Islamabad
The first short squeeze to plunge the London Metal Exchange into an existential crisis came over a century ago. In 1887, French industrialist Pierre Secretan set out to corner the copper market, sending prices more than doubling before he lost his grip and they collapsed.
In the years since, the exchange has survived world wars, scandals and defaults to cement its place as a City of London institution: the home of global benchmark prices for the world’s key industrial metals.
That status is now under threat. The reason is another short squeeze, this time in nickel, that is wreaking havoc through the metals world.
Investors are furious with the LME for allowing prices to soar 250% in less than two days, then retroactively canceling $3.9 billion in trades. When it tried to reopen the market, the exchange’s electronic trading system malfunctioned repeatedly.
The LME’s outsized role in how industrial metals are bought and sold means that angry traders and investors have few alternatives. But the fallout from the nickel squeeze will cast a long shadow, embroiling the exchange in investigations and lawsuits for years, and raising questions about its structure, ownership and oversight.
