LME Clear Proposes to Triple Capital Requirements to $30 Million for Clearing Members After 2022 Nickel Short Squeeze

Nov 14, 2024, 04:36 PM

The London Metal Exchange (LME) Clear has announced a proposal to significantly enhance its credit-related requirements for clearing members. The minimum net capital requirement will increase from $10 million to $30 million, effectively tripling the current threshold. This reform is part of LME's efforts to strengthen market stability following the 2022 nickel short squeeze. Additionally, LME Clear aims to improve the stability of its default fund by limiting the percentage by which the fund can decrease during recalculations. The proposed changes also include moving towards a 'defaulter pays' model and introducing an upper limit on the default fund, which would restrict the mutualised component of pre-funded resources contributed by clearing members.