The FCA has imposed a £9.2 million fine on the London Metal Exchange (LME) for failing to maintain adequate systems and controls to manage extreme market stress.

Between 4 and 8 March 2022, LME’s 3-month nickel futures contract experienced unprecedented volatility. In the early hours of 8 March, the price surged past $100,000—more than double its closing price the previous day—most of the increase occurring within just over an hour. This instability severely impacted market orderliness and investor confidence.

In response, LME suspended nickel trading for eight days and annulled all trades executed on 8 March.

The FCA found that LME’s systems and controls were insufficient to maintain orderly trading during severe market stress. Specifically, it lacked adequate policies governing its automatic volatility controls, known as ‘price bands.’

Furthermore, the exchange’s governance framework required senior managers to oversee decisions related to market stability. However, the mechanisms for escalating unusual or high-risk market conditions to these decision-makers were inadequate.

During LME’s ‘Asian trading’ hours (1 AM to 7 AM GMT), only junior trading operations staff were present. They were primarily trained to identify trading errors or rogue algorithms, not to recognize extreme market volatility as a potential threat to orderliness.

As a result, when nickel prices spiked dramatically on 8 March, the issue was not escalated to senior managers. Instead, trading operations staff attempted to accommodate the price surge, even disabling the price bands during the most volatile period.

This failure enabled the price of nickel futures to rise far more rapidly than it would have under normal circumstances, exposing investors and market participants to unnecessary risks—risks the price bands were specifically designed to mitigate.

The FCA acknowledged the steps LME has taken since March 2022 to enhance its controls and strengthen market oversight.

This enforcement action is part of a broader effort to reform the commodity derivatives regulatory framework, which was introduced in February 2025.

Steve Smart, joint executive director of enforcement and market oversight at the FCA, stated:
“London’s metal markets play a crucial role in both the UK and global economy. Given their significance, we expect robust controls. LME should have been better equipped to manage the serious risks posed by extreme volatility.”

This marks the first time the FCA has taken enforcement action against a UK-recognized investment exchange.

By accepting the FCA’s findings, LME qualified for a 30% reduction in its financial penalty.

The FCA launched its investigation on 3 March 2023, citing exceptional circumstances. Notably, this inquiry was completed significantly faster than the average timeframe for investigations closed in 2023/24.