 8.15am that morning, the London Metal Exchange, an integral part of London’s financial district and a hallmark of the essential integrity of the City, suspended trading in nickel.

All trades made that day up to 8.15am — about $4 billion worth — were cancelled.

The Metal Exchange is owned by China’s Hong Kong Exchange (HKEX), and regulated by the Financial Conduct Authority and the Bank of England.

The question being asked in the City is: did HKEX step in to save its guy? The LME says the decision was its alone.

It adds: “We recognise the frustration of some market participants regarding the decision to suspend nickel trading… it was the LME’s view that the nickel market had become disorderly.”

Disorderly, no question. Recognises the frustration? I’m not sure that covers the level of anger here.

It adds: “The LME’s decisions were made with full regard to regulatory due process and were, in the LME’s view, in the interests of the market as a whole.”

Not everyone in the market agrees. To say the least. Some hedge funds say they can’t do business there just now, or perhaps ever again.

A week later, the market remains closed as the LME struggles to untangle the mess.

The FCA and the Bank of England need to get into this and reassure investors that everything is as it should be. The LME also has some explaining to do.

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