Hedge fund Elliott weighs fresh action in the London Metal Exchange nickel scandal
A hedge fund is considering taking further action against the London Metal Exchange (LME) over a controversial spike in nickel prices three years ago.
Elliott Associates said that the City watchdog’s decision last week to fine the exchange nearly £10million over its handling of the scandal ‘vindicated’ its position.
In March 2022, nickel prices tripled within hours. During the chaos, the LME cancelled billions of pounds worth of trades, triggering legal action from investors who saw their profits wiped out.
The Financial Conduct Authority (FCA) on Thursday said the LME had failed to ensure it could deal with ‘severe market stress’.
Aggrieved investors, including Elliott, took legal action against the 148-year-old exchange.
Elliott lost its lawsuit against the LME last October and, in January, the Supreme Court did not grant the hedge fund permission to appeal further.
In March 2022, nickel prices tripled within hours. During the chaos, the LME cancelled billions of pounds worth of trades, triggering legal action from investors who saw profits wiped out
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But the New York investment firm yesterday said that the FCA’s fine ‘confirmed that Elliott was correct’.
‘The LME’s failures caused material financial harm to many investors, including Elliott,’ a spokesperson said.
‘Elliott is carefully reviewing the FCA’s [decision] and is considering what further action, if any, it may take in this matter.’
The ‘nickel pickle’ began after Russia’s invasion of Ukraine prompted fears over supply of the metal, which is used in steel production and to make electric car batteries.
While the courts ruled the exchange acted lawfully, the FCA said the LME’s actions ‘undermined the orderliness of and confidence’ of the market and fined it £9.2million.
It said some junior staff on duty during its ‘Asian trading hours’ of 1am to 7am London time ‘had not been trained’ to recognise the causes of the dysfunction.
The FCA also said that LME staff took steps to ‘accommodate’ the ‘increasingly extreme’ price rises.
Steve Smart, the FCA’s joint executive director of enforcement and market oversight, said: ‘The LME should have been better prepared to address the serious risks posed by extreme volatility.’
LME chief executive Matthew Chamberlain said: ‘We take our responsibilities as a global market operator very seriously and acknowledge that we could have provided a better line of defence.’
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