LME appoints Oliver Wyman to oversee post-mortem nickel crisis
The London Metal Exchange has chosen Oliver Wyman to lead the exchange’s independent review into its handling of the nickel crisis which saw the exchange wipe out some $4 billion in trades.
The consultancy, along with its sister company Nera, will examine the events that culminated on March 8, when a dramatic spike in nickel prices led the LME to suspend trading and cancel transactions.
Hedge fund Elliott Associates and market maker Jane Street have filed separate lawsuits for the millions they lost on what were believed to be nickel bets. The LME has already said Financial News that he would defend any litigation “vigorously”.
LILY Hedge fund titan Clifford Asness leads traders’ fury after LME cancels $4 billion in nickel trades
The scope of the review will include market conditions at the time, as well as the current market structure and LME trading rules, such as position limits and circuit breakers.
However, the decision-making process and governance arrangements between the exchange and its clearinghouse, LME Clear, will not be subject to the independent review. These are already included in the scope of reviews conducted by the Financial Conduct Authority and the Bank of England.
LILY Metals guru on nickel traders’ ‘apoplectic rage’ over LME debacle
He added that the review will last at least until December, followed by a final report. As part of the review, Oliver Wyman will conduct “in-depth” outreach to market participants.
Oliver Wyman has been contacted for comment.
“We look forward to reviewing the recommendations put forward as part of the review’s findings and taking further action to support the long-term health, efficiency and resilience of the market and its constituents,” said the LME in a statement.
LILYLME requires OTC contract reporting after Nickel Blindside raises transparency concerns
The stock exchange has already taken steps to try to restore confidence in the market. The LME announced on June 17 that it would require market participants to submit weekly reports on their OTC positions in metals traded on the exchange from July 18. Nickel OTC contracts were a blind spot during an unprecedented short squeeze that sent nickel prices soaring.
LILY The London Metal Exchange’s tumultuous three months – here’s what happened
Market participants as well as the Managed Funds Association said such a requirement was premature and called on the LME to put the implementation of the change on hold until the independent review is complete.
LME Chairman Matthew Chamberlain also defended the shares of the exchange. He said that without the intervention of the LME, several defaults could have occurred.
To contact the author of this story with comments or news, email Jeremy Chan