Wednesday, April 27, 2022
The IMF recently released its Global Financial Stability Report April 2022. The Executive Summary provides an informative overview of the financial risks facing markets in these turbulent times. I was particularly interested in Box 1.1 of the Report: Extreme Volatility in Commodities: The Nickel Trading Suspension. For those readers who might be unaware, the London Metal Exchange (LME) halted nickel trading "on March 8 after prices doubled over the course of a day to a record $100,000 (£76,200) a tonne" and cancelled all nickel transactions that day. Nickel is a key metal for electric car batteries. Not surprisingly, the LME’s actions proved controversial and are now the subject of several regulatory investigations. As the end of the Executive Summary highlights: “Recent measures taken in markets and exchanges in response to elevated volatility in commodity prices highlight the need for regulators to examine the broader implications, including exchange governance mechanisms, resiliency of trading systems, concentration of risk, margin setting, and trading transparency in exchange and over-the-counter markets” (p. xiv).