Second US trading firm sues LME over nickel trading shutdown

Second US trading firm sues London Metal exchange over nickel trading shutdown

Another US trading firm is suing the London Metal Exchange – this time for £12.2million.

Jane Street launched its lawsuit against the LME just a day after fearsome hedge fund Elliott Management kicked off its own £363million claim.

The 145-year-old exchange is under fire for cancelling a slew of nickel trades in March.

US trading firm Jane Street has launched a £12.2m lawsuit against the London Metal Exchange just a day after fearsome hedge fund Elliott Management kicked off its own £363m claim

Both Elliott and Jane Street are seeking a judicial review, hoping that a High Court judge will decide the LME’s decision to erase the trades was illegal.

The scandal occurred on March 8, when the price of nickel began to rise due to fears over Russia’s invasion of Ukraine.

Some investors were shorting nickel – meaning they were betting that its price would fall. 

One of the largest shorters was Tsingshan Holding Group, a Chinese nickel producer accused of being an LME ‘crony’.

When the LME decided to cancel nickel trades as the price of the metal rocketed, this limited the losses suffered by Tsingshan.

But it also meant hedge funds and other City firms that stood to benefit from the rising price lost out.

Jane Street said: ‘Exchanges function to create an orderly market and a level playing field for investors. 

‘The LME’s arbitrary decision to cancel nickel trades during a period of heightened volatility severely undermines the integrity of the markets and sets a dangerous precedent that calls future contracts into question.’ 

The LME’s owner, Hong Kong Exchanges and Clearing, said the claim was ‘without merit’ and it would contest it ‘vigorously’.