The London Metal Exchange (LME) made a "wholly unprecedented decision" to cancel nickel trades in March 2022 when it had other less extreme options at hand after a surge in nickel prices forced it to suspend trading last year, according to two funds suing the bourse in London.
Among its options, the Hong Kong Exchanges and Clearing (HKEX)-owned bourse could have set the margin price at the closing nickel price on March 7, the day before it suspended trading, according to Elliott Associates and Jane Street Global Trading. That would have avoided potentially billions of dollars in margin calls, the funds said in a court filing.
"It is really no exaggeration to say this decision sent shock waves through the commodities markets here and elsewhere," Elliott's lawyer Monica Carss-Frisk argued in the first day of a three-day judicial review hearing in London's High Court on Tuesday.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
Elliott and Jane Street are seeking nearly US$472 million in combined damages, arguing the bourse's actions violated their rights under the European Convention on Human Rights.
LME CEO Matthew Chamberlain speaks during the LME Asia Metals seminar in Hong Kong, China in May. Photo: Bloomberg alt=LME CEO Matthew Chamberlain speaks during the LME Asia Metals seminar in Hong Kong, China in May. Photo: Bloomberg>
The closely watched trial comes just over 15 months after the nickel market descended into chaos in March of last year as the metal's price soared more than 270 per cent over a three-day period following Russia's invasion of Ukraine, triggering nearly US$16 billion in margin calls.
The rapid price movement squeezed dozens of short-sellers, including the world's largest stainless steel producer, Tsingshan Holding Group of China.
The 146-year-old bourse suspended trading and cancelled billions of dollars of transactions in the early-morning hours of March 8, 2022, in a move that has sparked a series of legal actions and an enforcement inquiry by British regulators over the LME's response.
"The actions taken by the LME on March 8, 2022 averted significant and systemic damage to the nickel market as well as other metals markets and derivatives markets more widely," a LME spokesperson said.
"In more than a year since the LME took action, no other viable alternative response has been suggested or identified by the claimants that was not considered and rationally rejected by the LME at the time. In pressing and extraordinary circumstances, the LME at all times acted in accordance with its rules and regulatory obligations and in the interests of the market as a whole."