Activist hedge-fund manager Elliott Management Corp. sued the London Metal Exchange for more than $456 million, after the exchange earlier this yearsuspended nickel trading and canceled some trades following wild swings in the metal’s price.
The lawsuit is a fresh headache for the LME, whose actions had already drawn criticism from some market participants and prompted a review by British financial regulators.
Elliott is challenging the exchange’s decision to cancel trades that it says it made in the early hours of March 8, according toHong Kong Exchanges & Clearing Ltd., which owns LME.
“The LME management is of the view that the claim is without merit and the LME will contest it vigorously,” HKEX said Monday.
An Elliott spokesperson confirmed that the firm started legal proceedings against the LME. By canceling trades, the LME either exceeded its authority or was acting “unreasonably and irrationally,” the spokesperson said.
The hedge-fund firm, founded by billionaire Paul Singer, argues the metal exchange’s action “was unlawful on public law grounds and/or constituted a violation of the claimants’ human rights,” HKEX said. Elliott has brought the case in the English High Court through two vehicles, Elliott Associates LP and Elliott International LP. The claim is being pursued as a judicial review, a proceeding in which a judge assesses the legality of a decision or action taken by a public body.
Russia’s invasion of Ukraine sparked sharp gains in many commodities. The nickel market proved particularly turbulent.
The LME stopped nickel trading early on March 8 and retrospectively canceled trades in the eight hours before the suspension. It was the first time the LME had frozen trading for a metal since the collapse of an international tin cartel in 1985 and the 145-year-old exchange came under criticism from traders for the way it handled the crisis.
U.K. financial regulators in Aprillaunched a reviewinto the breakdown in nickel trading. The Financial Conduct Authority and the Bank of England said they would look for ways that the LME can improve its governance, market oversight and risk management.
In late April, the exchange’s parent said LME Chief Executive Matthew Chamberlain wouldremain in his position, reversing an earlier plan to depart.
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