The Day the Market Cancelled Itself

A trade is the most solid thing a market pro­duces. Two parties agreed, a price was printed, a clear­ing house stood in the middle. On the morning of 8 March 2022 the London Metal Exchange decided that about eight hours of those trades had not hap­pened.

The con­tract was three-month nickel, the LME's bench­mark for a metal that goes into stain­less steel and bat­ter­ies. The chronol­ogy below comes from the exchange's own notices, a working paper by the US Office of Financial Research, the High Court judg­ment that fol­lowed, and the UK Financial Conduct Authority's final notice.

The run-up

Russia's inva­sion of Ukraine on 24 February raised fears about supply from one of the world's largest nickel pro­duc­ers. At the same time, the Tsingshan Holding Group, a large Chinese stain­less steel and nickel pro­ducer, held a very large short posi­tion, reported at between 100,000 and 300,000 tonnes, much of it off the exchange through banks. Shorts lose money when prices rise, and must post margin as they do.

According to the OFR paper, three-month nickel rose from about $27,000 a tonne to $29,100 on Friday 4 March, and to $50,300 at Monday 7 March's close. The LME's own review later described the move on 7 March as nearly five times the next largest move in nickel in twenty years. Margin calls on the shorts ran into bil­lions of dollars.

The morning

The LME opens at 1:00 am London time for Asian trading hours. In the early hours of Tuesday 8 March the price roughly doubled again, to above $100,000 a tonne, as holders of short posi­tions bought to close them and others sold into the move. At 6:16 am LME Clear agreed to freeze margin require­ments at the pre­vi­ous close. At 8:15 am the exchange sus­pended nickel trading.

Around midday it announced that it would cancel all nickel trades exe­cuted on 8 March before the sus­pen­sion. Estimates of what was voided range from about 5,000 to 9,000 trades, and from $3.9 billion to $12 billion in value. The price reverted to the 7 March close. Trading did not resume until 16 March, with new daily limits on how far the price could move.

The rea­son­ing

The exchange's argu­ment was that the market had become dis­or­derly, that prices no longer reflected under­ly­ing supply and demand, and that at those prices several clear­ing members could default, threat­en­ing the clear­ing house itself. The OFR paper describes LME Clear's own anal­y­sis that morning of an intra­day margin call that would have run to tens of bil­lions of dollars.

Cancelling the trades removed the losses that would have caused those defaults. It also removed the profits of every­body on the other side. Firms that had sold nickel at ele­vated prices that morning, includ­ing the hedge fund Elliott and the trading firm Jane Street, lost trades that would have been prof­itable, and chal­lenged the deci­sion in court. In November 2023 the High Court dis­missed their claims, finding that the exchange had acted within its powers.

In March 2025 the FCA fined the LME £9,245,900 for failing to main­tain orderly trading during that period, the first penalty it had imposed on a recog­nised invest­ment exchange. Its notice con­cerned the exchange's systems and con­trols in the days before the sus­pen­sion, rather than the deci­sion to cancel.

What changed after­wards

The LME intro­duced daily limits on how far prices of its main con­tracts could move, began col­lect­ing more infor­ma­tion about over-the-counter posi­tions linked to its prices, and asked its clear­ing members to hold more data about their clients' expo­sures. All of it aimed at what the episode exposed: a huge posi­tion, mostly off the exchange, invis­i­ble to it until it moved the price.

The ques­tion

Taking a side on the LME is easy. The harder ques­tion is what the episode says about a price. For eight hours on 8 March, nickel traded above $80,000 and briefly above $100,000. People watched those numbers, made deci­sions on them, and some phys­i­cal con­tracts around the world are indexed to LME prices. Then the offi­cial record was rewrit­ten to say the price that day had been, in effect, what it was the night before.

The trades hap­pened. The prices were printed. The exchange's rules gave it the right to decide that they did not count, and a court agreed the rules meant it. So a com­pleted trade is solid, but con­di­tional. Its author­ity rests on a rule­book, and in the last resort on the judge­ment of whoever runs the market about whether the market was still a market.

The chart of nickel for March 2022 in the offi­cial history has a gap in it. Page 53 shows what was in the gap.