The London Metal Exchange faces complaints from U.S. hedge fund groups over canceled nickel transactions


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On June 1, U.S. hedge fund Elliot Management told the UK High Court for $ 456 million over a controversial decision to suspend nickel futures contracts and cancel transactions in early March against the LME. I filed a lawsuit.

A few days later, on June 6, trading company Jane Street also filed a proceeding against the exchange for $ 15.34 million.

Both judicial review claims have a similar message. Elliott said the London Metal Exchange (LME) should stop trading and close transactions after the price more than doubled to more than $ 100,000 per metric ton in a few hours on March 8. Said he didn’t.of [its] “Human rights,” he added, adding that this act is unreasonable and unreasonable.

However, the LME responded by denying the benefits of the proceedings.

“LME management believes this claim has no merit, and LME strongly disagrees with it,” the Hong Kong Stock Exchange (HKEX) commented on both proceedings.

“Changing the rules is a breach of contract and will definitely continue in proceedings. The reputation of the World Trade Center 100 years ago is questionable and investors will leave for other trade markets.” Mike Sun, a US-based investment consultant and Chinese expert, told the era.

The Managed Fund Association (MFA), a US hedge fund group, also announced on June 8th. Complaints To LME about cancellation and contract suspension of nickel transaction in March.

The MFA said it believes that the LME’s failure to meet its regulatory obligations led to the so-called “Demon Nickel” incident that exposed the existence of the “Hong Kong backdoor” on March 8.

A hedge fund group representing more than 150 member firms has expressed serious concern over complaints about how LME’s actions have affected market participants, including member firms.

In the appendix of the MFA Complaint Letter (pdf), In particular, pointed out the LME’s regulatory obligation to “identify and manage conflicts of interest between the LME and its owners.”

HKEX purchased all of LME’s common stock on December 6, 2012, resulting in the resignation of 10 of its 12 directors. Later, HKEX Charles Lee’s CEO described the acquisition as a “one-in-a-century opportunity.”

Hong Kong Exchanges Clearing Ltd logo
The Hong Kong Exchanges & Clearing Ltd. (HKEX) logo will appear on September 14, 2020 in the Financial Central District of Hong Kong, China. (Tyrone Siu / Reuters)

The Hong Kong government is the largest shareholder of HKEX. According to HKEX rules schedule The Chairman of the Hong Kong Stock Exchange requires the written approval of the City’s Chief Executive Officer.

Nickel, which traded between $ 22,750 and $ 25,260 per ton in February, temporarily reached $ 100,000 per metric ton during the trading session on March 8.

Christopher Balding, a specialist in the Chinese economy and financial markets, said the LME:[halted] A transaction to protect a Chinese company that has virtually gone bankrupt. “

China’s Tsingshan Holding Group, the world’s largest producer of nickel and stainless steel, suffered a global capital blunder on March 7 targeting the London Metal Exchange (LME) and delivered 200,000 tons of nickel. The contract was delivered by default and faced potential. Billions of losses in that short position.

However, before Tsingshan Holding fell into the default delivery dilemma, the LME suspended nickel trading on March 8, canceling all nickel trading that day, and continuing to suspend nickel trading until March 11. I announced that.

This is a rare outage of metal trading at the LME that last occurred in tin in 1985.

Mark Thompson, vice chairman of the British mining company Tungsten West Ltd, wrote on Twitter on March 8 that Tsingshan Holding estimates a market value loss of over $ 12 billion.

However, the nickel market did not resume until March 16 after the Kiyoyama Group reached a ceasefire agreement with banks and avoided margin claims to deposit additional cash to escape forced contract closures. Reuters report.

In addition, the LME has begun applying daily price limits, providing peace of mind to the Tsingshan Group without the spikes in nickel prices as on March 8.

Ranked 279th in the Fortune 500. Kiyoyama The group is a Chinese nickel and stainless steel giant with a footprint that traverses China, the United States, Indonesia, India and Zimbabwe.

Kathleen Lee


Kathleen Lee has been contributing to The Epoch Times since 2009, focusing on topics related to China. She is an engineer and chartered in Australian Civil and Structural Engineering.