Nickel reopens limit-down in shambolic day of false starts

Nickel prices tumbled by the maximum allowed as the market reopened in a messy sequence of false starts, with a glitch halting electronic trading for several hours and only a handful of contracts changing hands.

Nickel prices tumbled by the maximum allowed as the market reopened in a messy sequence of false starts, with a glitch halting electronic trading for several hours and only a handful of contracts changing hands.

For the London Metal Exchange, already facing the wrath of investors for its decision to cancel US$3.9 billion in trades last week, it was another embarrassing setback. The turmoil in nickel has plunged the metals industry into chaos, after a huge short squeeze focused on Chinese tycoon Xiang Guangda drove the price up by an unprecedented 250 per cent in little more than 24 hours last week.

In private, exhausted traders and brokers -- many of whom have been working around the clock for several weeks -- expressed their exasperation with the exchange. 

A metals portfolio manager at one macro hedge fund said he’d spoken to half a dozen friends at other funds on Wednesday, all of whom had vowed never to trade nickel on the LME again. To make matters worse, many were stuck holding long positions they couldn’t redeem because the market had barely traded.

The nickel market had been closed since March 8. On Wednesday morning, trading briefly restarted at 8 a.m. and futures immediately fell through the daily limit before the market was suspended again. The exchange said it halted electronic trading to investigate a glitch that had allowed trades below the lower price limit and would cancel a “small number” of transactions. A phone-based trading system and the LME’s open-outcry floor were unaffected, with prices in “the Ring” dropping by the 5 per cent limit as well.

At 2 p.m., the exchange restarted electronic trading. But with no one willing to buy at the limit-down price of US$45,590 a ton, it took over an hour before there were any trades.