Finance

LME appoints Oliver Wyman to oversee nickel crisis post-mortem

The London Metal Exchange has selected Oliver Wyman to head the exchange’s independent review of its handling of the nickel crisis that saw the exchange wipe some $4bn in trades.

The consulting firm, along with its sister company Nera, will examine the events the peaked on 8 March, when a dramatic spike in nickel prices led the LME to halt trading and cancel the trades.

Hedge fund Elliott Associates and market maker Jane Street have filed separate lawsuits over the millions they lost on what would have been right-way nickel bets. The LME has previously told Financial News that it would defend any litigation “vigorously”.

READ Hedge fund titan Clifford Asness leads trader fury after LME cancels $4bn in nickel trades

The scope of the review will include market conditions at the time, and the LME’s current market structure and trading rules, such as position limits and circuit breakers.

However, the decision-making process and governance arrangements between the exchange and it’s clearing house, LME Clear, will not be a subject in the independent review. Those are already included in the scope of reviews conducted by the Financial Conduct Authority and the Bank of England.

READ  Metals guru on the ‘apoplectic rage’ of nickel traders over LME debacle

It added that the review will take until at least December, followed by a final report. As part of the review, Oliver Wyman will conduct “extensive” outreach with market participants.

Oliver Wyman has been contacted for comment.

“We look forward to considering recommendations put forward as part of the review findings, and to taking further steps to support the long-term health, efficiency and resilience of the market and its constituents,” the LME said in a statement.

READLME mandates reports of OTC contracts after nickel blindside raised transparency issues

The exchange has already taken steps to try to reestablish confidence in the market. The LME announced on 17 June it would require market participants to submit weekly reports of their over-the-counter positions in metals traded at the exchange starting 18 July. OTC contracts in nickel were one blind spot during an unprecedented short squeeze that sent nickel prices soaring.

READ London Metal Exchange’s tumultuous three months — here’s what happened

Market participants along with the Managed Funds Association said such a requirement was premature, and called for the LME to hold off on implementing the change until after the independent review is completed.

LME chair, Matthew Chamberlain has also defended the exchange’s actions. He said without LME intervention, multiple defaults could have occurred.

To contact the author of this story with feedback or news, email Jeremy Chan

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