The Financial Conduct Authority (FCA) has imposed a £9.2 million fine on the London Metal Exchange (LME) for failing to maintain adequate systems and controls to handle severe market stress during the March 2022 nickel market crisis. This marks the first-ever FCA enforcement action and fine against a Recognised Investment Exchange.
Between 4 and 8 March 2022, the price of LME’s 3-month nickel futures skyrocketed, forcing the Exchange to suspend trading for eight days and cancel all nickel trades on 8 March. The FCA found that LME lacked proper safeguards, particularly around its automatic volatility controls and price bands.
The Exchange’s escalation process was also flawed, with only junior trading staff on duty during Asian trading hours (1am – 7am GMT). These employees were not trained to identify extreme price movements as market disorder, leading to delayed intervention. Instead of halting trading, they disabled price bands, allowing prices to rise unchecked and exposing investors to significant risk.
FCA enforcement chief Steve Smart stressed the global importance of London’s metal markets, stating: “We expect controls that match their significance. The LME should have been better prepared to address the serious risks posed by extreme volatility.”
By accepting the FCA’s findings, LME qualified for a 30% reduction in its financial penalty.