An Analytical Framework of Derivatives Sniper Attack Risk Based on the Case Study of Tsingshan Group's Forced Liquidation Incident in LME Nickel
The nickel futures prices on the London Metal Exchange(LME)experienced a sharp surge during the two trading days from March 7th to 8th,2022.As a result,Tsingshan Holdings Group,a Chinese company heavily involved in nickel hedging,suffered a sig-nificant loss,which marks another risk event where a domestic enterprise participating in overseas derivative trading was targeted by in-ternational capital.This paper provides a detailed case analysis of the sniper activity among"LME nickel futures incidents",and propo-ses an analytical framework for analyzing sniper events and sniper risk in the futures market from four dimensions:objective conditions,market environment,sniper strategies,and sniper motivation behind.The study reveals that the weak physical delivery capacity caused by cross-hedging became an objective condition for Tsingshan Group to be targeted,and the market environment of low-level nickel in-ventories triggered by geopolitical risks further limited Tsingshan Group's inventory control and delivery capacity.The design of LME con-tracts exposes trading positions and motivations,while the LME trading system facilitates short-term price manipulation and other sniper behaviors,allowing the inference of the using contract,timing,and price manipulation ways employed in this sniper attack.Analysis of large position reports reveals that the essence of this sniper attack may be a battle for nickel resources.Finally,this study utilizes event analysis to confirm that the sharp increase in nickel futures prices on March 7th,2022,was driven by trading factors rather than funda-mental factors.The analytical framework proposed in this research,which combines case analysis,data analysis,and empirical analysis,is of significant value in identifying sniper risks,recognizing market manipulation,and better evaluating related risks for early warning and prevention.
sniping in futures marketinventoryopen interestcommitment of trading reportfuture prices backwardationabnormal price detection
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