Elliott Management Loses Appeal in LME Nickel Trades Dispute

Elliott Management

US hedge fund Elliott Management's legal battle with the London Metal Exchange (LME) reached a conclusion today as the UK Court of Appeal upheld a prior ruling in favor of the LME. The court dismissed Elliott's appeal over the cancellation of billions of dollars' worth of nickel trades, which the LME executed following a market crisis in March 2022.

Court Upholds LME's Authority Amid Market Turmoil

The legal case stems from events on 8 March 2022, when nickel prices spiked to over $100,000 per ton due to a short squeeze, creating chaos in the market. In response, the LME intervened and cancelled $12 billion in trades to stabilize the situation. Elliott Management, which was among those affected by this decision, argued that the LME had acted improperly, favoring specific market participants who were on the verge of substantial losses. The hedge fund accused the LME of effectively providing bailout packages and contended that the exchange lacked the authority to annul these trades.

However, the Court of Appeal affirmed that the LME acted legally, ruling that its decision was made "in the interest of the market as a whole." The judgment stated that the LME's intervention was essential to prevent a potential "death spiral" that could have threatened the stability of the international metals market. Lord Justice Stephen Males, presiding over the case, noted, "To have allowed the 8 March trades to stand would have meant a real risk of what has been graphically described as a 'death spiral'... That left the LME with effectively no choice."

The ruling aligns with the London High Court's previous decision, which dismissed Elliott's initial lawsuit in November 2022. Trading group Jane Street also challenged the LME's actions but faced a similar outcome. Both firms had sought compensation for their losses, but the courts have consistently ruled in favor of the LME.

Reforms and the Path Forward

The LME welcomed the court's decision, which it believes validates the exchange's actions during the crisis. LME chairman John Williamson said, "The LME board is pleased with this positive outcome, which reinforces the Divisional Court's findings that the LME's actions were lawful, rational, and in accordance with its rules." Williamson also emphasized that the exchange is now focused on market modernization efforts, including reforms around price limits and enhancing visibility of over-the-counter trades, to restore trust and confidence.

Elliott Management, while expressing disappointment, has not ruled out further action and is currently evaluating its next steps.

LME Fined £9.2M by UK Regulator Over 2022 Nickel Market Crisis

LME

FCA Cites Inadequate Controls and Staffing Failures During Historic Short Squeeze

FCA Penalizes LME for Mishandling Nickel Price Surge

The London Metal Exchange (LME) has been fined £9.2 million ($11.9 million) by the UK Financial Conduct Authority (FCA) following its investigation into the March 2022 nickel short squeeze. The FCA concluded that the exchange lacked sufficient systems and controls to manage extreme volatility during the weeklong price spike, when nickel prices surged past $100,000 per tonne.

Between March 4–8, 2022, the nickel market experienced unprecedented stress. The crisis was triggered by massive over-the-counter short positions held by Tsingshan, a leading Chinese nickel producer. In response, the LME suspended nickel trading for eight days and controversially canceled all trades executed on March 8.

Regulators Cite Lack of Price Bands and Untrained Staff

The FCA identified LME’s failure to use automatic volatility controls, such as price bands, as a major weakness. Furthermore, the exchange’s decision-making process was too reliant on senior staff who were unavailable during Asian trading hours, when the crisis escalated.

At the height of the squeeze, junior operations staff—lacking crisis training—disabled price bands instead of escalating the situation. This action allowed nickel prices to rise faster than they should have. The exchange’s failure to report abnormal activity to its Hong Kong office worsened the volatility.

LME Implements Reforms, Wins Litigation Battles

The LME accepted the FCA’s findings and qualified for a 30% fine reduction. Since the crisis, the exchange has introduced daily price limits across all metals and improved oversight of OTC positions. These reforms aim to prevent similar breakdowns in market order.

Legal fallout followed the LME’s decision to cancel trades, with Elliott Management and Jane Street suing for losses of $456 million and $15 million, respectively. However, the UK High Court ruled in LME’s favor, and the UK Supreme Court recently denied Elliott permission to appeal.

The FCA’s decision underscores the critical need for robust trading oversight, especially during periods of extreme market stress.