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'Soviet Metals Exchange': LME irks traders by freezing nickel market, reversing $4 billion in trades

Section: Daily Dispatches

Are idiot Comex gold and silver futures traders paying attention?

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Philip Stafford and Robin Wigglesworth
Financial Times, London
Saturday, March 12, 2022

The London Metal Exchange has enraged some of the world's most influential electronic traders after it shut down its nickel market and unwound thousands of deals in response to a spike in the price of the metal.

Months after the 145-year-old exchange upset its traditional users by considering an end to raucous in-person dealing, the LME this week shut down its nickel trading -- a market where it sets global benchmarks -- in a move last seen in tin in 1985.

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The crisis measure came after the metal's value more than doubled in two days, to a record above $100,000 a tonne, as a large bet against the nickel price left the tycoon behind Tsingshan Holding Group, China's leading stainless steel group, facing billions of dollars in potential losses.

But the exchange also cancelled all 5,000 nickel trades that had been executed on Tuesday, worth nearly $4 billion. Mark Thompson, vice-chair of Tungsten West and a longstanding trader on the LME, estimated the exchange had wiped out $1.3 billion of profit and loss on the deals. It was "in the interests of the market as a whole," the LME said.

Some market participants say that in effectively scrubbing the day from the record books, the exchange crossed a line. Not only did the LME fail to manage the risks, but it also picked a side when it should be neutral, they say.

AQR, one of the largest hedge funds in the world, is exploring legal options in its dispute with the LME after losing out on significant profits from the exchange's decision, according to people familiar with the matter.

In a series of posts on Twitter, Clifford Asness, founder of the $140 billion fund, described the LME as "slime balls." This was, he said, the first time he had been told "you don't get your legitimate profits because, gee, someone else, a broker who didn't manage things so well, might suffer."

"I'm accusing you [the LME] of reversing trades to save your favoured cronies and robbing your non-crony customers," he went on. 

The LME denied that parent company Hong Kong Exchanges and Clearing had influenced its decision. ...

Alex Gerko, co-chief executive of electronic market maker XTX Markets, labelled it the "Soviet Metal Exchange." ...

... For the remainder of the report:

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