HKEX’s London Metal Exchange names Oliver Wyman to review nickel trading chaos amid investor lawsuits
- Independent review will run until December and examine issues that forced the bourse to suspend nickel trading in March
- Suspension only the second time in the 145-year-old metal exchange’s history that it had cancelled trades in one of its futures contracts
“We look forward to considering recommendations put forward as part of the review findings, and to taking further steps to support the long-term health, efficiency and resilience of the market and its constituents,” the LME said in a statement.
The review is expected to run until December and include “extensive market engagement and data collection,” it added.
The bourse has said the nickel market had become “disorderly” in the early hours of March 8 and the decision was made to cancel trades in order “to take the market back to the last point in time at which the LME could be confident that the market was operating in an orderly way”.
However, that decision has been criticised by some traders, who have said the exchange favoured some investors over others by cancelling completed trades that day.
The LME has already introduced a series of measures to try to avoid similar situations in the future, including upper and lower daily price limits for contracts that require metal to be physically delivered when a futures contract expires.
LME’s chief executive officer Matthew Chamberlain has pointed to the lack of transparency in off-exchange positions as one reason the bourse struggled to identify and manage the situation.
However, the industry has not necessarily embraced the OTC reporting requirements, with several respondents indicating in a consultation that they would prefer the LME wait until regulatory reviews of the situation have concluded before adopting the new measures.