Tuesday, June 7, 2022

Hedge fund Elliott sues LME for $456m over nickel trading halt

 LME to Nearly Double Its Default Fund After Nickel Squeeze


US hedge fund Elliott Associates is suing the London Metal Exchange (LME) for $456 million for cancelling nickel trades after chaotic trading in March that forced the exchange to suspend its nickel market, the LME said on Monday.

The legal action piles more pressure on the exchange, which is being probed by regulators and is struggling to restore trust and volumes in its nickel market.
Elliott said the LME should not have halted trading and erased deals after prices more than doubled to over $100,000 a tonne in a matter of hours on March 8. 

The LME and LME Clear Limited were named as defendants in the judicial review claim filed in a British court by Elliott Associates and Elliott International last week, the LME’s parent company Hong Kong Exchanges and Clearing said.

An Elliott spokesperson said in an email that the LME had acted “unreasonably and irrationally in particular by taking into account irrelevant factors, including its own financial position”.

The LME, the world’s largest and oldest market for industrial metals, said it had to take action to protect the market as a whole when trading became disorderly.

In a statement, the exchange said it had “an important role to play in ensuring the market is fair and orderly for all those who wish to participate”.

It added that the nickel market had become disorderly, and that it had cancelled deals from midnight to 0815 GMT on March 8 in an attempt to return the market to the time when it had last been orderly.

“The LME therefore considers that Elliott’s grounds for complaint are without merit, and the LME will defend any judicial review proceedings vigorously.”

LME sued nearly a decade ago

Elliott Management, founded and co-led by billionaire Paul Singer, is known for activist investing. The Elliott spokesperson did not say in the email what LME nickel positions it had when deals were cancelled.

The last time the LME was sued was nearly a decade ago when Russian aluminium giant Rusal sought to derail proposed LME reforms aimed at easing huge backlogs to withdraw metal from its global warehousing network.

The LME initially lost the case, but won an appeal allowing it to go forward and implement the reforms.

Last month, the LME proposed measures that it said would improve transparency and stability in the over-the-counter (OTC) metals market, including more frequent disclosures of all positions. 

HKEX shares closed up 1.6%, underperforming the broader market index .HSI, which gained 2.7%.

(By Selena Li and Eric Onstad; Editing by Florence Tan, Kim Coghill, Kenneth Maxwell and Jan Harvey)

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