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LME Launches Consultations

The London Metal Exchange (LME) has launched two consultations in response to the nickel trading crisis that occurred last year. The consultations aim to implement reforms and restore investor confidence following the suspension of trading and cancellation of significant deals.

The LME's action plan was released in March. The first consultation focuses on requiring warehouses to report the amount of all stored metal, including material not registered for delivery. This proposal aims to address fluctuations in LME prices resulting from movements between off-warrant and on-warrant inventories.

The second consultation aims to change the methodology for determining closing prices by adopting a more "industry-standard" approach, expanding the volume weighted average price (VWAP) methodology to include more contracts in various metals. The consultations will close on June 30 and July 14, respectively.

How much effect this has on the LME’s reputation remains to be seen. Since its cancelled trade crisis in March, 2022, the LME has been subjected to scathing criticism by some of the world’s most influential funds. Citadel founder Ken Griffin has been quoted as calling the crisis “one of the worst days in my professional career in terms of watching the behavior of an exchange.”

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