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Nickel traders at the London Metal Exchange accused the exchange of favoring its giant customers and taking extraordinary steps to protect top clients like a Chinese tycoon and JPMorgan after there was a short squeeze on nickel.
Clifford Asness, the founder of AQR Capital Management, took to Twitter on 10 March to accuse the exchange of reversing trades in order to protect its “favored cronies and robbing your non-crony customers.”
“Everyone who trades should know what you did,” he posted. “You got lawyers, I’m ready. Bring it slime balls.”
Asness linked his post to a Bloomberg report that showed the metal skyrocketed to above $100,000 a ton earlier this month before the LME suspended trades and canceled ones made during Asian hours.
Wall Street on Parade reported that Tsingshan Holding Group, one of JPMorgan’s clients, amassed an enormous short position in nickel prior to the Russian invasion of Ukraine, which has sparked a jump in commodities.
JPMorgan is the largest counterparty to the trades of Xiang Guangda, the founder of Tsingshan.
Tsingshan purchased large amounts to reduce its short positions in the metal, which contributed to the metal jumping to record highs, Reuters reported.
“The best way to describe what has happened is basically a physical supply risk, with Russia being sidelined from the market, translating through to a financial market event. And in particular, what we’re talking about is a short squeeze,” Vivek Dhar, a CBA commodities analyst, told ABC.net.au.
David Bassanese, BetaShares chief economist, told the paper that the size of Tsingshan’s short could have been close to another “Lehman-[Brothers]-type event.”
“You’re too big to fail almost sometimes,” he said. “And I think this is what we’re seeing at the moment—the market closed down rather than let him fail and cause the market to implode.” (See “BROKERAGES, MARKETS, GOVERNMENT: A RIGGED GAME OF DECEPTION.”)
Wall Street on Parade wrote that the LME decision to suspend trading “benefited the short positions but left other traders with profitable long positions out in the cold” and gives “JPMorgan and the other banks involved time to figure out a solution to their self-made mess.”
Wall Street Silver, a popular Twitter account, posted that the LME is owned by Hong Kong Exchanges and Clearing Ltd.
“The company caught in the Nickel squeeze was a Chinese heavyweight. All of the trades were canceled,” the post read. “We now know the impact of the Chinese buying all of our assets.”
The Wall Street Journal, citing unnamed sources, reported that Tsingshan still owes it brokers, which includes JPMorgan.
“I may owe Mattie Chamberlain, CEO of the LME, an apology,” Asness tweeted. “Rather than stealing, in an unprecedented manner, from his customers to save Xiang Guangda, he may have stolen from his customers to save JP Morgan. A somewhat different massive lie and theft. My heartfelt apologies.”