Paul Singer’s Elliott Investment Management is seeking $456 million in damages from the London Metal Exchange (LME) for its move in March to cancel nickel deals following a massive short squeeze.
According to a statement from Hong Kong Exchanges & Clearing, the defendants’ parent company, the lawsuit was brought by two Elliott vehicles against the LME and its clearing house in the High Court in London.
“LME management believes the lawsuit is without merit and LME will vigorously challenge it,” the statement said.
The activist investor’s move adds pressure on the LME, which has been widely criticized for its decision to halt trading and cancel bets.
The LME is also facing scrutiny from UK regulators after it reversed billions of dollars in transactions and suspended trading for over a week. The nickel market has been in an extended state of limbo with low liquidity and volatility since the crisis.
Elliott’s lawsuit challenges the decision to cancel trades, alleging it was “unlawful on public law grounds and/or a violation of their human rights,” according to the statement. The statement didn’t elaborate on what trades Elliott had taken or the impact of the cancellation. The plaintiffs are Elliott Associates and Elliott International.
The activist firm is known for taking a hard line, most famously for running a 15-year standoff against Argentina over a debt default. Elliott could not immediately be reached for comment.
As nickel prices soared in March, the exchange issued more than $7 billion worth of margin calls – nearly four times the previous daily record.
It has said it acted in the interest of the overall market when it halted trading.
Goldman Sachs has been among those who has criticized the exchange, while Tower Research Capital, one of Wall Street’s oldest electronic market makers, reined in its trading activities on the LME and put its exchange membership under scrutiny.
Those at the center of the historical pressure, nickel magnate Xiang Guangda and his Tsingshan Holding Group, have since reduced the total stake by more than half.
The move is seen as relieving liquidity pressures on the world’s largest nickel producer, easing the strain on its banks and removing a key backlog for the LME and its nickel market.
Nickel, which is used to make stainless steel and in rechargeable batteries, rose in March ahead of LME’s decision to suspend and cancel trade deals.
The market reopened with new daily price limits after Mr. Xiang signed the standstill agreement with his banks, but volumes remained well below normal three months later.
The spillover effect of the crisis could have a profound impact on the market.
LME has repeatedly defended its decision. The cancellations were “retrospective to set the market back to the last point in time when the LME could have confidence that the market was functioning properly,” it said.
https://www.independent.ie/business/elliott-unleashes-456m-action-against-london-metal-exchange-41726659.html Elliott files $456 million lawsuit against London Metal Exchange