LME has regulatory obligation to cancel nickel transaction in March

Based on the news on November 29, 2022, the London Metal Exchange (LME) said in court documents that all the regulatory obligations of the transaction were canceled in March, and the exchange was fighting the US $472 million lawsuit filed by Elliott Associates and Jane Street Global Trading.

On March 8, the world’s oldest and largest nickel exchange suspended the market and canceled nickel trading worth billions of dollars. The nickel price more than doubled in a few hours, reaching a record $100000 per ton.

According to court documents submitted on Monday, LME said that this decision was made under unprecedented market conditions, which was the only appropriate choice. Subsequent analysis strengthened this reason.

LME spokesman said:

“LME believes that the reasons for Elliott and Jane Street’s complaints are groundless, based on a fundamental misunderstanding of the situation on March 8 and LME’s decision. “

“All actions taken on 8 March were legal and in the interests of the entire market. LME will continue to vigorously defend these lawsuits. “Elliott Associates and Jane Street declined to comment.

The two groups accused LME of illegal acts, violating its published policies, favoring some market participants disproportionately, and violating their right to “peaceful enjoyment” of property under the European Convention on Human Rights.

However, the exchange countered that its rule book gave it clear and specific powers to suspend the market and cancel existing transactions.

LME said that it now knew that a large number of off-market positions held by all parties “contributed to chaos to a large extent”.

The company stated in the document:

“LME did not know this at that time, and the interests of either party did not constitute the motivation for LME to make a decision. “

According to the document, when LME suspended the nickel market, it also told the market that it was considering canceling the transaction, but none of the claimants objected. Other options have also been considered. LME executives called their counterparts at the LME Clear Clearing House to discuss options including allowing March trading to remain unchanged or using Monday’s closing price to calculate profit margins.

The exchange said in the document that the second option would lead to LME Clear’s “serious insufficient mortgage and breach of its regulatory obligations”. The management believes that some members are very likely to default and generate systemic risk.

Elliott and Jane Street are not the only companies angry after the nickel transaction was canceled due to out-of-control short selling. QAR Capital Management and the other four parties have also filed legal proceedings.