LME: Hong Kong owners pledge to ‘strengthen its stewardship’ of the industry after nickel crisis
The London Metal Exchange (LME) will ramp up its oversight of metal markets following last year’s nickel crisis, the boss of its parent company has pledged.
Nicolas Aguzin, chief executive of owner Hong Kong Exchanges and Clearing (HKEX) confirmed the LME will be “strengthening its stewardship of the industry,” according to Financial News.
Speaking at a conference during London Metals Week, he pledged to keep the LME at “at the heart of the global metals industry” – with the historic trading floor one of the last open trading pits in the capital.
He committed to making the exchange “more efficient, resilient and attractive” – and to “leading by example”.
“We are committed to creating marketplaces people want to be a part of. The LME is very much part of this commitment,” he said.
This follows LME’s decision last March to cancel over £3bn in trades after a failed short squeeze rocked nickel prices – causing prices to more than double to records of more than $100,000 per metric tonne.
The exchange is currently embroiled in a protracted legal saga with Elliot Investment Management and Jane Street, who suffered heavy losses from cancelled trades.
A court verdict on the LME’s conduct and potential liability is expected later this year.
The two parties are collectively seeking more than $15m in damages, with the exchange facing widespread criticism over its handling of the crisis.
The LME is also facing enforcement action from the Financial Conduct Authority, while its clearing house – LME Clear – is being independently monitored by the Bank of England.
The two groups commissioned Oliver Wyman to independently assess the group’s conduct during the nickel crisis – the business management consultancy returned a damning report in March earlier this year.
Oliver Wyman recommended the LME bring in risk and control functions to prevent market distortions, upgrade volatility controls and spend more time monitoring potential threats in the market.
Refinitiv data suggests both open interest and volume traded in nickel fell nearly 50 per cent last year following the scandal.
However, the LME has revealed activity has rebounded since, with year-to-date volumes up more than five per cent compared with the same period last year – with open interest 15 per cent higher.
Aguzin’s speech comes after LME’s announcement this morning that it plans to work with producers and standards bodies to improve the group’s sustainability platform which details the environmental credentials of the metals traded in its system.
The platform known as LME Passport is the exchange’s digital register for storing information about the sustainability of metas traded on the LME.
“We’re delighted that already more than 50 per cent of LME-listed brands are now sharing sustainability credentials on LME Passport,” said Georgina Hallett, LME chief sustainability officer. “We’ve recently added 12 new sets of certifications, metrics and standards.”