LME’s nickel-crisis decision at heart of dispute in UK judicial review involving US$12 billion in cancelled trades
- Judicial review of LME’s decision on March 8 last year has potential to reshape how bourses respond to ‘market emergencies’
- Elliott Associates, Jane Street sued the exchange over its move to cancel US$12 billion worth of nickel trades during the market chaos
But, by the time he arose at 5.30am London time the next morning and briefly scanned his mobile telephone, Chamberlain said in court documents that he was alarmed by “extreme price movements in nickel” at a level he had never witnessed before.
The price of nickel had doubled in about five hours since trading opened at 1am and soared by about US$40,000 to US$101,000 a metric tonne in just over a half-hour for no outwardly apparent reason, Chamberlain said. Within hours, the LME had suspended trading in nickel and took the unprecedented step of unwinding about US$12 billion in trades, essentially resetting the day because of market disorder.
The decision to cancel executed trades and pending contracts avoided more than US$19 billion in margin calls that the LME claims would have forced about a quarter of its members into default and threatened the overall stability of nickel and its other metals trading markets.
Paul Singer’s hedge fund Elliott Associates and Jane Street Global Trading, however, believe the LME made a “hasty” and “irrational” decision to cancel profitable trades that morning when they claim it had the ability to take less extreme measures than revoking transactions to ease the escalating margin pressure and restore stability.
The bourse’s decision to “wind back the clock” on March 8, 2022, also favoured some traders facing a “short squeeze” over others – namely the world’s largest stainless steel producer, Tsingshan Holding Group of China, the firms said in court papers.
