LME plans new chapter after nickel scandal

The London Metal Exchange is preparing a consultation paper on proposed rule changes to implement a new regime on commodity market position limits.

The paper, due in February, was announced by the LME following financial penalties and criticism from the UK’s Financial Conduct Authority’s (FCA) in the wake of the nickel price scandal in 2022.

Seismic shock

The seismic shock of extreme volatility in the LME’s three-month nickel futures market that year culminated in the early hours of 8 March when the price rose to over US$ 100 000 (EUR 85 000) per tonne, more than double the closing price of the day before, with most of the rise occurring in little over an hour.

In March 2025, the FCA fined the LME £9.2 million (EU 10.6 million) for failing to ensure its systems and controls were adequate to deal with severe market stress. It was the first enforcement action the FCA has taken against a UK-recognised investment exchange. The LME accepted the findings and thereby qualified for a 30% reduction in its financial penalty.

‘Inadequate’ systems

According to the FCA in March, orderliness and confidence in the LME markets had been undermined. 
‘The LME’s systems and controls were not adequate to ensure orderly trading under conditions of severe market stress,’ it said. ‘In particular, LME did not have adequate controls or policies relating to the operation of its automatic volatility controls, its “price bands”.’

From 6 July, responsibility for setting and administering position limits, exemptions and other position management controls will transfer from the FCA to the LME. ‘This will strengthen the LME’s ability to calibrate and manage limits directly, ensuring they remain appropriate and responsive to market dynamics,’ the LME says.