February 8, 2023

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LME hit by $450mn lawsuit from Elliott Management over nickel market chaos

2 min read

US hedge fund Elliott Management is suing the London Metal Exchange for more than $456mn over its decision to cancel nickel trades in March after an unprecedented surge in the price of the metal.

Elliott filed the suit through two vehicles against the LME and LME Clear, the exchange’s clearing house, on June 1 in England’s High Court of Justice, said LME’s owner Hong Kong Exchanges and Clearing on Monday.

The suit by the Florida-based group, which was founded by billionaire Paul Singer, alleged that the cancellation of nickel contract trades on March 8 was “unlawful on public law grounds and/or constituted a violation of the claimants’ human rights”.

LME will contest the claim “vigorously” and views it as “without merit”, HKEX said.

Elliott’s suit relates to the 145-year-old exchange’s decision to cancel a day’s worth of nickel trades and suspend trading for eight days in March.

It will add to the exchange’s woes as it battles to restore its reputation as the world’s leading venue for trading industrial metals including nickel, used to produce stainless steel and batteries for electric vehicles.

The decision to suspend trading followed a 250 per cent surge in the price of nickel to a record $100,000 a tonne that was triggered by a short squeeze as banks and brokers rushed to close part of a large position amassed by Xiang Guangda, the billionaire founder of China’s leading stainless steel producer Tsingshan Holding Group.

Nickel is currently trading at more than $28,000 a tonne.

The LME’s decision to erase a day of trading because of the price surge — which it claimed pushed several smaller members of the exchange to the brink of failure — provoked uproar among some traders who saw their profits wiped out by the move.

AQR Capital Management, one of the world’s largest hedge funds, was exploring legal options in its dispute, people familiar with the matter said in March. The fund’s founder accused the LME of “reversing…

2022-06-06 02:52:05

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