US trading firm Jane Street sues LME over nickel trade chaos

Jane Street, one of Wall Street’s top market makers, has followed US hedge fund Elliott Management and filed a lawsuit against the London Metal Exchange over the nickel short squeeze fiasco.

Jane Street filed the application for judicial review against LME and its clearing house on June 6, seeking $15.3 million after nickel trading was suspended and trades were canceled on March 8, when prices jumped by 250%, the owner of the Hong Kong Exchanges and Clearing metals exchange said on Tuesday.

The move follows a $456 million claim made by Elliott, which was announced by HKEX on Monday.

The LME’s handling of the nickel chaos is coming under increasing scrutiny, with UK regulators probing the suspension of trading.

The spike in nickel prices has centered on Xiang Guangda, a self-made Chinese billionaire who heads Tsingshan Holding Group, the world’s largest producer of nickel and stainless steel.

Xiang had bet the price of nickel would plummet, but Russia’s invasion of Ukraine upset his bet by sending commodity prices skyrocketing, leaving him exposed to losses of up to billions of dollars.

The LME, which sets global benchmark prices for industrial metals, canceled several hours of trading for the day and suspended nickel trading for days.

International fund managers, including the managing director of AQR Capital Management, one of the world’s largest hedge funds, have accused the LME of cronyism over the decision to call off the deals.

LME denied that parent company HKEX influenced its decision to suspend nickel trading.

“Exchanges work to create an orderly market and a level playing field for investors. The LME’s arbitrary decision to call off nickel trading during a time of heightened volatility seriously undermines the integrity of the markets and sets a dangerous precedent that calls into question future contracts,” Jane Street said.

“As the world’s leading market maker, Jane Street has taken this action to recoup its losses caused by the LME’s illegal actions and to strengthen the exchange and restore market confidence in it. »

LME will “vigorously” contest the claim and consider it “without merit,” HKEX said.

A person familiar with the Jane Street case said the amount claimed, which is significantly lower than that of the Elliott lawsuit, was “secondary” and that the company wanted to “send a message” that it would take action against the “unreasonable” market actions.

“If your job. . . is essentially to ensure the smooth and orderly functioning of the global financial markets, they cannot do this if the counterparties, i.e. an exchange, do not align themselves with the contracts they enter into, “said said the person. They added that the uncertainty created by stocks such as the LME increased the risks of providing liquidity to exchange-traded fund markets, one of the group’s biggest businesses.

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