The London Metal Exchange (LME) has been fined £9.2 million by the Financial Conduct Authority (FCA) for mishandling the nickel market chaos in 2022. This marks the regulator’s first penalty against a major investment exchange. The FCA investigation found that the LME was unprepared for the “serious risks” that emerged in March of that year, when Russia’s invasion of Ukraine caused a surge in the price of nickel. Prices more than doubled on 8 March 2022, to over $100,000 a tonne, with most of the jump occurring in just over an hour.
The LME subsequently suspended trading for eight days and controversially canceled all trades from the day of the surge, resulting in a lawsuit by the hedge fund Elliott Associates, which was later dismissed in court. The LME has stated that the cancellations were necessary to protect the market and prevent smaller members of the exchange from going bankrupt.
The FCA stated that the LME failed to ensure that its systems and controls were adequate to handle severe market stress. The FCA also found that junior trading staff were on duty overnight during Asian trading hours, but they were not properly trained to recognize market disorder. As a result, the extreme surge in nickel prices was not escalated to senior managers, and junior staff disabled price bands that were meant to mitigate the risks.
The FCA added that the LME’s breaches allowed the price of its three-month nickel futures contract to increase more quickly than it would have otherwise, exposing investors and market users to greater risks. Steve Smart, joint executive director of enforcement and market oversight at the FCA, emphasized the importance of robust controls in the metal markets.
The LME has accepted the FCA’s findings and stated that it has improved its controls to prevent similar problems in the future. Its chief executive, Matthew Chamberlain, acknowledged the need for better defense against disorderly effects and stated that the LME is now stronger as a result of the implemented enhancements.
Source: https://www.theguardian.com/business/2025/mar/20/london-metal-exchange-fined-nickel-market-chaos
