LME Faces Lawsuits Over Nickel Market Chaos
Posted by Colin Lambert. Last updated: June 7, 2022
Hong Kong Exchanges and Clearing subsidiaries the London Metal Exchange and LME Clear are facing two lawsuits relating to the events in early March that saw the nickel market suspended and then a whole swathe of trades unilaterally cancelled.
On March 8, LME suspended trading due to a more than doubling of Nickel prices as Chinese firm Tsingshan Holdings moved to close a huge short position. When it announced the cancelling of a whole day’s trades, LME said it did so because many smaller members would have faced financial difficulties had the trades stood, but the exchange has equally come in for severe criticism from traders over the decision.
In announcing the legal actions, HKEX says the LME considered that trading activity up to and including close of trading on March 7 had been orderly, but that in the early hours of March 8 (UK time) nickel prices then increased dramatically over a short period of time. “After consultation with LME Clear, the LME took the decision to suspend trading in all nickel contracts with effect from 08:15 UK time and to cancel all trades executed on or after 00:00 UK time on 8 March 2022,” the statement observes. “This decision to suspend trading was taken because the nickel market had become disorderly. Cancellations were made retrospectively to take the market back to the last point in time at which the LME could be confident that the market was operating in an orderly manner.
“It should be stressed that the LME always acted in the interests of the market as a whole. LME nickel trading later resumed on 16 March 2022 on all LME execution venues,” the statement adds.
Hedge fund Elliot Associates is suing the group for just over $456 million in the UK High Court, while a secondary action by Jane Street Global Trading seeks $15.34 million in damages.
HKEX says LME management is of the view that the claim is “without merit” adding it will contest it “vigorously”, however sources say LME is likely to face several more lawsuits brought by firms emboldened by the filings from Elliot and Jane Street.