Eric Onstad and Pratima Desai

LONDON (Reuters – U.S. hedge funds Elliott Associates and London Metal Exchange are suing each other for $456 millions for cancelling Nickel trades following chaotic trading that occurred in March, which caused the LME to suspend their nickel market.

Legal action puts more pressure on the exchange. The regulators are probing it and they are trying to restore trust and volume in its nickel marketplace, a crucial component in stainless steel as well as electric vehicle batteries.

Elliott Associates and Elliott International, which filed the British claim in British courts against LME and LME Clear last week, named LME and LME Clear as defendants.

WHAT IS NEXT

Elliott filed its judicial appeal claim June 1. It was served to the LME in June 2.

21 days are allotted to the 145-year-old exchange for its response.

The court filings will become public once the LME has responded to the claim.

What is ELLIOT SAYING??

Elliott spokesmen said Elliott violated its power when it cancelled nickel trades with the LME in March.

Or that LME (it) used the power it had unreasonably, irrationally and in particular by not taking into consideration irrelevant factors — such as its financial situation — and neglecting to consider relevant factors.

Elliot’s position in nickel on March 8, and the calculation of $456million were not discussed by the spokesperson.

Prices for nickel rose to an all-time high of over $100,000 per tonne, surpassing the record set at the end of February.

WHAT DO THE LME SAYS?

LME clarified that the LME (and LME Clear) tried to protect the overall interests of the market at all times.

“The LME therefore considers that Elliott’s grounds for complaint are without merit, and the LME will defend any judicial review proceedings vigorously.”

WHAT HAPPENED IN MARCH 8TH?

Following a double-digit increase in nickel prices, the oldest forum of trading ended disorderly. The price spike was caused by expectations that China’s Tsingshan Holdings would need to reduce their long position.

Bets on low prices are called short positions. Tsingshan made large sales of nickel via futures contracts which were expected to be repurchased by the market.