Fresh chaos for nickel: LME hit by glitch as prices plunge
BNN Bloomberg
The London Metal Exchange froze electronic trading in nickel immediately after it restarted from a week-long suspension.
The London Metal Exchange froze electronic trading in nickel immediately after it restarted from a week-long suspension, after a systems glitch allowed prices to plunge past a new daily limit that was supposed to help restore order following last week’s historic short squeeze.
The forced halt is an embarrassing setback for the 145-year-old exchange, which is the world’s main venue for setting prices and trading some of the most important industrial metals. The turmoil in nickel has plunged the metals industry into chaos and the LME was already facing widespread anger for its decisions to suspend the market and cancel several hours of trades last week after a massive price spike.
Trading briefly restarted at 8 a.m. on Wednesday and nickel futures immediately fell through the 5 per cent daily limit before the market was suspended again. The exchange said it halted electronic trading to investigate the problem and will cancel a “small number” of transactions. Phone-based trading remains open and brokers in the open-outcry floor known as “the Ring” will also trade nickel later today.
“What a debacle,” said Ole Hansen, head of commodities strategy at Saxo Bank A/s. “The LME is not doing itself any favors.”
For the nickel market, the drop in prices is a sign that last week’s historic short squeeze is easing. It narrows the gap between contracts on the LME and those on Shanghai Futures Exchange, which have continued trading during the suspension. Last Tuesday’s historic decision to halt trading came after spiraling prices left some brokers scrambling to pay huge margin calls against bearish positions held by top producer Tsingshan Group Holding Co.
The immediate drop on Wednesday reflects how holders of long positions were looking to get out of a market “that has become and is likely to remain dysfunctional,” Marex analyst Alastair Munro said in a note.
