LME faces Elliott Management’s US$456 million lawsuit for suspending nickel futures trading, cancelling trades
- Elliott International and Elliott Associates, two Elliott affiliates, claim LME’s trading suspension constituted a breach of their human rights
- The trading halt has raised concerns about LME’s approach to the nickel price crisis
The London Metal Exchange (LME) has been sued in the British courts by affiliates of American hedge fund Elliott Management over its controversial decision in early March to suspend trading of nickel futures contracts and cancel trades in the metal amid a short squeeze on the century-old bourse.
Elliott International and Elliott Associates have filed a judicial review claim in England’s High Court of Justice against LME for US$456 million, claiming that the trading suspension and trades cancellation “constituted a violation of [their] human rights”. The suit was filed on June 1, and served on the metals exchange on June 2.
The lawsuit came as Nicolas Aguzin, HKEX’s CEO, was expected in London to meet LME executives to celebrate the 10th anniversary of its acquisition this month. HKEX’s shares fell by as much as 1.2 per cent in Hong Kong in early morning trading, before rising 1.6 per cent to close at HK$347.60 on Monday.
LME’s nickel rout: does the 145-year metals exchange have a future?
The LME “acted unlawfully in that it exceeded its powers” in cancelling trades on March 8 or exercised its powers “unreasonably and irrationally” at the time by taking into account “irrelevant factors”, such as its own financial position, an Elliott spokesperson said.
A LME spokeswoman said the exchange believed the nickel market had become “disorderly” in the early hours of March 8 and the decision was made to cancel trades in order “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 way”.
“At all times the LME, and LME Clear, sought to act in the interests of the market as a whole,” she said. “The LME therefore considers that Elliott’s grounds for complaint are without merit, and the LME will defend any judicial review proceedings vigorously.”
Nickel contracts have been changing hands at a fraction of their previous volumes since trading resumed, raising the question whether the LME – with its quaint rituals – is still reliable when it comes to setting the prices of metals such as aluminium, copper, nickel and zinc. Mainland China, the biggest worldwide consumer of industrial metals, already offers a trading venue in the form of the Shanghai Futures Exchange.
Chamberlain, a former UBS banker who advised HKEX on its £1.4 billion (US$1.8 billion) purchase of LME, joined the metals exchange in 2012 as its head of business development before being promoted to CEO in 2017.
