The Financial Conduct Authority (FCA) fined the London Metal Exchange (LME) £9,245,900 on 20 March 2025, holding the Recognised Investment Exchange directly accountable for failures in its systems and controls that allowed disorderly trading conditions to develop during the nickel market crisis of March 2022, when nickel prices doubled within a single 24-hour period. The fine was accepted by the LME following an early settlement with the FCA.
The penalty included a 30% early settlement discount, implying that the full pre-discount figure would have been approximately £13.2 million. The FCA found that the LME had breached REC 2.5.1 of the FCA Handbook and Articles 18(3) and 18(4) of Regulatory Technical Standard 7 (RTS 7) by failing to maintain the adequate systems and controls required of an exchange operator. The regulator concluded that those breaches allowed the price of the three-month nickel contract to rise much more quickly than would otherwise have been possible, before the LME suspended nickel trading and cancelled trades.
THE MARCH 2022 NICKEL SHORT SQUEEZE
Prices rose by more than 100% within a single 24-hour period as a short position held by a Chinese industrial group was caught in a short squeeze, amid uncertainty about Russian nickel supply following Russia's invasion of Ukraine.
The LME cancelled approximately USD 4 billion of trades and halted nickel market operations for several days, a decision that was challenged in court by market participants.
The FCA's investigation examined the period leading up to and during the crisis, focusing on whether the LME had maintained the systems, controls, and governance arrangements needed to identify and manage the accumulating risks. The regulator concluded that the exchange had not met the required standard.
OWNERSHIP AND LITIGATION
The LME is owned by Hong Kong Exchanges and Clearing. On the same day, the UK Supreme Court refused Elliott permission to appeal the dismissal of its legal challenge to the trade cancellations.
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