The LME Nickel Crisis of 2022: The Short Squeeze, the Suspension, and the Cancelled Trades

On March 8, 2022, the London Metal Exchange (LME) suspended trading in nickel at 08:15 London time and later that day cancelled every nickel trade executed on or after 00:00 UK time, after the price of its three-month contract had more than doubled in a few hours to a peak of $101,365 a tonne. Over three trading days the price had risen more than 270%, and the margin calls that would have followed threatened to push several of the exchange’s clearing members into default.

In short: a short squeeze, driven by large short positions held partly off-exchange in the over-the-counter (OTC) market, met a thin market and record margin calls. Shorts bought to close out, prices jumped, margin calls grew, and more shorts were forced to buy. Overnight on March 8, with only junior staff on duty and the automated price bands switched off, the price went vertical. LME Clear calculated, but never sent, $19.75 billion of fresh margin calls. The LME suspended the market and cancelled about $12 billion of trades. The independent Oliver Wyman review (January 2023), the Bank of England (March 2023) and the FCA (March 2025, a £9.2 million fine) all found failings. English courts, from the Divisional Court in November 2023 to the Court of Appeal in October 2024, held the cancellation lawful, and the Supreme Court refused permission to appeal in January 2025.

The episode sits alongside the cases in famous futures blowups and the clearing house mechanics in central counterparty risk management. It is the clearest modern example of an exchange choosing not to let its default waterfall run.

A common misconception: “one Chinese company caused it”

The press focused on Tsingshan Holding Group, a large Chinese nickel and stainless steel producer known to hold a big short position. Tsingshan is the only short identified by name in the Oliver Wyman report, and the OFR brief on the episode (John Heilbron, Brief 25-01, May 8, 2025) says about 80% of Tsingshan’s short had been placed in the uncleared OTC market and had not been reported to LME Clear.

But the Oliver Wyman report is clear that there were several large, exposed shorts. In its analysis of the ten largest short positions by beneficial owner, two were held only on the exchange, five had both OTC and on-exchange components (on average 52% OTC), and three were entirely OTC. On average each of these ten was spread across five LME members, and one across twelve. No single member, and not the exchange, could see the whole picture. That fragmentation, not one company, is the structural lesson.

The market

The contract. The most traded LME nickel contract is the three-month (“3M”) contract, physically settled by delivery of LME-approved nickel. One lot is 6 tonnes.
The venues. Trading happens on LMEselect, the electronic order book open from 01:00 to 19:00 London time, and in the inter-office (telephone and messaging) market between members. Trades clear through LME Clear, the exchange’s own clearing house.
The scale. The Oliver Wyman report’s 2021 figures: average LME 3M nickel closing price $18,457 a tonne; average open interest of about 224,000 lots (1.34 million tonnes); initial margin averaging 7.6% of the price; and average daily variation margin called by LME Clear across all metals of $391 million.

The role of the clearing house is explained in how clearing houses work. What matters here is that LME Clear calls variation margin intraday as well as overnight, and, according to the High Court judgment, intraday calls must normally be paid within one hour.

Timeline: March 4 to March 16, 2022

All times are London time. Sources: the Oliver Wyman (OW) report, the Divisional Court judgment ([2023] EWHC 2969 (Admin)) and the FCA Final Notice.

When	What happened
Fri March 4, 2022	3M nickel opened at $27,080 and closed at $28,919 (+6.8%). LME Clear made an intraday margin call of about $2.6 billion, 40% higher than the previous record (Divisional Court). OW puts total margin generated that day at over $3.5 billion
Mon March 7, 2022	The price opened at $29,770 and closed at $50,300, up 69%. OW calls it “nearly five times greater than the next biggest move in nickel in the last twenty years” and a 25 standard deviation move on a 20-year view
March 7, daytime	LME Clear’s first margin run called over $5.1 billion (OW). Calls through the day totalled about $7.05 billion; three clearing members paid late and one remained in default at the end of the day (Divisional Court)
March 7, 16:00	The LME Special Committee discussed an upper price limit and decided against one for the moment, judging the rise to reflect the war and sanctions (FCA)
March 7, overnight run	A further $4.9 billion was called and settled before 09:00 on March 8. Since March 4, members had posted nearly $16 billion (OW)
Tue March 8, 2022, about 04:49	With the price near $60,000, the Hong Kong trading operations team suspended the nickel price bands. Senior managers were not told (FCA)
About 05:30 to 05:50	The LME’s chief executive woke, saw the move, and concluded the market had become disorderly (Divisional Court)
05:44 to 06:08	The price rose from $70,000 to $101,365, 44% in 24 minutes (FCA)
06:16	LME Clear agreed to freeze margin requirements at the March 7 closing price (OFR Working Paper 24-09, citing the LME’s court submissions)
07:24	An LME Clear spreadsheet showed $19.75 billion of additional margin due by 09:00 at a price of about $80,000, with at least five members expected to default (Divisional Court)
08:15	Nickel trading suspended on “orderly market grounds”
09:00 (about 52 minutes)	Meeting of LME and LME Clear executives on four options (below). A second spreadsheet at 09:47 showed $750 million of margin if trades stood but were margined at the March 7 close
12:05	Notice cancelling all nickel trades executed on or after 00:00 UK time on March 8
Wed March 16, 2022	Trading resumed with a daily price limit (15% for nickel). Asian-hours trading in nickel did not reopen until March 2023 (FCA)

Worked example: margin on a 100-lot short

To see why shorts could not hold on, take a hypothetical holder of a 100-lot short (600 tonnes) in 3M nickel, opened at the March 4 open of $27,080. Prices are from the sources above; the margin rate is the 7.6% average in the OW report, used here as an illustration rather than LME Clear’s actual parameters. Computed in Python.

Price point	Price ($/t)	Cumulative loss on 600 t	Variation margin due for this step
March 4 open	27,080	0	0
March 4 close	28,919	$1.10m	$1.10m
March 7 close	50,300	$13.93m	$12.83m
March 8 peak, 06:08	101,365	$44.57m	(not called)
March 8 around 07:00	about 80,000	$31.75m	(not called)

Initial margin at the start: 7.6% x $27,080 = about $2,058 a tonne, or $1.23 million for 600 tonnes.
The March 7 variation margin alone, $12.83 million, was about 10.4 times that initial margin. A trader holding twice the initial margin in spare cash would still have run out.
Initial margin also rises with price. At 7.6% of $50,300, it would be about $3,823 a tonne, adding about $1.06 million to the requirement on top of the losses.
Had March 8 trades stood at around $80,000, this position would have owed a further $17.8 million in variation margin that morning. Across the market, LME Clear’s estimate was $19.75 billion, about 50 times the average daily variation margin for all metals in 2021.

For a physical producer, the short future may be offset by the rising value of nickel it will produce. But that offset is in metal, in the future, while margin is in cash, today. This is the same liquidity mismatch described in how futures margin works, at extreme scale.

Why the price went vertical

The Oliver Wyman review identifies four reinforcing causes:

Large, exposed short positions, built up on and off the exchange well before March, partly as hedges by producers.
Price acceleration and resultant margin calls. Rising prices produced margin calls that forced shorts and their OTC counterparties to buy.
Rapid risk reduction. By the close on March 7, nearly 11,500 lots of pre-existing shorts had been closed out. More than half of the outright buying on members’ house accounts came from five members that each had over 5,000 lots of exposure to the five largest shorts.
Withdrawal of liquidity. Few participants were willing to sell into the rise. On March 8, OW found that buy trades moved the price by over $250 a lot on average.

The controls that should have slowed the move did not. The FCA’s Final Notice (March 19, 2025) found that the LME’s dynamic and static price bands had been widened and then, at about 04:49 on March 8, suspended entirely by junior trading operations staff in Hong Kong, who “had not been trained or instructed” to alert the senior managers empowered to judge whether the market was orderly. The bands stayed off for more than three hours, until the 08:15 suspension, and senior managers did not learn they had been suspended until on or around March 9. Price limits and circuit breakers in general are covered in limit moves and circuit breakers.

The decision: four options

The Divisional Court describes the 09:00 meeting on March 8 at which LME and LME Clear executives considered:

Option	Description	Why it was rejected or chosen
1A	Let the trades stand and margin at their prices	Trades reflected a disorderly market; risk of multiple member defaults from a $19.75 billion call
1B	Let the trades stand but margin at the March 7 close	LME Clear’s head judged it would leave the clearing house potentially under-collateralized; the second spreadsheet still showed default risk on $750 million of calls
2	Let the trades stand at adjusted prices	Unfair, since parties might not have traded at the adjusted prices
3	Cancel the trades	Chosen

The decision to cancel was for the LME’s chief executive; the decision on margin was for LME Clear. The court treated them as inseparable.

The counterfactual waterfall

What would the default waterfall have looked like if the trades had stood? The OFR Working Paper 24-09 (John Heilbron, December 10, 2024) reconstructs the LME’s own estimates as presented in court:

The $19.75 billion call would have forced seven members into default, with default losses of about $2.6 billion, of which $220 million would exceed LME Clear’s prefunded resources.
Calls to cover that excess and replenish the default fund, about $1.17 billion more, would have threatened five more members, for 12 of 45 clearing members (27%), with another $170 million of losses.

Using the OFR’s figures, about $1.3 billion of the losses would have been covered by the defaulters’ own initial margin, leaving about $1.3 billion against a default fund of about $1.1 billion: 18% more than the fund (our arithmetic). LME Clear’s own skin in the game at the end of 2021 was $22.75 million, which would have been wiped out. These are estimates of an outcome that did not happen, prepared by the party defending the decision, and should be read that way.

What the reviews found

Oliver Wyman, January 10, 2023

The LME commissioned Oliver Wyman (with NERA) to review the events. Its report, Independent Review of Events in the Nickel Market in March 2022, deliberately excluded the LME’s decision-making and governance, which regulators were examining. It recommended, among other things, extending the LME’s visibility of OTC positions (including mandatory OTC position reporting), better tools to aggregate positions across members, upgraded volatility controls building on the 15% daily price limit, and, at LME Clear, exploring formal exposure limits on members’ total initial margin relative to their capital and liquidity. The LME announced an action plan based on the report on March 30, 2023.

Bank of England, March 3, 2023

The Bank of England supervises LME Clear as a UK CCP. It commissioned a skilled person review under section 166 of the Financial Services and Markets Act 2000, which “pointed to several shortcomings across LME Clear’s governance, management and risk management capabilities.” The Bank required LME Clear to strengthen its governance, increase independence in its management and governance, and improve risk management, and appointed a second skilled person to monitor implementation.

FCA Final Notice, March 19, 2025

The FCA opened an enforcement investigation on March 3, 2023 and, in its first enforcement action against a UK recognized investment exchange, fined the LME £9,245,900 (after a 30% settlement discount from £13,208,400). It found that the LME’s systems and controls were “not adequate to ensure orderly trading under conditions of severe market stress,” that its escalation procedures did not get unusual conditions in front of senior managers, and that the LME did not tell the FCA for more than two months that its price bands had been suspended on March 8, although the FCA did not suggest an intent to mislead. The notice records that the LME has since introduced weekly OTC position reporting and that the FCA’s own policy statement PS25/1 addresses risks from large OTC positions.

The litigation

Hedge fund Elliott Associates and trading firm Jane Street Global Trading sought judicial review of the cancellation and damages under the Human Rights Act 1998, which protects possessions. Recognized investment exchanges such as the LME have statutory immunity from most damages claims under section 291 of the Financial Services and Markets Act 2000, which helps explain why the claims were framed as judicial review with damages under the Human Rights Act. Elliott said the cancellation cost it about $456 million in net profits; Jane Street about $15 million.

Divisional Court, November 29, 2023 ([2023] EWHC 2969 (Admin), Swift J and Bright J). Both claims were dismissed on all grounds. The court found the LME had the power to cancel under its Trading Regulation 22.1 and acted lawfully, fairly and rationally. It was critical that the chief executive concluded the market was disorderly “within about 20 minutes from waking up,” without real investigation, but held that the decisions did not depend on establishing the causes of the price moves. It also held that Elliott, whose trades had not been fully cleared, had no “possessions” for human rights purposes.
Court of Appeal, October 7, 2024 ([2024] EWCA Civ 1168, Males, Singh and Underhill LJJ). Elliott alone appealed. The court disagreed with the lower court on one point, holding that Elliott did have possessions, but unanimously dismissed the appeal: the decision was lawful, procedurally fair, rational and proportionate, and the LME was not required to know the causes of the price movements, the exact moment the market became disorderly, or that the price bands had been suspended.
Supreme Court, January 29, 2025. Permission to appeal refused, according to the LME’s litigation page. Other claimants, including AQR, DRW and Pala Investments, had stayed their claims pending the outcome and discontinued them afterwards.

Elliott has since brought a separate claim. On September 3, 2026 Elliott Associates and Elliott International filed a standalone competition-law damages claim in the UK Competition Appeal Tribunal against the LME and its parent, Hong Kong Exchanges and Clearing (Case 1791/5/7/26), alleging abuse of a dominant position through inadequate volatility controls, and relying heavily on the FCA Final Notice. According to the claim form, it challenges the conduct that led to the cancellation, not the cancellation itself. In a ruling dated September 22, 2026 ([2026] CAT 73) the Tribunal permitted service of the claim on HKEX in Hong Kong, while noting that the abuse theory appears novel. HKEX says the claim is without merit and may still contest jurisdiction. A case management conference is listed for December 9, 2026. The claim is at an early stage and its outcome is unknown.

How professionals read the episode

Margin is a liquidity claim, not a P&L number. A hedged producer can be right on economics and still fail on cash. Treasury desks at producers and their banks now plan for multi-day stress on margin, not only for price.
Know your exposure off-exchange. Members with clients holding OTC shorts were exposed to those clients and, through hedges, to the exchange. Aggregating a client’s positions across venues and counterparties is part of credit control.
Market structure can make the exchange the last line of defence. When positions are fragmented across members and OTC, neither the exchange nor any member sees the concentration. Weekly OTC reporting at the LME and the FCA’s PS25/1 are the regulatory response.
Read the rulebook for discretionary powers. The courts upheld a broad power to cancel trades in a disorderly market. Anyone trading on a venue should assume such powers can be used, and the OFR’s Heilbron argues that frequent use could weaken a CCP’s incentive to manage risk before the event, because its skin in the game is never at stake.

What can go wrong (and did)

Concentrated, hidden shorts. Large positions spread across many members and the OTC market.
Correlated forced buying. Margin calls forced the people holding the biggest positions to trade in the same direction at the same time.
Controls off at the worst moment. Price bands suspended by junior staff, with no escalation.
Margin calls larger than the default fund. $19.75 billion against a default fund of about $1.1 billion.
Ex-post losers. Cancellation protected shorts and their members from defaults but erased profits for those on the other side, which is why the case reached the Court of Appeal.

The short version

LME nickel rose more than 270% in three trading days in March 2022, from $27,080 to $101,365 a tonne, because large short positions, many held OTC and across multiple members, were forced to buy into a thin market as margin calls mounted: about $16 billion was paid between March 4 and March 7. On March 8, with price bands switched off by junior staff, LME Clear computed $19.75 billion of new calls that it never sent; the LME suspended trading at 08:15 and cancelled roughly $12 billion of trades from that day. The LME’s own estimate was that letting trades stand could have pushed up to 12 of its 45 clearing members into default and exhausted the default fund. Oliver Wyman, the Bank of England and the FCA (which fined the LME £9.2 million in March 2025) all found failings, but the courts held the cancellation lawful, and the Supreme Court refused Elliott permission to appeal in January 2025. A separate competition claim by Elliott was filed in 2026 and is pending.