Financial Forensics: The Due Diligence Files

← Financial Forensics: The Due Diligence Files26 sep · 11 min

LME Nickel 2022: Clearing Blind Spot │GP/LP - 3 Red Flags│File 169 T2

LME Nickel 2022: Clearing Blind Spot │GP/LP - 3 Red Flags│File 169 T226 sep11 min

<p></p><p><br></p><p><br></p><p>This episode is part of Financial Forensics Labs — two shows, one forensic methodology: The Due Diligence Files traces how institutions collapse, The Signal Files traces how the good calls get made. Built from primary-record research by a 15-year capital markets professional.</p><p>Get to know the framework, the other show, and the tools built from it — all in one place.</p><p>Explore </p><p><a href="https://www.financialforensicslabs.com.ar/">⁠⁠⁠⁠⁠⁠⁠⁠Financial Forensics Labs — Forensic Finance Intelligence⁠⁠⁠⁠</a></p><p>LME Nickel Short Squeeze 2022: the GP/LP institutional analysis of how central clearing removes one kind of risk between individual traders while quietly relocating a different kind of risk — the aggregate size of one underlying position — to a place almost nobody is actually watching.</p><p><br></p><p>This is the deep-dive institutional layer of the LME Nickel file. We break down exactly how Tsingshan Holding Group&#39;s nickel short position, split deliberately across roughly ten separate clearing brokers, grew large enough that no single counterparty — including the London Metal Exchange itself — could see the true aggregate size until the morning it broke the market on March 8, 2022. We explain why a central clearinghouse eliminates bilateral counterparty risk but does nothing, by design, to catch a single client&#39;s exposure ballooning across multiple member firms, and why honoring that morning&#39;s margin calls at market prices would have required collecting close to $20 billion from 28 banks in a single day, more than ten times the exchange&#39;s previous record. We walk through three unasked questions that existed before the crisis: what tonnage separates a genuine hedge from a directional bet on a producer&#39;s own physical output; why the LME chair&#39;s request for an update on the position the evening before did not trigger an adequate response; and why LME staff, asked directly by the UK&#39;s financial regulator that same morning what was driving the price, never raised the possibility of a short squeeze at all.</p><p><br></p><p>We also cover the aftermath in detail: the standstill agreement a bank consortium gave Tsingshan instead of forcing default, the Elliott Management and Jane Street lawsuits seeking a combined $472 million in damages, and the UK courts&#39; rulings — from the High Court in November 2023 through the Court of Appeal in October 2024 and the Supreme Court&#39;s refusal t