The London Metal Exchange (LME) has been fined £9.2 million by the Financial Conduct Authority (FCA), marking a significant enforcement action against a UK recognized investment exchange. This penalty stems from the exchange's mishandling of the nickel market chaos that erupted in early March 2022, during which nickel prices surged to over $100,000 per ton, more than double the price just a day prior.
The extreme volatility occurred primarily between March 4 and March 8, 2022. Panic surrounding the availability of nickel, intensified by Russia’s invasion of Ukraine, led to unprecedented price spikes. In the early hours of March 8, 2022, the price of LME’s three-month nickel futures contract exploded, predominantly rising within a mere hour, resulting in market disruptions and a complete suspension of nickel trading for eight days. During this turbulent period, the LME controversially canceled all trades executed on March 8, totaling about $12 billion, which resulted in a lawsuit from Elliott Associates, a hedge fund pursuing claims over the losses incurred due to the cancellations.
On March 20, 2025, the FCA's findings from its investigation highlighted multiple failures in LME's controls and governance, particularly the inadequacy of its staffing procedures during critical market hours. Reportedly, during the LME’s ‘Asian trading’ hours—from 1 a.m. to 7 a.m. GMT—only junior trading staff were available, none sufficiently trained to identify ‘disorderly’ market conditions. Consequently, when nickel prices began to skyrocket, these staff members failed to escalate the anomaly to senior management in a timely manner. Instead of taking appropriate action, the staff disabled price bands meant to curb such volatility, inadvertently allowing the prices to rise unchecked.
“The LME’s breaches allowed the price of its three-month nickel futures contract to increase much more quickly than it would otherwise have,” stated the FCA, emphasizing that these failures heightened the exposure of investors to risks that the price bands were supposed to mitigate.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, remarked, “London’s metal markets are of vital importance to the UK and global economy. We expect controls that match their significance. The LME should have been better prepared to address the serious risks posed by extreme volatility.”
Although the LME successfully defended itself in the subsequent lawsuit, the trial exposed systemic weaknesses within its operational framework. Matthew Chamberlain, LME’s chief executive, acknowledged these shortcomings, stating, “We take our responsibilities as a global market operator very seriously and acknowledge that we could have provided a better line of defense to the effects of the disorder in the OTC market, which had spilled over onto the LME market in March 2022.”
In response to the FCA investigation, the LME has made significant reforms to enhance its operational resilience. Since the price surge in March 2022, the exchange has implemented a variety of changes to its control frameworks. This includes the introduction of daily price limits to ensure that no commodity price can surge more than specified thresholds—12% for aluminium and copper, and 15% for other metals. Additionally, the LME has introduced mandatory weekly reporting of over-the-counter (OTC) positions to improve visibility and risk assessment.
Despite the turmoil, nickel trading volumes have shown resilience and fully recovered by 2025, with trading activity reported at the strongest levels since 2015. However, the events have left a mark. Analysts have observed that the lack of a robust regulatory response during the nickel crisis could erode investor confidence in UK markets.
“The absence of a robust regulatory response to the nickel crisis will erode investor confidence in UK markets and undermine efforts to secure UK as a global financial center,” warned Jennifer Han, chief legal officer at the Managed Funds Association (MFA).
In light of these events and the FCA's actions, industry observers have expressed the need for stronger regulations and training procedures. The FCA's actions against the LME serve as a reminder of the importance of proper crisis management and the responsibilities financial exchanges hold in maintaining market integrity.
The LME's ongoing reforms are viewed as steps in the right direction, but it remains evident that continued vigilance is necessary to ward off similar crises in the future. With the spotlight now on the LME, how they adapt and strengthen their systems amidst growing market complexities will be crucial in regaining trust and fortifying their position in global markets.
