KEY POINTS
- Elliott sought $472 million in compensation.
- The Court of Appeal upheld the decision to cancel trades.
- The LME acted to prevent a potential market “death spiral.”
Hedge fund Elliott Associates lost its appeal Monday over the dismissal of its lawsuit against the London Metal Exchange regarding billions of dollars in canceled nickel trades.
Judges ruled the cancellations were vital for market stability.
Court upholds LME’s trade cancellations to stabilize market
The LME suspended trading and canceled $12 billion in nickel trades in March 2022, after prices doubled to over $100,000 per metric ton in just a few hours.
Elliott sued the LME in London’s High Court, but the case was dismissed in November 2023. The Court of Appeal rejected Elliott’s attempt to overturn that decision on Monday.
According to a report by mining.com, Judge Stephen Males ruled that the price surge on March 8, 2022, was “a once in a generation event” and that the LME acted lawfully in canceling the trades.
“There was no question of seeking to favor one group of traders over another. The decision was taken in the interest of the market as a whole,” Males wrote in his ruling from a three-judge panel.
He added that allowing the trades to stand would have posed “a real risk of what has been graphically described as a ‘death spiral’ in the international metals market.”
Elliott claims new evidence but loses appeal again
At a July hearing, Elliott argued that the Court of Appeal should overturn the ruling, partly because the LME had failed to disclose documents. Lawyers for Elliott said the exchange belatedly revealed details in May about its internal “Kill Switch” and “Trade Halt” procedures, along with a report that Elliott said highlighted potential conflicts of interest.
An Elliott spokesperson said the hedge fund was disappointed with the ruling and was “further analyzing the decision with its legal team and considering its next steps.”
Elliott and market maker Jane Street Global Trading had sought a combined $472 million in compensation, alleging at a June 2023 trial that the 147-year-old exchange had acted unlawfully.
The LME, the world’s oldest and largest metals marketplace, welcomed the ruling, stating it confirmed the exchange’s power to cancel trades during extreme price movements.
“We are now focused on looking to the future as we advance our market modernization strategy,” LME Chairman John Williamson said.
Elliott noted that the LME had implemented reforms and commissioned an independent study following the events in March 2022.
“The public scrutiny resulting from our challenge has already led the LME to take numerous steps to improve its systems and processes,” Elliott said.
The LME is owned by Hong Kong Exchanges and Clearing Ltd.
