London Metal Exchange sued by US fund manager over nickel freeze
The London Metal Exchange (LME) is being sued for a sum worth £365m by a Wall Street hedge fund after the cancellation of nickel trading earlier this year.
Fund manager Elliott Associates has filed a claim in the English High Court against the platform and its subsidiary LME Clear.
The trading platform suspended nickel trading in March as prices surged amid a wider spike in commodities sparked by Russia’s invasion of Ukraine.
Trading was halted for more than a week after it was frozen on 8 March.
The suit claims that cancelling trading was “unlawful on public law grounds and/or constituted a violation of the claimants’ human rights”.
Hong Kong Exchanges and Clearing (HKEX), which owns the platform, said the claim was “without merit” and pledged to contest it “vigorously” in court.
“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,” HKEX said.
At the time, bosses at the LME said they opted to freeze trading as prices “did not reflect the underlying physical market” and it had become “disorderly”, the first time it has taken the decision to suspend trading since 1985.
City watchdog the Financial Conduct Authority is probing what happened, as well as regulators at the Bank of England.
The US hedge fund alleges that the LME “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,” a spokesperson for Elliot said.