LONDON, Nov 14 (Reuters) - London Metal Exchange rules
on daily price swings were breached on Monday, traders said,
with offers to sell nickel above the 15% limit placed in
volatile trade for the first time since the March debacle when
the exchange imposed constraints.
Disorderly trade on March 8 pushed nickel prices to a record
above $100,000 a tonne. The LME cancelled all nickel trades on
that day and suspended the market for more than a week.
When the market reopened, the exchange imposed price limits
of 15% up or down and ordered its members not to submit any
orders outside those boundaries.
An LME notice in March said a failure to comply with the new
rules "may be treated as a breach of the LME Rulebook, and the
LME may take disciplinary action accordingly".
"The LME implemented a rule-based prohibition on the
submission of orders outside the daily price limits...to ensure
that participants do not place orders that give false or
misleading supply and demand signals," the exchange said.
"The LME recognises the operational challenges of this
approach for market participants and in the longer term intends
to automate order rejection outside the daily limits."
Traders said on Monday orders were placed above the 15%
upper threshold of $30,960 a tonne soon after the LME's nickel
market opened after 0800 GMT, as market players rushed to cut
bets on lower prices of the metal used to make stainless steel.
One trader sent Reuters a screenshot showing an offer at
$31,060 a tonne on the LME's electronic trading system Select.
"Why can't Select automatically stop bids and offers that
breach the limits?" another trader said. "It shouldn't be up to
us as users of the exchange... things can get very heated, as we
saw this morning, there should be failsafes in place."
Traders said the exchange was working on a new version of
its electronic platform which will ensure limits cannot be
broken, but that it has no plans to update the current version
of Select to stop bids and offers breaching daily limits.
Night trading - from 0100 London time - for nickel has been
suspended since the March debacle. "They can't restart nickel
night trading till this flaw in current system is fixed,"
another trader said
The exchange, the world's oldest and largest market for
industrial metals, is owned by Hong Kong Exchanges and Clearing
(Reporting by Pratima Desai and Eric Onstad; Editing by Jan
Harvey and Susan Fenton)