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June 24, 2022

Oliver Wyman selected to review LME’s nickel trading disruption

Expected to run until December 2022, the review will make recommendations to avoid similar events in future.

The London Metal Exchange (LME) had selected management consulting firm Oliver Wyman to undertake an independent review of the events that resulted in a week-long nickel trading suspension earlier this year.

On 8 March 2022, LME suspended trading as prices soared more than 250% in a single day.

This chaos, linked to Russia’s military attack on Ukraine, resulted in a record price exceeding $100,000/t in several hours.

The world’s largest and oldest forum, however, resumed nickel trading on 16 March following the introduction of daily price limits.

Oliver Wyman will be responsible for carrying out the review over the trading suspension and publishing a report.

Expected to run until December this year, the independent review will examine the factors that triggered the conditions in the nickel market, resulting in the suspension of trading.

It will also make recommendations to reduce similar events in the future.

The scope of future recommendation covers the LME Group’s market structure; trading rules, and trading controls; specifications of physical contract and broader links to the physical market; as well as risk management policies.

However, the review excludes the LME and LME Clear’s governance arrangements and decision-making processes.

These events will form part of the regulatory reviews, which will be carried out by the UK Financial Conduct Authority (FCA) and the Bank of England (BoE).

To ensure market stability, LME has already introduced upper and decrease daily price limits for all physically delivered contracts on the exchange, and over-the-counter (OTC) position reporting, scheduled to be in force from 18 July 2022.

In a press statement, the exchange said: “The LME will continue to proactively develop and assess further market structure reform proposals to mitigate the risk of circumstances similar to those leading to the events of 8 March 2022 arising in the future on the LME.

“Where the LME considers it to be in the interest of the long-term health, efficiency and resilience of the market, the LME may seek to proactively introduce further measures prior to the conclusion of the Independent Review.”

Earlier this month, US traders sued the exchange for cancelling nickel trades.

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