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LME to overhaul margins, introduce new nickel contract in market revamp
- HKEX-owned bourse is seeking to rebuild investor confidence a year after chaos in nickel market forced trading halt, cancellation of trades
- New ‘action plan’ includes permanent daily price limits, effort to develop new contract for lower-grade nickel with Chinese bourse
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Chad Brayin London
The London Metal Exchange (LME) has unveiled its long-awaited “action plan” to improve its markets a year after a short squeeze threatened to destabilise the global nickel market, saying it would overhaul its margin requirements and introduce a new nickel contract focused on the Asian markets to improve liquidity.
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As part of a two-year overhaul, the Hong Kong Exchanges and Clearing (HKEX)-owned bourse also said it would seek to further enhance its monitoring of liquidity and over-the-counter (OTC) positions, as well as make daily price limits on its physically delivered metals a permanent feature of its markets going forward.
“We remain fully committed to supporting the trading community as we drive forward initiatives to build deep resilient liquidity across our markets, and we look forward to working with our stakeholders to deliver these enhancements,” LME CEO Matthew Chamberlain said in a statement on Thursday.
Large off-exchange positions in nickel have been partially blamed for chaos in the nickel market last March as the metal’s price soared more than 270 per cent over a three-day period following Russia’s invasion of Ukraine, triggering nearly US$16 billion in margin calls.
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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 was ultimately forced to suspend trading and cancel billions of dollars of transactions on March 8, 2022, a move that has sparked a series of legal actions by investors over the 146-year-old bourse’s response.
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The bourse also is facing an enforcement inquiry by the Financial Conduct Authority, Britain’s top financial watchdog, into the LME’s conduct, as well as its systems and controls, leading up to the suspension of trading last year.
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