LONDON, March 20 – The Financial Conduct Authority (FCA), Britain’s financial regulator, has fined the London Metal Exchange (LME) for its handling of the 2022 nickel crisis, marking the first-ever enforcement action against a UK exchange.
The FCA imposed a penalty of £9.2 million ($11.9 million) on the world’s oldest and largest industrial metals market following an investigation that revealed multiple failures in managing severe market stress.
The investigation found that on the morning of March 8, 2022, only junior staff were on duty when nickel prices surged beyond $100,000 per metric ton—more than doubling in just a few hours. The FCA noted that the extreme price volatility was not escalated to senior LME managers in time.
“The escalation of price increases in the nickel contract was not handled promptly, which led to delays in response,” the FCA said in a statement.
The crisis forced the LME to void $12 billion in trades, prompting a lawsuit from financial firms that claimed they lost hundreds of millions of dollars. Although the LME won the lawsuit, the trial exposed significant weaknesses in its internal controls.
“The LME’s handling of the nickel crisis is a textbook example of how not to operate a global exchange,” said Simon Morris, financial services partner at law firm CMS. “Market stress policies were unclear, front-line staff lacked proper training, and senior management struggled to respond effectively when briefed.”
The crisis was exacerbated by low stocks and a lack of physical delivery options for large short position holders, such as China’s Tsingshan Group.
“The LME should have been better prepared to address the risks posed by such extreme volatility,” stated Steve Smart, joint executive director of enforcement and market oversight at the FCA.
LME ACCEPTS THE FINDINGS
The 148-year-old LME, now owned by Hong Kong Exchanges and Clearing Ltd. (0388.HK), accepted the FCA’s findings and qualified for a 30% reduction in the penalty. The LME acknowledged that it could have responded better to the market turmoil, which spilled over from the over-the-counter (OTC) market into the LME’s systems.
“We recognize that we could have provided a stronger defense against the effects of disorder in the OTC market,” said LME CEO Matthew Chamberlain. “We have now implemented enhanced processes to improve the resilience of our markets.”
The LME also welcomed the FCA’s acknowledgment that large OTC positions were the primary cause of sharp price movements and that it did not have visibility of OTC positions at the time.
Banks and brokers are required to report their OTC trades to trade repositories such as the Depository Trust and Clearing Corporation (DTCC), which the FCA can access.
Hedge fund Elliott Associates, which sued the LME, and several LME brokers declined to comment.
“We know LME made mistakes, but we’ve moved on, and the nickel market has recovered,” said an industry source.
Although nickel trading volumes plummeted after the crisis, the market has since fully recovered, with 2025 showing the highest trading activity since 2015.
