A look into the LME Nickel Fiasco of March 2022 – No Safe Bets

So, LME, the London Metal Exchange, had some sort of Nickel Fiasco. Enough time has settled that I could properly sift through the shit posts and find a -somewhat- coherent story.

LME is another egregious event as taking the buy button from a certain ticker. LME is, in it’s own right, way worse than removing the buy button.

Contrary to how the name sounds, LME has a bit more history than the name London implies. LME is owned by Hong Kong Exchanges and Clearing Ltd. So it’s a Hong Kong company, and Hong Kong is now under the Chinese Government. You know those ‘free HK protests?’ yea, HK lost it’s freedom.

You see, here is what happened in bullet points;

  • LME trades Nickel
  • Nickel prices shot the fuck up (almost double) to more than $100,000 per tonne on Tuesday, March 8th
  • Trading was halted
  • And then they undid 12 hours of trades, giving back money to losers, and taking money from winners.

LME’s Publicly available Statements,

So I went to their website to hear what they have to say, because rewinding time for 12 hours is pretty fucked. Not gunna lie, they best have a reason. These are the supporting documents reference numbers that I will be referencing, followed by my brief description of the docs;

8 March;

22/052 – We suspended trading Nickel for the rest of the day

22/053 – We’re blaming Russia and Ukraine, so now we’re going to rewind time and undo trades.

22/054 – We’re going to stop publishing Nickel prices for the time being

22/055 – Uh, we don’t know when we’re going to open up the market. And We did some math, and decided that no one should have really big positions in nickel for the time being. . .

9 March;

22-016 – We’re upping/changing our Margin Requirements effective March 14th

22/056 – We’ll allow people to transfer their positions to allow nickel to still exchange hands, and we’re waiving fees. But Nickel Market still closed. So, trade amongst yourselves.

10 March;

22/057 – we’re clarifying why more about the previous documents and also include our reasons for what we did during March 8.


So Far,

The most egregious thing is turning back time to undo the trades;

LME would;

1.Cancel all trades executed on or after 00:00 UK time on 8 March 2022 in the inter-office market and on the LME select until further notice (affected contracts)

2.Defer delivery of all physically settled Nickel Contracts due for delivery on 9 March 2022 and any subsequent Prompt Date in relation to which delivery is not practicable (as determined by the LME and notified to the market) owing to a trading suspension in line with the process of this Notice.

From their 22/053 document

The other substantive document so far is 22/057;

Basically, as this reads, Some Retard opened a fucking huge short position and got fucked by the upward price spike. Resulting in said person to buy contracts because they were naked. This resulted in a Short Squeeze that drove price through the roof, resulting in roughly $8 Billions in dollars (as alleged by AP).

Resulting in LME rewinding time and cancelling all trades to save this Retard,

Because the margin call would’ve been so catastrophic that it posed a systemic risk to the market, meaning the LME itself was at risk.

Including LME CLEAR being at risk as well, LME CLEAR is the Clearinghouse for, well, LME.

Lmao, systemic risk alright.

11 March;

22/061 – We are clarifying the Transfer process for contracts. Nickel Markets are still closed.

14 March;

22/064 – We are gonna open the Nickel market up on March 16. We also have a bunch of other information on trade limits and whatnot to keep a close eye on price action and limit it. Also, we are expanding our power, or more-so, just letting you know the scope of our powers with regards to ‘disruption events’ and other things.

15 March;

22/067 – We talk more about price limits and closing prices.

22/068 – We are delaying the shipments/deliveries of Nickel. And we’re also going to Open our Nickel Market later so you tards can’t get your dick stuck in the wee early hours of the morning. Opening at 0800 instead of 0100, among some other time changes. -Also we are sticking with our guns and our actions to rewind time, by saying that is a-okay.

‘Disruption Events’ are events decided by, well, LME
And that includes that March 8 incident of the Tard with the large Short Position

So, we can go ahead and null and void trades and stop trades whenever we want. Especially if someone is going to lose.

Don’t worry, it’s not like we bailed out some huge loser. It’s not like we are encouraging risky market practices for participants by showing them a new No-Lose Casino like WallStreet in 08′.

This is the London Markets in Hong Kong baby, we’re golden, pony boy.

I mean, if anything, Hong Kong is catching up to how them WallStreet Yankees playin’ ball.

*sigh*

16 March;

22/069 – Nickel Market is open, but the ‘LMEselect’ feature for Nickel is having technical issues and is down.

22/070 – Nickel Market is down, lmao. Price hit our new 5% down limit. we imposed a 5% up and down limit because -we worried-. Price dropped on market open, so we halted trading.

22/071 – Nickel Market is back open.

22/072 – We did it boys, we made it through a trade day. When it hit 5% down and tripped our halt, it proved our system worked. Oh, by the way, that was considered a disruption event (as defined in 22/064)

22/073 – Alright, we are changing our limits from 5% to an 8% up and down band. Wish us luck.

17 March;

22/076 – This is a notice that because we hit our down limit yesterday, we’re setting our prices based on that.

22/077 – We’re gonna up out limits from a 8% band to a 12% band on March 18.

18 March;

22/078 – We hit our down limit boys.

22/079 – Closing price for the Day.

22/080 – We’re upping our limit band from 12% to 15% on March 21

21 March;

22/81 – We hit our down limit boys.

22/82 – Closing prices for the day.

And it’s basically repeat, hitting ups and down limits throughout March.

But the thing is, if it hits either up or down limit, it rewinds time.

So what the fuck is the point of having a band to stay in? If any time you go outside of it, it wipes all trades, even good and bad ones?

This almost seems like it’s forcing people to ‘play within the sandbox’ of the exchange. It’s quite honestly fucked. I mean, if I had some contracts, my fucking Strangles would be printing with this kind of shit.

Also my spreads would be printing, I mean, who the fuck get’s to literally manipulate price to stay in a tiny band? And the fucked up part is that they can wipe trades and restart all over.

It’s like groundhog day, but everyone knows what you’re doing, and you end up trading like a retard until you get what you want. Basically, sorta, not really, but it was a funny idea. So, your welcome.

So,

Those were the major documents that came from LME’s website and Press releases.

There were a few pages under the Nickel Market about disruption events, but it’s really wordy and you should probably ignore;

There’s also a list of disruption events, starting with our beloved day, March 8th.

Anyways, that’s all the information from LME’s side that I care about.

I’m going to now talk about the outrage from, well, every investor concerned.

Because essentially, what this meant was, LME didn’t want to be liable, LME CLEARING didn’t want to do literally it’s job as a Clearing House, and that meant a lot of Long Positions (and hedged positions) from investors who took the right side of the trade, got fucked.

Here’s some side news;

Apparently, LME ‘Boss’, (idk what that means) is blaming the bankies.

So, this shit has gone from financially cordial, to my realm of poop flinging. It’s great. Let’s talk shit and let the blame games commence.

So, uh, LME has no integrity

Here’s the Twitter mob of Financial Opinions;

It’s a small market comparatively to others, but it’s also big money moving around;

Here are some of the feels;

Yea, people would probably agree that it’s a New “No-Lose Casino”;

As a side note, Matthew Chamberlain is the CEO of LME.

A lot of people are throwing shade at the trade-tard that fucked it up. Mainly because this is a glorified bail out from the Exchanges. Which is unprecedented by the way.

Here we have a thread in which this person points out the double standard. Short Squeeze when the bankies do it is okay. When the Bankies get Short Squeezed, that’s not okay. Sounds familiar.

And remember, this rewinding of time and undoing trade agreements between consenting traders is technically theft sanctioned by the exchanges. Because the point of an exchange is to create trades, and the point of a clearinghouse is to ensure that trades go through and are ‘cleared’.

The Point of a Clearing house is to clear trades and settle them, and for the clearinghouse to pay the collateral in the event that they default or go bad. That’s why Clearinghouses collect fees. . .

So what the fuck is the point of that added insurance/assurance if you can’t redeem it?

This only adds to the fact that insurance is a scam.

Just because some bankies didn’t want to pay up?

I’m going to give a run down and close up shop, but this shit is actually funny when I summarize how retarded it is.

With all the information above, shit-jokes aside. The theory based on many other commentators and this article;

  • There is a Holding company named Tsingshan that, simply, creates nickel pig iron (NPI)
  • LME doesn’t trade NPI, they trade a higher quality Class 1 Nickel only.
  • The Boss of Tsingshan, Xiang Guangda, thinks he has a plan for some underwriting reasons believing he could devalue Nickel and flood the market (maybe with his supply of Pig Nickel) or something. Idk, it’s a retarded bet with asymmetrical loss.
  • He borrows money from some Big Banks to open a huge short position of like 150,000 tons of Nickel. 120,000 tons of that was OTC, so away from the LME’s tracking.
  • Just for record, according to two analysts. China is estimated to hold around 100,000 tons of nickel in state stocks. “There isn’t much spot nickel product in the market, it’s not even likely that Tsingshan could get 100,000 tonnes,” said a Guangdong-based analyst
  • This Tard shorted more Nickel than all of China, Not only that, he shorted Class 1 High Quality Nickel,
  • Which he has literally none of. Like. Smooth Brain.
  • He basically naked shorted Nickel beyond the Float, so he has infinite downside potential.
  • How could this ever go tits up?
    .
    .
    .
  • His bet goes tits up around 0845 on March 8 as Nickel Prices soar to 250% gain to peak at $100,000 per ton. Resulting in him having to buy back in his naked short position, because turns out, He doesn’t have the Nickel. Fuck, no one does at the time. Which is an obvious bet to bet against if you knew his position.
  • Nickel Short Squeezes the fuck out of our Heroic Trade-tard.
  • Now he owes around $8 billion dollars, or a shit ton shit tonnes of Class 1 Nickel.
  • LME suspends trading and rewinds time and wipes trades and resets everything. Meaning the Longs got robbed and the shorts got saved.
  • People who gives a damn about the market and trading are pissed, rightfully so, at LME. This is one of the most fucked up interactions resulting in losing faith in the exchange.
  • LME blames Banks for lobbying against regulations for not disclosing short positions on OTC. LME rightfully is like ‘what the fuck’ with regards to 120,000 tons of OTC Nickel Short Position. Because 30,000 tons is already a huge bet, if they knew how big, maybe they’d be like ‘Fuck no’.
  • People, who are smart, know that Tsingshan should have been Fucked. And also, ‘what the fuck you retard’ probably left their lips.
  • LME itself and it’s clearinghouse didn’t want to pay a minimum of $8 Billion dollars.
  • The Banks that funded Tsingshan also didn’t want to lose their loan.
  • Yea, welcome to the HKEK, where a retard individually posed a systemic risk.

God Bless Hong Kong, they sure know how to be Hyper Capitalistic and they even had one person pose a systemic risk to the markets. Over in Wall Street, it took upwards of 15 million people to do the same thing in early 2021, creating a trade volume in excess of a Trillion for the month of January. That’s a Trillion with a T.

But here’s our boy HK, doing it with one person.

Gotta love them Hong Kongers,

In Closing,

I personally don’t like commodities nor futures. But that’s because I don’t want to lose a bet where I’d have to actually hold stuff.

Pro tip, if you are in commodities or futures, gamble in the industry that you are responsible for and can take a loss. For instance, if you make Nickel Pig Iron, don’t trade in Class 1 Nickel. If you want to trade in gourds, either have a gourd farm or a reliable means of selling gourds. What you want is an ability to recover or a roadmap to victory if your bet ever, heaven forbids, goes tits up.

But of course, people just gamble papers like they aren’t liable for a shipment of 5 tons of Peas while they live in their 1 Shit-room apartment.

Throughout this article, I asked my questions that I wanted to ask.
There’s a lot of problems with what the Exchange did.
A lot of problems with what the banks authorized through OTC.
A lot of problems with Naked Short selling and making promises that you simply can’t deliver.

There are a lot of parallels with LME and something else that ends in -ME.

Exchanges robbed the people and are losing trust.
Banks were funding degeneracy.
And someone made a really lopp-sided asymmetrical bet. . . against themselves.

And moving forward, LME has decided to use ‘Disruption Events’ to allow them the ability to regulate price and wipe AND reset trading. They’ve done it at least 4 or 5 times in the month of March alone. So they’ve set a new standard and precedence to control the infinite loss potential.

You know, so less investor faith in that market, and probably all markets. Because this is a new precedent and if it’s normalized then other markets will play ball.

Overall, don’t trust bankies, and don’t trust exchanges, and Clearinghouses are useless with a dry default fund that only seems like it’s there. I mean, if you had the money, we’d be good to keep on keeping on. And we’d also have some pretty nice lottery winners.

Again, there’s No Safe Bets

*Not Valid Financial, Legal, Life, or Any Advice


Disclaimer;

I use the term Retarded and tard and trade-tard to describe a person based on my opinion. Because let’s be honest, “what the fuck was he thinking?”

There could be alternate theories as to what happened. I mean, it might not be one person posing systemic risk to the markets. That could be a cover story.

So, who knows? I don’t.

I’m just reporting what other people have reported.

Author: Elsie Hughes