LME Fined £9.2M by UK Regulator Over 2022 Nickel Market Crisis

LME

FCA cites lack of controls and untrained staff during historic short squeeze

The London Metal Exchange (LME) has been fined £9.2 million ($11.9 million) by the UK Financial Conduct Authority (FCA) for serious regulatory failings during the March 2022 nickel short squeeze, when prices surged past $100,000 per tonne in a matter of days. The FCA’s findings highlight a breakdown in market governance and crisis management.

The crisis was triggered by a massive short position held by Tsingshan Holding Group, a major Chinese nickel producer. From March 4 to 8, 2022, extreme volatility gripped the market. The LME suspended trading for eight days and controversially canceled trades made on March 8.

Key failures identified by the FCA included:

• No automatic price bands to limit extreme moves
• Lack of trained crisis staff during Asian trading hours
• Failure to escalate abnormal market activity
• Delayed coordination with LME’s Hong Kong operations

In a critical moment, junior operations staff disabled price limits, worsening the situation when senior decision-makers were unavailable.

Reforms, Legal Fallout, and Market Implications

The LME accepted the FCA’s conclusions and received a 30% fine reduction for cooperation. Since the crisis, it has implemented daily price limits across all metals and bolstered oversight of OTC positions, addressing gaps that contributed to the crisis.

Despite the reforms, the LME faced major lawsuits over its decision to cancel trades:

• Elliott Management sued for $456 million
• Jane Street sought $15 million

The UK High Court ruled in favor of the LME, and the Supreme Court denied Elliott the right to appeal in 2024, effectively ending the legal saga.

The FCA ruling signals a critical need for real-time market controls, especially during off-hours. The LME, once a symbol of stability in metals trading, is now a case study in the risks of operational unpreparedness during a crisis. With global metal markets growing more volatile amid geopolitical shocks and supply constraints, regulators may look to tighten oversight at other exchanges as well.