Commodities

London Metal Exchange sued for $456m over cancelled trades | Commodities

The London Metal Exchange is being sued by the New York hedge fund Elliott Management for $456m (£363m), over its controversial decision to cancel nickel trades after a spike in prices linked to the invasion of Ukraine.

Elliott’s case, which was filed at the high court last week, claims the LME acted “unreasonably and irrationally” when it cancelled trades originally made on 8 March, a move that the exchange said was meant to avoid disorderly trading.

The lawsuit will pile further pressure on the LME, which is also facing a UK regulatory investigation over the suspension and cancellation of those trades.

The LME suspended trading in nickel for a week in early March after prices doubled over the course of a day to a record $100,000 a tonne. The surge in prices was caused by uncertainty over the metal’s availability, given fears that companies such as the Moscow-headquartered Nornickel – which is world’s largest supplier of the metal – could face sanctions as a result of Russia’s invasion of Ukraine.

The exchange later reopened trading on 16 March, but caused further uproar when it cancelled all transactions that were made on the first day of the suspension on 8 March. The LME has defended its decision, saying it needed to protect the market and prevent smaller members of the exchange from going bust.

“This decision to suspend trading was taken because the nickel market had become disorderly,” the LME’s parent company, Hong Kong Exchanges and Clearing (HKEX), said in a statement on Monday.

“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.”

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Elliott, which is the world’s largest activist hedge fund and is led by the billionaire Republican party donor Paul Singer, has alleged that the decision may have violated Elliott’s “human rights”, according to the HKEX announcement regarding the lawsuit.

A spokesperson for Elliott said the hedge fund considered that the LME “acted unlawfully in that it exceeded its powers when it cancelled those trades, or that it exercised the powers that it did have unreasonably and irrationally, in particular by taking into account irrelevant factors (including its own financial position) and failing to take into account relevant factors”.

The LME said it believes Elliott’s claim is “without merit” and said the exchange would “contest it vigorously”.

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