US fund manager Elliott Management is seeking $456 million in damages from the London Metal Exchange (LME), in judicial review proceedings started in England on 1 June.

An Elliot spokesperson told Kallanish on Monday the hedge-fund company believes LME acted “unlawfully” when it cancelled nickel trades on 8 March, 2022. It says LME exceeded its powers when it cancelled those trades or exercised the powers that it did have “unreasonably and irrationally in particular by taking into account irrelevant factors (including its own financial position) and failing to take into account relevant factors.”

LME’s parent company HKEX said the claim was filed by Elliot Associates and Elliott International in the English High Court, and served on the LME and LME Clear on 2 June (Hong Kong time).

In the early hours of 8 March, nickel prices increased dramatically over a short period of time to unprecedented levels. LME decided to suspend trading in all nickel contracts with effect from 08:15 UK time and to cancel all trades executed on or after 00:00 UK time on 8 March. This was to “take the market back to the last point in time at which the LME could be confident that the market was operating in an orderly way,” LME says.

“As the world’s leading industrial metals exchange, the LME has an important role to play in ensuring the market is fair and orderly for all those who wish to participate,” an LME spokesperson tells Kallanish. “At all times the LME, and LME Clear, sought to act in the interests of the market as a whole. The LME therefore considers that Elliott’s grounds for complaint are without merit, and the LME will defend any judicial review proceedings vigorously.”

LME nickel trading resumed on 16 March on all LME execution venues, with the exchange facing criticism from traders for the way it handled the crisis. It also faced probing from UK financial regulators.

LME’s decision to cancel nickel trades has reportedly rescued several brokers from potentially ruinous margin calls, including serving as a bailout of nickel tycoon Xiang Guangda’s Tsingshan and its banks. The move, however, is set to have wiped out huge profits for those investors that held bullish bets.