LME CEO Backtracks on Exit Plan After Nickel Market Chaos

(Bloomberg) -- London Metal Exchange Chief Executive Officer Matthew Chamberlain will remain to steer the company through the fallout from March’s nickel crisis after canceling plans to leave for a crypto startup. 

Chamberlain’s impending exit came at a tumultuous time for the LME, which has been lambasted by some users for its handling of the unprecedented short squeeze in nickel. U.K. regulators announced a rare review following the chaos, and the exchange -- where benchmark prices are set for the world’s key industrial metals -- has seen open interest slump dramatically as traders and investors cut exposure.

The LME has repeatedly said it was acting in the best interest of the market when it chose to suspend nickel trading after a massive price spike, and canceled billions of dollars of transactions. Chamberlain has signed a multiyear contract to stay on, according to a person familiar with the matter, pointing to backing for his decisions from LME owner Hong Kong Exchanges and Clearing Ltd.

The about-turn comes after an announcement early this year that he would leave at the end of April for a job at blockchain startup Komainu. Chamberlain, a former banker, was named CEO in 2017, as the LME sought to repair relations with core users and brokers after an outcry over HKEX’s efforts to extract more profit. 

While he built an early rapport with the LME’s famously fractious user base, he found himself in a bruising clash with members last year over a plan to permanently close the open-outcry trading floor.

Last month, he once again became a lightning rod for criticism as investors reacted with fury to the LME’s controversial attempts to rein in a runaway short squeeze centered on producer Tsingshan Holding Group Co. 

Cliff Asness, the founder of multibillion-dollar asset manager AQR Capital Management, accused the LME at the time of “stealing money from market participants trading in good faith and giving it to Chinese nickel producers and their banks.”

Still, some more traditional users of the LME have expressed support for Chamberlain’s leadership.

“Things need to calm down, and I think Matt is the man to make things calm down,” industry veteran Michael Lion said on Wednesday. “No leader is ever faultless, but Matt has shown great preparedness to listen openly and take the needs of the industry into account.”

There are broad expectations that the LME may face lawsuits from investors who stood to profit from the spike in prices, and Chamberlain will also need to liaise with U.K. regulators who are probing its handling of the crisis. Investigations by the Financial Conduct Authority and the Bank of England will examine the LME’s governance, market oversight and risk management processes following the massive spike in prices and halt on trading in early March.

The International Monetary Fund also said last week that the LME’s governance systems need to be strengthened in the wake of the squeeze. The exchange has said it sought to act in the interests of the market as a whole and acknowledges the concerns expressed by some market participants.

The scandal has also shone a spotlight on the LME’s clearinghouse, LME Clear, which was built in-house following HKEX’s acquisition in 2012 and is designed to insulate the exchange from the collapse of major users. The LME told members last month it would nearly double the size of the clearinghouse’s default fund, after the spike in prices brought several brokers to the brink of failure. The LME has said it faced a systemic risk to its market.

Adrian Farnham, who runs the LME’s clearinghouse and was set to take over as CEO on an interim basis, will instead retire in July. Catherine Lester, the exchange’s chief financial officer, will also leave to pursue other opportunities. Tabitha Silverwood, the current acting CFO, will succeed Lester next month. 

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