London Metal Exchange (LME) said on Thursday it had appointed management consultant Oliver Wyman to conduct an independent review of events that led to a week-long suspension of nickel trading in March, Reuters reported.
On March 8, the world's largest and oldest metals forum was forced to halt nickel markets and cancel all trading after prices surged more than 50 percent in a matter of hours to a record above $100,000 a tonne. Nickel trading resumed on March 16th when the exchange introduced daily price limits.
Oliver Wyman, which advises clients on how to improve their operations, will conduct the review, which is expected to last until December, and aims to issue a report at the end of the process.
In a statement, the exchange said the review would look at "factors contributing to market conditions in the period up to and including March 8, 2022, and make recommendations to reduce the likelihood of similar events occurring".
"The review will not include the decision-making process and governance arrangements of the LME and its clearing house, LME Clear."
Decision-making and governance will form part of the regulatory review being undertaken by the Financial Conduct Authority and the Bank of England.
The FCA regulates the trading activities of the LME as the UK recognised investment exchange, while the Bank of England regulates the clearing activities of LME Clear as the UK recognised central counterparty.
The suspension and cancellation of nickel trading have drawn the ire of producers and traders who depend on LME prices for metals used to make stainless steel and batteries for electric cars. It also leaves the exchanges vulnerable to litigation.
Us hedge funds Elliott Associates and Jane Street Global Trading are suing the LME for $456m and $15.3m respectively over cancelled nickel trades.
The spike in nickel prices was blamed on short-covering by Qingshan Holdings Of China, one of the world's largest nickel producers. The LME has said that the bulk of the short positions came mainly from the over-the-counter (OTC) market.
Last week, the LME, which is owned by Hong Kong Exchanges and Clearing LTD. 0388.HK, approved a requirement for members to report all otc positions from July 18 and said it would require holders of large otc positions to explain the reasoning behind them.
