Why? Everyone agrees it was a short squeeze that led to predatory pricing. It’s a much bigger social good to reverse transactions than to bring charges against all the sellers for price gouging.
One of my rules is that prices that have increased by 3 times in a few hours with no real change in demand and most suppliers still producing, then it’s not a real price.
if shareholders lose assets, then it's not a bailout. If they get bailed out, then they aren't losing assets. You're talking about the same coin, viewed from different angles.
What you wish to accomplish - the shareholders taking a haircut, but for third-parties such as customers or general public to not take one, is impossible.
Neither has ever been true. Its just a theoretical ideal some people in government argue in favor off.
Food subsidies are bailouts under the guise of "social good", in some places they prevent people from starving.
However this can create unusual and aberrant situations that certainly warrant raising these sort of questions in order to determine appropriate regulations and rules
This makes trades move quickly, which speeds up price discovery. This is good for market health.
Market makers make their money on the difference between the buy-sell spread. Of course, this is a bet: if the market moves against them, they can lose money on this. Often a market has one or more officially designated market makers who are paid to _always_ have a certain number of both buy and sell offers on the market to ensure that there is always liquidity. The payments help cover their risk
(These payments are often also materialized in the form of a "takers fee", i.e. a surcharge you pay whenever you place an order into the market which can be immediately filled)
TL;DR: They're a warehouse which will always buy and sell some product, except when talking futures we're talking wagons full of nickel 1 month from now and so the warehouse doesn't physically exist
It's not like there's a gun to the heads of producers and traders. Market makers are also usually not a single entity. Traders could trade amongst themselves in a different exchange that bans market makers. And yet no such exchange exists (as far as i know - except over the counter exchanges perhaps, which not many people use).
Fierce competition by market makers mean that for commodities producers and consumers they don’t need to go to investment banks to get bespoke insurance & loan products. They can instead use the market extremely cheaply.
This means that it’s less risky to produce nickel or use it in industrial/commercial processes.
That in turn is not just an efficiency improvement it allows pricing oddities like this one to stay in the realm of wonky finance news. Without the exchanges and market makers the commodity supply chain would lurch and halt, and we’d have stories about how no smartphone batteries will be available in 2023.
A. To understand how the "modern economy" works
B. It cannot work without one system
Both claims are very big claims, and while they could be true they are nowhere near so obvious that you can say that it belies an "immense ignorance" to think that this system is bad.
Is there such a thing as price gouging for metals and is that illegal?
If you lose your job, you lose your health insurance.
If you bet on the wrong part of the roulette wheel, you lose your chips.
If you miss your rent, you get evicted.
In all these endeavors, if you screw up you suck up the consequences, end of story. I feel literally no pity for traders who got margin called, they're forced to buy nickel to cover their short positions but they're just not worthy victims, they're debtors. And these are expensive people, these traders took out those loans to buy proof of their superiority, like cars, houses, jewelry for wives and affairs, investment-type goods like watches...maybe one of them was smart enough to buy Magic cards, but if they get short-squeezed, I doubt it.
To my knowledge these traders are consenting adults, 18 and up surely, they gambled and won and took their money, this time they gambled and lost. They have to pay, with nothing but silence from them.
Well, the short squeeze traders knew the risks - they knew that LME had the legal authority to cancel trades in extraordinary circumstances, they made the trade anyway and boom that's exactly what happened. They gambled and lost; they have to pay.
Or we can just act like real consenting adults and agree that markets break every once in a while leading to outcomes that are bad for everyone. And thus we can reverse these outcomes. Even casinos have rules, and have reversed winnings or losses.
If the price of Nickel skyrockets, their shorts will lose money but their inventory will also become more valuable. But due to the nature of the instrument, they need to come up with additional margin for mark to market losses. This isn't a question of solvency but of liquidity.If there's a short squeeze and the price gets completely disconnected from fundamentals, the producers and the brokers might go under and speculators who held long positions will make a massive profit. I don't see how that is more socially useful than the exchange stepping in to correct a market failure.
The participants in commodity markets produce literal tangible goods, it's not a casino.
It's an interesting reading and I think you should read.
If the rules have a weird interaction with world events and threaten entire artifice, they should suspend the rules.
The consenting adult thing is a joke. These aren't 19 year old college students who are spending student loans irresponsibly, and need debt forgiveness or relief. These are 50 year old men mostly, millionaires, lots of degrees saying they're smart, and lawyered up to the teeth. And the appearances they put on, and the new jargon they are introducing (desynchronization?) is similar to how the public had to be "educated" about "toxic loans" which is really a PR move to pass their losses to others. They lost money, that's it.
They're exactly like a gambler who thinks he has a system, like the martingale, meaning double your money when you lose, reset when you win. So they make a lot of money for a while and it looks really cool, they look like badasses when they lose a bit, double their bet, lose again, then double their bet again and this time they win and they think wow, how did we come up with such a great system, we have such a bright future ahead of us, let's go squander the winnings.
The LME should be as strict as a casino. You don't want to give up your chips after you lost? Security! And six guys show up from different directions. But it won't, LME would rather play favorites, and what this loss of integrity means is the exchange will lose the appearance of integrity. Basically giving up their dignity to Shanghai.
The whole purpose of the LME is to cheat countries that are constantly being raided out of the only thing that can't be stolen in one shot, their natural resources. England can steal all the silver of the Chinese Emperor, but they can't move mountains. So they say, oh, you have a lot of natural resources! If you want manufactured goods you can sell those and buy the goods with that! What should the price of these rocks be? I know a perfect system, very prestigious and it's never gone wrong, high integrity, and it happens to be in London.