The Financial Conduct Authority (FCA) has imposed a £9.2 million fine on the London Metal Exchange (LME) for inadequate systems and controls during extreme market volatility, marking the regulator's first enforcement action against a UK “Recognized Investment Exchange.”

London Metal Exchange Fined £9.2 Million by FCA

The fine stems from events between March 4-8, 2022, when LME's 3-month nickel futures contract experienced unprecedented price swings, culminating in prices more than doubling to over $100,000 in just over an hour on March 8. The extreme volatility led LME to suspend its nickel market for eight days and cancel all nickel trades executed on March 8.

"The LME's systems and controls were not adequate to ensure orderly trading under conditions of severe market stress," the FCA stated in its enforcement action. Specifically, the exchange lacked proper controls and policies for its automatic volatility controls, known as “price bands.”

"London's metal markets are of vital importance to the UK and global economy. We expect controls that match their significance," said Steve Smart, joint executive director of enforcement and market oversight at the FCA. "The LME should have been better prepared to address the serious risks posed by extreme volatility."

Regulator Cites Junior Staff, Poor Escalation Procedures

The investigation revealed critical gaps in LME's escalation procedures. During Asian trading hours (1AM-7AM GMT), only junior trading operations staff were on duty without proper training to identify market disorder beyond error trades or rogue algorithms.

When nickel prices began rising dramatically in the early hours of March 8, staff failed to escalate the issue to senior managers and instead took steps to accommodate the price rises, even disabling price bands during the most extreme volatility.

LME accepted the FCA's findings, qualifying for a 30% reduction in the financial penalty, which would otherwise have been £13.2 million. The exchange has reportedly undertaken work since March 2022 to enhance and strengthen its controls.

“We take our responsibilities as a global market operator very seriously, and acknowledge that we could have provided a better line of defence to the effects of the disorder in the OTC market, which had spilled over onto the LME market in March 2022," said Matthew Chamberlain, the CEO of LME. "The LME swiftly implemented market enhancements and we are pleased to be able to move forward, stronger as a result. In parallel we fully recognise the important work the FCA continues to undertake in strengthening oversight of the OTC market."

The enforcement action comes alongside broader reforms to the commodity derivatives regulatory framework introduced by the FCA in February 2025. The investigation was completed significantly faster than the average 42-month timeframe for FCA investigations closed in 2023/24.