Financial District of London and the Tower Bridge
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The U.K.’s Financial Conduct Authority (FCA) is investigating the circumstances surrounding the suspension of trading in nickel markets by the London Metal Exchange (LME) last March.

The LME suspended trading on March 8 last year, after finding that the market had become “disorderly” and didn’t restart trading until March 16. The suspension came at a time when commodity markets were in turmoil in the early days of Russia’s invasion of the Ukraine.

In the wake of that episode, the FCA, which oversees the LME, said it has “reviewed the events surrounding the suspension of the nickel market and has opened an enforcement investigation into some of the LME’s conduct and systems and controls.”

Ordinarily, the regulator wouldn’t confirm the existence of an ongoing investigation, but in this case it did so, “in light of the public interest” regarding the incident.

At the same time, the Bank of England, which oversees the exchange’s clearing arm, LME Clear, has undertaken a supervisory review of the clearing agency’s operations. Additionally, the LME and LME Clear hired consulting firm Oliver Wyman to review the episode.

These reviews highlighted “several shortcomings” in LME Clear’s governance, management and risk management capabilities, the central bank said.

As a result, it said that the firm will need to “strengthen its governance arrangements, increase independence in management and governance at the CCP, and improve on its wider risk management.”

In a statement, LME Clear acknowledged the bank’s expectations, and said that it “intends to incorporate all additional findings from the bank’s feedback into the implementation plan that LME Clear has already announced.”

The LME also said that it will cooperate with the FCA’s enforcement investigation, and will continue to work to restore confidence in the market.

“Active steps are being taken to enhance nickel market liquidity,” it said, “most notably, the forthcoming resumption of Asian hours nickel trading on March 20. The LME also continues to work to improve [over-the-counter] market transparency to support robust risk management in its on-exchange trading, and appreciates the FCA’s positive feedback in respect of work already undertaken in this respect.”