Chinese tycoon Xiang Guangda has been bailed out by JP Morgan after receiving a whopping $8 billion margin call.
The margin call came about as he was shorting Nickel.
The commodity short squeezed leaving the Chinese tycoon with an $8 billion margin call.
Xiang told banks he wanted to keep shorting Nickel and shrugged off suggestions to reduce his short positions, Bloomberg.
Should this even be allowed?
Let’s discuss it.
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Chinese tycoon gets away with $8 billion margin call
The tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesn’t intend to reduce his position, according to Bloomberg.
The London Metal Exchange halted trading in nickel after prices spiked as much as 250% in two days.
Xiang has told the roughly 10 banks that he still believes prices will fall and that he would like to keep his short position.
The LME acknowledged that short sellers weren’t going to voluntarily reduce their short positions.
It said there were “considerable differences in view on the appropriate price.”
Apparently big net worth short sellers make the rules.
They Chinese Tycoon secured a deal with JP Morgan and China Construction Bank that would allow it to avoid defaulting on its $8 billion margin call.
LME halts Nickel trades
The LME cancelled $4 billion in transactions as Nickel prices began to surge.
The exchange said: “Nickel will be deemed a disrupted session and all agreed trades during this session will be null and void.”
In other words, they took away the ‘buy’ button and are allowing short sellers to either close their positions or profit on the way down.
Dave Lauer says the exchange is ruining their credibility by protecting very wealthy and powerful people/firms.
“You can’t run a market like this, busting trades at someone’s whim.”
The halts are similar to those that occurred last year during the ‘meme stock’ frenzy when Robinhood froze the purchasing of GameStop, AMC, and other heavily shorted stock.
At some point, the people will cause an uproar.
What are your thoughts on the matter?
Big banks are beginning to bail out wealthy people and firms.
What can be done about it and what should be done about it?
The Chinese tycoon is only one example, but what will happen when heavily shorted stock begin to squeeze again?
Leave your thoughts in the comment section below and share this article to raise awareness to the injustices in the markets.
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Nice post.
Thats why we need crypto and defi where rule is clear and transparent to all.
I’m dumbfounded at how this is even allowed to happen legally. It’s already an open secret that the market is rigged, ffs the market makers are marinating in their own gray zone trading, and now big players don’t even need to worry about taking a hit. This sets a precedent with very dangerous consequences.
But hey, worry not…. I’m sure someone in authority will give a strongly worded statement 🙄
Line up the corrupt in one line so my 50 cal will take care of at least 20 of them per shell… they are not worth one a price.
The massive distinction between this and memestocks that was left out of the article is that he wasn’t speculatively shorting nickel. Tsingshan group is in the business of extracting nickel and was using futures to hedge their price in the event that spot prices fall too much. This is what futures were invented for and there is no wrongdoing. They got caught in a margin call that forced them to put up collateral earlier than they had it (assuming they were working to have that amount of nickel by maturity). The bank has every interest to protect him as a client because it would create an unnecessary loss for them and for the client. True, if it were a small producer, the bank would not have cared and enforced the margin call, but doing so on this guy would have created a huge loss for the bank, the company, and likely the industry as a whole. That is not the bank’s or the exchange’s fault that this company became too big and affects the whole nickel market. The article’s purpose is just to make people angry by stating selected information out of context.
Rules are only applied if you don’t have enough leverage and personal worth to threaten the system. Hedge funds and banks are in it to make money and if they need to they just suspend the rules so they don’t lose money….retail just gets canceled out…for the greater good of the wealthy.
If banks are the evil one’s. Why aren’t we finding another way not to include them.
We are – that’s where decentralized finance comes in such as crypto and NFTs. These mediums allow retail investors to not go through banks and has been one of the reasons why the space has exploded.
It is possible that Tsingshan shorted expecting a huge increase in Indonesia Ni contained in NPI/RKEF/Matte but there is a potential shortage of high-grade saprolite ore feed. Some smelters may not be able operate a full capacity resulting in a shortage of Ni in products.
Wow. Just wow. Banks are the enemy, once again. Even though hedge funds are doing the attacking, banks continue to bail out short sellers
Banks fund short sellers and bail them out. I don’t like banks.
They bail them out with your money in there banks. Close your bank accounts with them and refinance your loans with community banks and local credit unions. These national banks are cancers.
Let’s start a discussion!
Big banks and hedge funds are an axis of evil designed to steal money from the masses.
I agree Brian ☝️