According to the latest news, the London Metal Exchange (LME) won a lawsuit brought against it by a financial company over the cancellation of nickel trading, and a British court ruled against hedge fund Elliott.It is reported that after the "Lun Nickel" incident occurred in March last year, Elliott Associates, a hedge fund owned by well-known American hedge fund manager Paul Singer, and Jane Street Global Trading, another Wall Street market maker, applied for a "judicial review" of the LME's behavior during the nickel crisis. At that time, the exchange responded to an unprecedented price surge by suspending trading for a week and canceling transactions worth billions of dollars.
Two months after the incident, the two plaintiffs filed a complaint demanding that the defendant, the LME, a wholly-owned subsidiary of the Hong Kong Exchange, and the clearing house LME Clear Limited compensate for approximately US$470 million. The reason was that the cancellation of nickel trading was illegal and violated the LME's own announced policies, and disproportionately favored certain market participants, constituting a violation of the plaintiff's human rights.
The two plaintiffs in this case believe that the LME’s rules lack clarity and guidance and do not provide a precedent for when the exchange can use its power to cancel transactions. They believe that the LME failed to properly investigate the chaotic nickel price, whether the market was acting rationally, and what harm the decision to cancel the transaction would cause to some market participants. Potential alternatives may cause less market disruption. In short, the plaintiffs will try to prove that the LME’s decision to cancel the all-day nickel trading on March 8 last year was unfair, irrational or motivated by improper motives.
Public information shows that Elliott Management was founded by Paul Singer in 1977 and managed approximately US$55.2 billion in assets as of the end of 2022. According to statistics from LCHInvestmen, an overseas third-party institution, Elliott ranks fifth among the top 20 most profitable hedge funds in 2021. This hedge fund is known as the "vulture fund". It is an activist investor known for its hard-line style and radical methods. It has even pursued the president of a South American country for sovereign debt.
In response to the lawsuit, the LME issued an announcement saying: "As the world's leading industrial metals exchange, the LME plays an important role in ensuring that the market is fair and orderly for all wishing participants. In the view of the LME, the nickel market in the early morning of March 8, 2022 has become disorderly. After consultation with LME Clear, the LME decided to suspend all nickel contracts from 8:15 UK time transactions and cancel all transactions executed after midnight on March 8, UK time, so that the market can return to the last time when the LME can be confident that the market is operating in an orderly manner. At all times, the LME and LME Clear act in the interests of the entire market. Therefore, the LME believes that Elliott’s complaint has no legal basis, and the LME will actively respond to any judicial review proceedings.”
The ruling marks a major milestone for the London Metal Exchange, which has introduced a series of reforms as it seeks to emerge from the crisis. Although it has not yet returned to pre-crisis levels, Matthew Chamberlain, the exchange's chief executive for other metals, previously said liquidity in damaged nickel contracts has been improving.
At the same time, at the end of March this year, the London Metal Exchange (LME) announced a two-year reform plan. It is reported that in view of the substantial increase in Class I nickel production in Asia, the LME will provide a "fast track to market" for new Class I nickel products. This method allows new Class I nickel products to enter the LME market after three months of regular sample testing. The LME also announced that new product listing fees will be waived. The LME plans to use crude nickel powder as a deliverable Class I form; the LME also plans to launch new Class II nickel spot market products at China's Qianhai Joint Trading Center (QME). The LME believes that additional stocks that may enter the market will increase liquidity and offset concerns about structural divergence in the Class I and II nickel markets.
On June 9, the LME said in a statement that Huayou Cobalt (603799.SH) had applied for a nickel brand listing on the exchange and was the first company to use the fast track listing of nickel products. On July 20, the LME stated that it had approved the nickel produced by Quzhou Huayou Cobalt New Materials, a subsidiary of Huayou Cobalt, as a listed brand. The agency said this is the first newly approved delivery brand for the LME nickel contract since the LME shortened the waiting time for listing, and is part of the exchange's plan to restore nickel trading volumes after the crisis in 2022. On November 1, 2023, GEM-NI1 brand electrolytic nickel was successfully registered as a London Metal Exchange delivery brand. Green became the second company to benefit from the launch of the LME nickel brand registration fast track.
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