LME model quirk saved members $915m nickel margin

Report on March 2022 blow-up says CCP may need to “intervene” on deduction of VM gains from IM


The London Metal Exchange’s unusual approach to margining, which allows members to net variation margin (VM) gains against initial margin (IM), led to a “maximum of $915 million” in offsets for members with clients that were short nickel in the six months leading up to the March 2022 blow-up.

An independent report, written by consultancy Oliver Wyman and commissioned by LME, and published on January 10, stopped short of recommending that the practice be abolished altogether. But it warned that

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