UK Financial Conduct Authority opens investigation into LME’s March 2022 suspension of nickel futures

The UK’s Financial Conduct Authority (FCA) has opened an enforcement investigation into the London Metal Exchange’s “conduct, systems and controls” related to nickel futures trading

The investigation takes into account nickel futures trading between the start of 2022 and the time trading was suspended three months later on March 8, 2022.

The benchmark nickel price on the LME briefly surged above $100,000 per tonne in March 2022, causing the exchange to suspend nickel trading. That decision led to low liquidity and wild volatility in the nickel market.

“The FCA has made clear its expectation that the LME should consider carefully how the events of March 2022 should shape its future approach on market structure, including the role of transparency in facilitating effective risk management,” the FCA said on Friday March 3, without disclosing further details about the investigation.

The FCA is responsible for supervision of the LME as a recognized investment exchange and, since issuing a joint statement with the Prudential Regulation Authority (PRA) and the Bank of England in April 2022, it has been focusing on the orderly resumption of trading in nickel.

On February 23, 2023, the LME sent a notice to members informing them that it will resume Asian trading hours for its nickel contract from March 20.

The exchange had initially planned to announce the return of Asian trading hours in late 2022, but the move had reportedly been blocked by the FCA.

“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,” the exchange said in response to the FCA’s March 3 announcement.

If you want more information about nickel futures contracts or hedging your battery raw material risk, contact our risk solutions team.

Why are risk management tools important?

  • Hedge exposure to future price volatility
  • Protect profit margins
  • Increase certainty of cost budgeting and cash flows
  • Improve procurement, planning and inventory requirements
  • Secure financing for new projects or developments
  • Mitigate counterparty risk
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