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The London Metal Exchange temporarily froze electronic trading in nickel after restarting from a week-long suspension, as a glitch allowed prices to fall beyond a new daily limit (5%) that was supposed to help restore order after last week’s historic short squeeze.
The market reopened for the second time at 15:00 Italian time, but without any trading. The forced shutdown is an embarrassing setback for the 145-year-old exchange, which is the world’s leading venue for setting prices and trading some of the most important industrial metals.
The turmoil in nickel has thrown the metals industry into chaos and the LME was already facing widespread anger over its decisions to suspend the market and cancel several hours of trading last week after a massive price surge.
Trading resumed briefly at 9 a.m. Wednesday and nickel futures immediately fell back through the daily limit before the market was suspended again.
It narrows the gap between contracts on the LME and those on the Shanghai Futures Exchange, which continued to trade during the suspension. Last Tuesday’s historic decision to halt trading came after spiralling prices left some brokers struggling to pay huge margin calls against bearish positions held by main producer Tsingshan Group Holding Co.
Wednesday’s immediate drop reflected how long position holders were trying to get out of a market that has become and is likely to remain dysfunctional.
Several brokers said they were reluctant to take on new short positions, given last week’s huge margin calls. And some hedge fund managers, including metals market veterans and generalist investors, said they are pulling back from the LME or significantly reducing their trading in the wake of the nickel chaos.
