Column: Court case shines a harsh light on London Metal Exchange – by Andy Home (Reuters – June 25, 2023)

The first part of the London Metal Exchange’s (LME) courtroom drama is over after three days of legal argument at London’s Royal Courts of Justice. The LME, owned by Hong Kong Exchanges and Clearing, now awaits judgment on whether its cancellation of nickel trades on March 8 last year was lawful.

US-based hedge fund Elliott Associates and market maker Jane Street Global Trading (Jane Street) argue its action was unlawful and are demanding $472 million in damages. The 146-year-old exchange contends it was justified in closing the market and cancelling trades because $19.7 billion of margin calls would otherwise have triggered a “death spiral” of member defaults.

The legal spotlight has not been kind to either the LME or its chief executive Matthew Chamberlain, who made the fateful decision that the nickel market had become disorderly. How to define that word is a tricky question.

Two other tricky questions emerging from the court proceedings are why no-one spotted the nickel storm coming and why such a momentous decision came down to one man’s call.

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