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LME seeks increased transparency to prevent repeat of nickel squeeze

Section: Daily Dispatches

By Mark Burton
Bloomberg News
Friday, May 13, 2022

The London Metal Exchange plans to force members to regularly report details of their over-the-counter metals positions, substantially expanding its market surveillance capabilities in the wake of this year’s nickel squeeze.

The LME has already imposed emergency limits on daily price moves to prevent a repeat of the 250% spike in nickel prices seen in March, and is now looking to expand its oversight of the bilateral deals agreed between dealers and their clients.

... Dispatch continues below ...



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The opacity of OTC markets in commodities trading has come under growing focus following the nickel crisis on the LME, and as wild price swings more broadly result in huge margin calls across the sector. There’s also been an increase in calls this year for regulators to look more closely at commodities markets and the risks they pose to the wider financial system. 

The nickel squeeze in March was centered around a large short position amassed by entrepreneur Xiang Guangda, whose Tsingshan Holding Group Co. is the world’s biggest nickel and stainless steel company. The vast majority of his position was held in OTC positions with banks, and the LME has said it had no visibility of the large off-exchange position prior to March 8, when it suspended trading in response to spiking prices.

The exchange has been harshly criticized for allowing the market to open at all that day and then canceling billions of dollars of trades at the highest prices. ...

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