ICE working on nickel derivatives with new trading platform

Intercontinental Exchange is working on nickel derivatives contracts, making the US group the first major exchange to move on nickel since the London Metal Exchange suspended trading in that metal two years ago.

ICE said it is working with Global Commodity Holdings, run by former LME boss Martin Abbott, on plans to use an index from GCHL’s soon-to-launch physical nickel trading platform to develop ICE nickel derivatives contract.

Chris Rhodes, president of ICE Futures Europe, said on Wednesday: “Building upon our longstanding relationship with Global Commodities, ICE is well placed to bring its best-in-class commodities infrastructure to the nickel market.”

Rhodes, who runs London-based ICE Futures Europe, added: “We are exploring the potential to do this and engaging with market participants and key stakeholders on how we can deliver an alternative market structure for nickel, using Global Commodities pricing, to deliver a better model for hedging which is more adaptable to a changing supply chain.”

London-based GCHL said it will launch in April 2024 its physical trading platform with nickel the first commodity made available.

Abbott said in a statement: “GCHL is working with ICE on plans to link its physical price indices for the settlement and clearing of derivatives contracts, closing the loop from physical trading, through price discovery to price risk management and providing a complete package to the industries we and ICE serve.”

GCHL, regulated by Britain’s Financial Conduct Authority, said its Class 1 nickel “will trade for delivery in locations from Baltimore to Yokohama” in line with the GCHL Standard Trading Agreement for Metals (STAM). The firm also said it is an approved Benchmark Administrator and its benchmarks are IOSCO compliant.

ICE Futures Europe, which is strong in energy, interest rates and equity derivatives, does not currently list any metals contracts while ICE Futures US has gold and silver futures. The launch of nickel would see the US group moving into base metals for the first time, competing with the LME, CME Group, which has aluminium and copper book on its Commodity Exchange, and the Shanghai Futures Exchange.

Abaxx Exchange said this month the Singapore-based market will start trading in the coming weeks, offering nickel sulphate futures as well as natural gas and carbon products.

The LME, owned by Hong Kong Exchanges and Clearing, has seen its nickel trading volumes recover over the past year after turnover collapsed in the wake of the LME’s high-profile nickel suspension in March 2022.

The exchange, which has introduced in the past two years various reforms to guard against a repeat of the March 2022 nickel problems, won in November last year a court case which ruled the exchange had acted lawfully when it suspended the nickel market.

The LME was forced to close its nickel market in early March 2022 after a price spike in its overnight market drove margin calls on LME clearing members to unprecedented levels.