LME wins High Court ruling over cancelled nickel trades

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The London Metal Exchange has won a landmark legal victory against traders who sued over its decision to cancel billions of dollars worth of nickel trades as England’s High Court dismissed claims it acted unlawfully.

The world’s largest metal exchange was accused by hedge fund Elliott Management and market maker Jane Street Capital of making hasty and unlawful decisions during a crisis in the nickel market last year, when prices more than tripled in one day.

The exchange cancelled about $12bn worth of trades on the grounds that the market had become “disorderly”, a decision that wiped out both outsized gains and losses among its members.

The LME’s handling of the chaos sparked uproar among customers and led to a wave of litigation. Paul Singer’s Elliott sought compensation for lost profits totalling about $456mn and Jane Street $15mn.

But in a ruling handed down on Wednesday, Mr Justice Swift and Mr Justice Bright said Elliott and Jane Street’s claims for judicial review “fail on all grounds and their challenges are dismissed”.

Elliott said it would appeal against the judgment, warning it was “concerned about the precedents that it establishes for market participants in the UK”.

The hedge fund said the ruling raised “fundamental questions” about an “absence of trade certainty” and “a lack of effective checks and balances on UK exchanges”.

The nickel price surge, over the space of a few hours last March, came after a large bet on falling prices made by Chinese steel producer Tsingshan coincided with market concerns about sanctions against Russia, a top exporter of the metal.

The LME said it had to take action to avert a broader market meltdown. Chief executive Matthew Chamberlain told the court that such dramatic moves posed a “systemic risk” to the market. He feared many users would have defaulted on margin calls and faced severe financial difficulty had it let the trades stand.

Chamberlain said in a statement on Wednesday that the LME was “pleased that the court has ruled in our favour on all grounds”. He added that the LME had “focused on strengthening and enhancing our markets” following the crisis.