London Metal Exchange sued over cancelled nickel contracts

Elliott Management alleges that the exchange’s cancellation of nickel contract trades on March 8 was ‘unlawful’.

Nickel is the metal used in stainless steel and is key to the production of rechargeable lithium ion batteries (Alamy/PA)

The London Metal Exchange is being sued by activist investor Elliott Management for more than 456 million US dollars (£365 million) over its move to suspend and cancel nickel trades earlier this year after dramatic swings in the metal’s price.

Elliott filed the claim in England’s High Court of Justice on June 1 against the London Metal Exchange (LME) and its subsidiary LME Clear.

The US hedge fund alleges that the cancellation of nickel contract trades on March 8 was “unlawful on public law grounds and/or constituted a violation of the claimants’ human rights”, according to a statement from LME owner Hong Kong Exchanges and Clearing (HKEX).

HKEX said the claim is “without merit and the LME will contest it vigorously”.

The London Metal Exchange was forced to halt nickel contracts and cancel trades after Russia’s invasion of Ukraine sparked wild movements in the price of nickel (Yui Mok/PA) (PA Archive)

The LME was forced to halt nickel contracts and cancel trades on March 8 after Russia’s invasion of Ukraine in February sparked wild movements in the price of nickel.

It marked the first time the LME had frozen trading for a metal since the collapse of an international tin cartel in 1985, sparking criticism over the way the 145-year-old exchange handled the crisis.

According to a spokesman for Elliott, the hedge fund alleges that when the LME cancelled nickel trades “it acted unlawfully in that it 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”.

In April, UK financial regulators launched a review into the nickel contracts market after the trading breakdown, with the Financial Conduct Authority and the Bank of England looking for ways to improve the LME’s governance, market oversight and risk management.

Nickel is the metal used in stainless steel and is key to the production of rechargeable lithium ion batteries.

Prices of the metal have soared as it has become harder to source due in part to the Ukraine war and sanctions against President Vladimir Putin’s regime, given that Russia is one of the biggest producers of nickel.