LME receives favorable court ruling

The extreme price volatility that brought trading to a halt on the London Metal Exchange (LME) last March is not entirely in the rearview mirror, although the LME has recently cited two reasons for optimism.

In late November, a judge in the United Kingdom ruled in favor of the LME and affiliate LME Clear over plaintiffs who challenged decisions made by the LME in relation to nickel trades made last March.

At that time, the LME halted trading tied to its nickel contract and ruled that several trades made while the nickel price was at its most volatile were not valid.

The plaintiffs, New York-based Elliott Associates and New York-based Jane Street Global Trading, filed lawsuits contending the LME’s cancellation of the trades were unlawful.

The recent decision in favor the LME says the aggregate value of the cancelled trades was around $12 billion, with Elliott Associates contending the trade cancellations caused them to lose net profits totaling about $456 million.

“The court ruled in favor of the LME and LME Clear on all grounds, confirming that the actions taken in the nickel market in 2022 were lawful, rational and in accordance with the LME’s rules," the LME says. "The judgment recognizes the LME’s obligation to maintain orderly markets and its powers to intervene to this end, including by cancelling trades.

“A further three claims were issued in the English Commercial Court against the LME and LME Clear in March 2023 by claimants seeking damages under the Human Rights Act 1998. As these lawsuits do not raise any issues that are not already the subject of the claims brought by Elliott and Jane Street, the parties have agreed [to] a stay of these additional lawsuits pending the final determination of the Elliott and Jane Street lawsuits.”

In the aftermath of the March 2022 price volatility, trading activity against the LME nickel contract was slow to rebuild. As of late this year, however, the LME says a substantial rebound has taken place.

“It’s good to see the nickel market showing signs of stabilization and growth,” the LME says in an early-December newsletter. “Average daily volumes across all venues and prompts was at about 50,000 lots in November—the highest since March 2021.

“With liquidity building and volatility reducing, the initial margin rate for nickel in December was cut from $4,250 to $3,800—the second month in a row the rate has been reduced.”