The London Metal Exchange (LME) suspended nickel trading on 8 March 2022, having concluded that a disorderly market had arisen due to challenging commodity market conditions following the events in Ukraine. Nickel trading on the LME has since resumed on 16 March.
The Financial Conduct Authority (FCA) and the Bank of England (BoE) – as the supervision authorities of LME in its capacity as an recognised investment exchange and LME Clear Limited (LME Clear) as a central counterparty respectively – have issued a joint statement, together with the PRA, on their plans following the suspension, including:
- FCA to review LME’s approach to managing the suspension and resumption of the nickel market to determine the lessons learned in relation to LME’s governance and market oversight arrangements;
- BoE to review the operation of LME Clear during the suspension to determine whether the lessons learned in relation to its governance and risk management;
- PRA and FCA to engage with their supervised firms which held significant positions in the LME market to assess the effectiveness of their risk management and governance during the suspension;
- LME to consider how recent events should shape its future approach on market structure in light of the questions raised on the role of transparency in the LME and related markets in a recent LME Discussion Paper on Market Structure;
- LME to review the best approach to appoint additional independent directors with a view to strengthening its governance.
Both the FCA and PRA reviews will be undertaken by skilled persons to be appointed under Section 166 of the Financial Services and Markets Act 2000.