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 historic nickel market crisis of March 2022, when nickel prices doubled within a single 24-hour period in one of the most dramatic commodity market events in modern financial history. 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 Recognised Exchange Requirement 2.5.1 and Article 18 of MiFID's Regulatory Technical Standard 7 by failing to maintain the adequate systems and controls required of an exchange operator. The regulator concluded that those failures directly enabled the disorderly conditions that ultimately forced the LME to cancel trades and suspend nickel trading in an unprecedented intervention that remains deeply controversial among market participants.
THE MARCH 2022 NICKEL SHORT SQUEEZE
The nickel crisis of March 2022 remains one of the most closely studied episodes in modern commodity market history. Prices surged by more than 100% within a single 24-hour period as a substantial short position held by a Chinese industrial group was caught in a violent short squeeze, driven by uncertainty about Russian nickel supply following Russia's invasion of Ukraine and the consequent risk-off repositioning across commodity markets. The scale and speed of the price movement overwhelmed the LME's risk management infrastructure and led to calls being triggered for margin payments that some participants could not immediately meet.
The LME's response — cancelling approximately USD 4 billion of trades and halting nickel market operations for several days — was highly controversial and prompted a wave of criticism and legal challenges from market participants who had held profitable long positions that were effectively nullified by the cancellation decision. The episode raised fundamental questions about the adequacy of the exchange's pre-crisis risk management framework, its real-time monitoring of position concentrations, and whether its governance processes were equipped to handle the kind of extreme market stress that emerged in those circumstances.
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 before they culminated in market breakdown. The regulator concluded that the exchange had not met the required standard, and the LME's decision to accept the findings through early settlement enabled a reduction in the financial penalty while providing the FCA with an authoritative resolution of its investigation.
REGULATORY IMPLICATIONS FOR EXCHANGE OPERATORS
The FCA's action against the LME carries broader significance for Recognised Investment Exchanges across the United Kingdom, establishing that exchange operators bear direct regulatory accountability for the real-world effectiveness of their trading controls — not merely the formal existence of rules and procedures on paper. The fine reinforces the regulatory expectation that exchanges must invest continuously in surveillance technology, position monitoring capabilities, and circuit-breaker mechanisms that can function under extreme stress conditions without requiring emergency interventions of the kind the LME deployed in March 2022.
The LME, which is owned by Hong Kong Exchanges and Clearing, has been working since the 2022 episode to strengthen its risk management frameworks, review its policies on exceptional circumstances, and restore the confidence of the international metals trading community in the integrity and resilience of its markets. The FCA's enforcement action brings formal regulatory closure to a central chapter in the post-crisis accountability process, though civil proceedings from affected market participants relating to the trade cancellations were continuing through the UK courts as of the date of the fine's imposition.