Elliott Associates and Jane Street Global Trading's lawsuit against the London Metal Exchange (LME) for canceling nickel trades during chaotic trading in March 2022 will be heard in a London court on June 20-22 . On March 8, 2022, nickel prices more than doubled in a matter of hours to record levels above $100,000 a tonne, prompting the exchange to suspend trading for the first time since 1988 and cancel all nickel trading for the day.
Elliott Associates and Jane Street Global Trading are suing the London Metal Exchange for $472 million, citing human rights law, seeking judicial review of its decision to cancel a nickel trade. The two organizations accused the LME of misconduct, contrary to its published policies, disproportionately favoring certain market participants and violating their right to "peaceful enjoyment" of property under the European Convention on Human Rights, documents filed in a London court show. .
The case will test the LME's rules, which Elliott claims lack clarity, guidance and priority over when the exchange can use its cancellation power. The world's largest metals market argued that it had both the right and the duty to close markets and cancel trades, or else a $19.7 billion margin call would lead to multiple clearing members' bankruptcy and create systemic market risk. The exchange said the unprecedented market conditions had resulted in a "disorderly" market and that it acted fairly to protect stability and integrity.
LME is regulated by the UK Financial Conduct Authority (FCA), and its clearing house, LME Clear, is regulated by the Bank of England (BOE). The FCA first opened an investigation into possible wrongdoing at the U.K. exchange in March, following the LME's decision to halt trading. The conduct, systems and controls put in place by the LME between January 17 and 12 will be investigated. Trading was suspended on March 1 and March 8, the FCA said. The BoE said the pause showed several shortcomings.
"In response, LME Clear will need to strengthen its governance arrangements, increase the independence of management and governance, and improve its wider risk management," the BoE said. Nickel trading volumes plummeted after the trading fiasco, but a reduction in margin calls and a resumption of nickel trading during the Asian session have since helped. > Average daily volume in the benchmark nickel contract on the exchange's electronic system Select has risen to 18,190 tonnes, the highest since March 2022. Overall average daily volumes for nickel futures and options bottomed out in October at 196,868 tonnes and recovered to 217,920 tonnes in May. This compares to 241,062 tons in May 2022 and 368,928 tons in May 2021.
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