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HKEX-owned LME’s handling of 2022 nickel chaos faces scrutiny as British financial watchdog opens enforcement inquiry
- Financial Conduct Authority to investigate London Metal Exchange’s conduct, controls after suspension of nickel trading last year
- Bank of England to appoint independent monitor for LME’s clearing house
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Chad Brayin London
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.
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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.
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HKEX CEO Nicolas Aguzin on the future of Hong Kong’s capital market
HKEX CEO Nicolas Aguzin on the future of Hong Kong’s capital market
“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.
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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.
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