Top traders on the London Metal Exchange are expressing their outrage with its recent decision to cancel nickel trades with some accusing the commodities bourse of favoritism.
The London Metal Exchange (LME) froze nickel trading after a historic price spike, driven by Chinese industrial giant Tsingshan which is on the hook for up to $8 billion in short positions.
According to chief executive of LME – owned by Hong Kong Exchanges and Clearing (HKEX) – allowing some of the canceled trades to run through would have caused pressure for «core members».
«One of our key responsibilities is to serve the physical traders,» said LME’s Matt Chamberlain, who is also a management committee member at HKEX Group. «If we allowed the trades to stand, we would have to say that the price of nickel is $80,000-$90,000 and that would not seem rational to the physical market. And we could have placed significant stress on a number of our core members.»
«Soviet Metal Exchange»
Unsurprisingly, not all traders benefitted from market intervention and some have voiced their concerns in public.
Co-CEO of electronic market maker XTX Markets Alex Gerko Tweeted «Soviet Metal Exchange» in response to a post on the LME’s announcement of trade cancellations.
«First time in my long experience I’ve ever been told 'you don’t get your legitimate profits because, gee, someone else, a broker who didn’t manage things so well, might suffer,’» said Clifford Asness, founder of $140 billion hedge fund AQR in a series of social media posts.
«[LME] please note, I’m accusing you of reversing trades to save your favored cronies and robbing your non-crony customers. Everyone who trades should know what you did. You got lawyers, I’m ready. Bring it slime balls.»
More Trader Dissatisfaction
The latest nickel incident follows just months after LME caused more dissatisfaction as it pushed through its plan to close the physical trading floor to become fully electronic.
According to Mark Thompson, Tungsten West vice-chair and longtime trader on the LME, the commodities exchange’s decision to cancel trades erased an estimated $1.3 billion in profits and losses.
The LME is currently in discussions with U.K. watchdogs, the Financial Conduct Authority and the Prudential Regulation Authority.
