Better derivatives data needed after LME nickel halt, says EU watchdog

By Huw Jones

LONDON (Reuters) – The suspension of nickel trading in London and Stockholm’s flash crash in shares show the need to improve data on derivatives and review temporary halts to trading, the European Union’s markets watchdog said on Wednesday.

Verena Ross, chair of the European Securities and Markets Authority (ESMA), said the halt in nickel trading on the London Metal Exchange (LME) in March after the metal jumped to record highs showed how market volatility can turn into a challenge for trading venues.

Piecing together a full picture of positions in commodities has proved difficult, industry officials have said.

“Recent events in commodity markets are leading us to reflect carefully on the additional tools that could be put in place to better identify potential risks to orderly markets,” Ross told an event held by the Federation of European Securities Exchanges.

Ross said that ESMA was looking at how to improve transparency in commodity markets, such as through additional information on over-the-counter positions held by market participants.

On the flash crash in Sweden last month after a single sell order trade by Citigroup, Ross said it was another example highlighting the central role of so-called circuit breaker halts in trading after extreme moves.

Halts in individual stocks reached record levels during an extreme bout of volatility in markets when economies entered coronavirus lockdowns in March 2020, she said.

There were also several halts at the end of February and early March this year when Russia began its invasion of Ukraine, she added.

“A discussion on the design of circuit breakers might well be warranted,” Ross said, adding that outages and flash crashes can be detrimental to markets and damage their reputations.

(Reporting by Huw Jones; Editing by David Goodman)