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UK regulator launches probe into LME nickel trading halt



UK regulator launches probe into LME nickel trading halt
© Reuters. FILE PHOTO: Traders work on the floor of the London Metal Exchange in London, Britain, September 27, 2018. REUTERS/Simon Dawson

By Iain Withers and Eric Onstad

LONDON (Reuters) -A British financial watchdog on Friday launched its first ever investigation of a UK exchange for possible misconduct after the London Metal Exchange’s decision last year to halt nickel trading.

It was unclear, however, whether the probe would look at the exchange’s controversial decision to cancel billions of dollars of trades.

The world’s largest and oldest metals market annulled all nickel trades in March last year after chaotic price action and suspended trading for the first time since 1988.

The March 8 suspension occurred after prices doubled to more than $100,000 a tonne in a matter of hours in a surge sources blamed on short-covering by one of the world’s top producers.

The move has prompted investor lawsuits while the nickel contract remains broken with volumes sliding, leaving the industry without an effective global reference price.

A statement from the Financial Conduct Authority (FCA) said it had launched an “enforcement investigation” into the conduct and systems and controls that the LME had in place between Jan. 1 and the suspension of trade on March 8, 2022.

Two lawyers said it appeared the watchdog was limiting its probe to the decision to stop trading, and would not cover the more contentious one to cancel trades.

“It does look from the statement that the FCA is not going to look at the cancelled trades,” said a regulation lawyer who declined to be named.

The watchdog said it would not make any further comment about the investigation.

Its website says of enforcement investigations: “We will start an investigation where we have reason to believe serious misconduct may have taken place.”

This was the first such action the FCA has launched against an exchange, a spokesperson said.

“The FCA’s decision to open this investigation into an exchange is a bold step,” said James Alleyne, legal director at law firm Kingsley Napley.

“That the FCA has decided to investigate means it considers there are circumstances suggesting that LME may have committed serious misconduct. Such a finding would certainly have significant cost and reputational implications for the LME.”

The FCA did not give any timeline, but Alleyne said the case could take years to conclude.


The 146-year-old LME said it had taken active steps to enhance nickel market liquidity and transparency, including 15% daily price limits and over-the-counter (OTC) position reporting for all physically delivered metals.

“The LME will cooperate fully with this process and will continue to take the appropriate steps to ensure the long-term health, efficiency and resilience of its market,” its statement added.

In its statement, the FCA acknowledged that the LME had committed to a wider package of market reform, adding that it was encouraged by the exchange’s focus on transparency.

The FCA and Bank of England (BoE) began a review last April into the trading halt by the LME, owned by Hong Kong Exchanges and Clearing.

On Friday, the BoE separately said its reviews had pointed to several shortcomings at LME clearing house LME Clear, adding that it would name an independent monitor to assess and report on its remedial actions.

“The dual-pronged approach of the FCA and the Bank represents a significant and possibly unprecedented development,” said Adam Topping, a commodities and financial regulation specialist at law firm Holman Fenwick Willan.

Topping added that it demonstrated how seriously they view any perceived compliance shortcomings.

In January, management consulting firm Oliver Wyman released an independent review of the nickel trading debacle, and the exchange said it would set out an implementation plan for the report’s recommendations by the end of March.

The nickel crisis, spurred partly by large OTC short nickel positions, shone a light on the failure of a core reform from the global financial crisis to help regulators quickly spot destabilising risks in markets.

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French climate investments to drive up national debt burden – think-tank




French climate investments to drive up national debt burden - think-tank
© Reuters. FILE PHOTO: French President Emmanuel Macron visits Institut Curie laboratory ahead of announcements on biomedical research in Saint-Cloud, France, May 16, 2023. REUTERS/Benoit Tessier/Pool

PARIS (Reuters) – Investments that France needs to finance its transition to a low-carbon economy are set to add 25 percentage points to its debt burden by 2040, a report from the government-funded France Strategie think-tank said on Monday.

France will need to make additional annual investments of about 67 billion euros ($74 billion) – more than 2% of economic output – by 2030 to meet its objectives for reducing its dependence on fossil fuels, France Strategie calculated.

The think-tank, which is part of the prime minister’s office, said the financial effort would weigh heavily on public finances partly because the investments imply lower potential growth, which would cut tax revenues.

As a result, the debt burden would rise by 10 percentage points by 2030 and 25 percentage points by 2040, which France Strategie suggested might need to be financed in part by a temporary tax on wealthy households.

President Emmanuel Macron’s government has hoped to chip away in the coming years at France’s national debt, which currently stands at slightly more that 111% of gross domestic product after surging during the COVID crisis.

The report said the financial burden of investing in Europe’s energy transition also posed a risk in terms of international economic competition, as other major economies such as the United States and China were less concerned about budgetary constraints.

About 100 experts in French and European research groups as well as public French institutions participated in the report, which was led by economist Jean Pisani-Ferry, who previously helped Macron draft his economic programme.

($1 = 0.9084 euros)

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Crude oil largely flat; Caution ahead of debt ceiling meeting




Crude oil largely flat; Caution ahead of debt ceiling meeting
© Reuters — Oil prices traded largely unchanged Monday, with traders cautious ahead of the resumption of U.S. debt ceiling negotiations while supply concerns add support. 

By 09:30 ET (13:30 GMT), futures traded 0.1% lower at $71.59 a barrel, while the contract fell 0.1% to $75.52 a barrel.

U.S. President Joe Biden and Republican House Speaker Kevin McCarthy are set to meet later this session to try and agree on a deal to raise the more than $31 trillion debt ceiling.

Concerns that a failure to come up with an acceptable compromise have weighed heavily on the market over the recent weeks, as this would result in the U.S. defaulting on its debt obligations, likely plunging the global economy into recession.

The U.S. Treasury has warned that the government could run out of money to pay its bills as soon as June 1.

That said, both crude benchmarks managed to post gains last week, ending four straight weeks of heavy declines, helped by the U.S. starting to refill its Strategic Petroleum Reserve as well as the supply disruptions in Canada, due to early wildfires in the crude-rich Alberta province. 

Additionally, the latest data from showed the U.S. oil rig count fell by 11 over the last week, to its lowest count since June 2022.

“A slowdown in U.S. drilling activity is a concern for the oil market, which is expected to see a sizable deficit over the second half of the year,” said analysts at ING, in a note. 

“Producers appear to be responding to the weaker price environment, rather than expectations for a tighter market later in the year.”

This brings the Organization of Petroleum Exporting Countries and allies, known as OPEC+, firmly into focus, with its next meeting in early July. 

The cartel surprised the market with an output cut at the last meeting, which came into effect at the start of this month. However, this has done little to support crude prices, implying the members may be looking at a further reduction in production.

The fact U.S. producers are not increasing in number will be good news for OPEC+, ING added, “as it suggests that they will be able to continue supporting prices without the risk of losing market share to U.S. producers.”

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California grid operator signs off on $7.3 billion of power lines




California grid operator signs off on $7.3 billion of power lines
© Reuters. FILE PHOTO: A woman jogs by power lines, as California’s grid operator urged the state’s 40 million people to ratchet down the use of electricity in homes and businesses as a wave of extreme heat settled over much of the state, in Mountain View, Californi

(Reuters) – California’s electric grid operator has approved a plan expected to cost $7.3 billion for 45 new power transmission projects over the next decade and made it easier for new power plants in high-priority areas to connect to the grid.

The projects will support the development of more than 40 gigawatts (GW) of new generation resources, the California Independent System Operator (CAISO) said on Thursday.

“With electrification increasing in other sectors of the economy, most notably transportation and the building industry, even more new power will be required in the years ahead,” the CAISO said.

The vast majority of the transmission projects will be built in California, with some in neighboring Arizona, it said.

The power lines recommended by CAISO’s 2022-2023 Transmission Plan will allow the state’s grid to add more than 17 GW of solar resources, 8 GW of wind generation, 1 GW of geothermal development, and battery storage projects.

CAISO will prioritize connecting power plants to the grid in specific geographical zones identified by its plan where developing new power lines and plants “make the most economic and operational sense.”

The grid operator also approved proposed reforms to account for “increasing levels of net load forecast uncertainty between day-ahead and real-time markets … as the generation fleet evolves towards a cleaner, but more variable, resource mix.”

It projected that its transmission plan next year could include the need to add 70 GW of new power to the grid by 2033, rising to 120 GW as the state seeks to meet its goal of a carbon-free power system by 2045.

Power supply in the U.S. West is vulnerable to extreme heat as it relies on regional energy transfers to meet demand at peak or when solar output is diminished, the North American Electric Reliability Corp (NERC) said in its summer outlook on Wednesday.

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