Second firm seeks damages from London Metal Exchange
A SECOND firm has launched a lawsuit against the London Metal Exchange over its decision to cancel nickel trades following a short squeeze in March.
Jane Street, a cornerstone of Wall Street trading, is seeking around $15m (£12m) in damages, piling further pressure on the 145-year-old exchange.
It comes after a $456m claim launched last week by Elliott Manage- ment, a hedge fund known for its aggressive legal actions.
The new claim was filed by Jane Street on Monday at the High Court, the LME’S owner Hong Kong Exchanges & Clearing said in a statement.
Echoing a statement made the previous day after it announced Elliott’s claims, HKEX said: “The LME management is of the view that the claim is without merit [and] will contest it vigorously.”
The bourse suspended trading in the nickel contract on the morning of March 8 and erased that day’s trades after the market became “disorderly”.
Prices had skyrocketed to more than $100,000 a ton after fears the conflict in Ukraine would disrupt global supply turned into a squeeze on investors who were shorting the nickel market.
LME management have repeatedly said it was acting “in the interests of the market as a whole” – including participants who faced huge margin calls on their short bets – but traders have expressed exasperation that potentially lucrative trades were undone by the exchange.
The Financial Conduct Authority and Bank of England are investigating the incident.
Jane Street is a dominant player in the markets for exchange-traded funds and corporate bonds, for which it provides trading services and liquidity.
A spokesman for the company said it had launched the legal claim “to recoup its losses caused by the LME’S illegal actions and to strengthen the exchange and restore the market’s trust in it”.
Further companies may launch cases against the LME. Clifford Asness, managing principal of US hedge fund AQR Capital Management, has been outspoken in his criticism of the LME’S decision to cancel trades.