US fund Elliott can appeal London court decision on LME lawsuit

LONDON (Reuters) – Elliott Associates has been granted permission to appeal a London court’s decision in favour of the London Metal Exchange, which the U.S.-based firm sued for cancelling nickel trades last year, a regulatory announcement said.

On March 8, 2022 nickel prices more than doubled in a matter of hours to a record above $100,000 a tonne in chaotic trade, prompting the LME to suspend the market for the first time since 1988 and void all nickel trades on that day.

Elliott Associates and U.S. market maker Jane Street Global Trading brought a case demanding a combined $472 million in compensation, alleging the 146-year-old exchange had acted unlawfully.

Last month in a written ruling, London’s High Court said the LME, the world’s largest and oldest metals forum, could cancel trades in exceptional circumstances and was not obligated to consult market players prior to its decision.

The announcement by Hong Kong Exchanges and Clearing (HKEx), which owns the London exchange, said “the timing of the appeal has yet to be determined”.

“The LME and LME Clear are of the view that the Appeal is without merit and will contest it vigorously,”.

Elliott Associates declined to comment.

The LME said it had both the power and a duty to unwind the trades because a record $20 billion in margin calls could have led to at least seven clearing members defaulting, systemic risk and a potential “death spiral”.

Elliott and Jane Street were critical of Chamberlain for taking account of possible adverse consequences for members.

“It is difficult to think of anything more likely to make the nickel market disorderly,” the ruling said.

“Further, it would not only have affected the nickel market; the failure of an LME member, let alone a clearing member, would have had a serious impact on the global commodities market more broadly.”

Britain’s Financial Conduct Authority (FCA) in March this year launched its first ever investigation of a UK exchange for possible misconduct after the LME’s decision to cancel nickel trades last year.

(Reporting by Pratima Desai; editing by David Evans)