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UK watchdog still probing LME nickel trading suspension

Kitco News

(Updates with FCA declining to comment on timelines)

By Pratima Desai

LONDON, Jan 26 (Reuters) - Britain's Financial Conduct Authority (FCA) told Reuters this week that it is still investigating the London Metal Exchange's decision to suspend nickel trading on March 8 after prices soared to records in disorderly trade.

When trading resumed on March 16, the exchange had technical glitches for several days after imposing price limits. The LME, the world's oldest and largest market for industrial metals, also cancelled all nickel trades on March 8 after prices spiked by more than 50% in a matter of hours to above $100,000 a tonne.

The FCA is still assessing the circumstances surrounding LME's decision to suspend nickel trading to make sure all lessons are learned, the watchdog said. It declined to comment on when it expected the investigation to be completed, whether it would make an announcement on the findings, recommendations or enforcement measures, or when an announcement should be expected.

The FCA and the Bank of England (BoE) last April announced a rare joint intervention into what happened on the LME's nickel market under section 166 of the Financial Services and Markets Act 2000. "After a period of stability, the FCA intends to review the LME's approach to managing the suspension and resumption of the market in nickel to determine what lessons might be learned in relation to the LME's governance and market oversight arrangements," the FCA said in April.

"The Bank will similarly undertake a review into the operation of LME Clear during the period to determine whether any lessons might be learned in relation to its governance and risk management." Last April's announcement said the probes "will be assisted by the appointment of skilled persons to report on the matter". It said the "FCA and the Bank will consider these reports in determining whether further action should be taken and will announce next steps in due course".

The BoE declined to give Reuters an update on its investigation. The Prudential Regulation Authority (PRA) and the FCA are examining firms that held significant nickel positions during that period to assess their risk management and governance. The FCA is responsible for the supervision of the LME as a recognised investment exchange, while the Bank of England is responsible for the supervision of LME Clear as a central counterparty.

The LME is owned by Hong Kong Exchanges and Clearing Ltd. (Reporting by Pratima Desai; Editing by Bernadette Baum)

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