UK London Court Hearing to Determine Legal Rights of $12 Billion Cancelled Nickel Trades by London Metal Exchange in March 2022, LME Highlights $19.7 Billion of Margin Calls Will Lead to Defaults & Systemic Risk While Elliott Associates & Jane Street Argue No Power to Cancel Transactions to Prevent Defaults or Systemic Risks & Seek $472 Million in Compensation
23rd June 2023 | Hong Kong
A UK (United Kingdom) London court hearing is determining the legal rights of $12 billion cancelled nickel trades by London Metal Exchange in March 2022, with LME highlighting $19.7 billion of margin calls will lead to clearing members default & systemic risk while Elliott Associates (Hedge Fund) & Jane Street argued LME has no power to cancel transactions to prevent defaults or systemic risks and are seeking $472 million in compensation. In March 2023, the UK Financial Conduct Authority (FCA) & Bank of England released a joint statement on London Metal Exchange (LME) nickel market suspension in April 2022, with the UK FCA to open an enforcement investigation into LME conduct, systems & control. Also in March 2023, London Metals Exchange (LME) had discovered stones instead of $1.3 million of nickel registered since early 2022 at a Netherlands Rotterdam warehouse. The $1.3 million nickel (stones) represents around 0.14% of inventories at London Metals Exchange (LME). London Metal Exchange (LME) is a subsidiary of Hong Kong Exchange Group (HKEX). More info below.
“ UK London Court Hearing to Determine Legal Rights of $12 Billion Cancelled Nickel Trades by London Metal Exchange in March 2022, LME Highlights $19.7 Billion of Margin Calls Will Lead to Defaults & Systemic Risk While Elliott Associates & Jane Street Argue No Power to Cancel Transactions to Prevent Defaults or Systemic Risks & Seek $472 Million in Compensation “
London Metal Exchange Discovers Stones Instead of $1.3 Million of Nickel Registered Since Early 2022 at Netherlands Rotterdam Warehouse
18th March 2023 – London Metals Exchange (LME) has discovered stones instead of $1.3 million of nickel registered since early 2022 at a Netherlands Rotterdam warehouse. The $1.3 million nickel (stones) represents around 0.14% of inventories at London Metals Exchange (LME). London Metal Exchange (LME) is a subsidiary of Hong Kong Exchange Group (HKEX). Earlier in March 2023, the UK Financial Conduct Authority (FCA) & Bank of England have released a joint statement on London Metal Exchange (LME) nickel market suspension in April 2022, with the UK FCA to open an enforcement investigation into LME conduct, systems & control. In 2023 February, Citigroup ending financing of Switzerland & Singapore-based French commodities giant Trafigura Group on 27th October 2023 triggered Trafigura Group to send inspectors to check nickel containers and uncovered missing nickel in the containers. Trafigura Group reported a $577 million loss in February 2023 on the nickel fraud & also won a UK judgement to freeze $625 million of India counterpart Prateek Gupta & companies. In 2023 January, Singapore Envy Global Trading founder Ng Yu Zhi who is going on trial for alleged $1.1 billion (S$1.46 billion) nickel trading fraud, had his bail raised from S$4 million to S$6 million for increased flight risk after the case is scheduled to be heard at the Singapore High Court with power to give jail sentences exceeding 20 years. Ng Yu Zhi is facing 105 criminal charges for fraud in nickel trading investment scheme (including cheating, criminal breach of trust, forgery, fraud & money laundering).
UK Financial Conduct Authority & Bank of England Released Joint Statement on London Metal Exchange Nickel Market Suspension in April 2022, UK FCA to Open Enforcement Investigation into Conduct, Systems & Control
11th March 2023 – The UK Financial Conduct Authority (FCA) & Bank of England have released a joint statement on London Metal Exchange (LME) nickel market suspension in April 2022, with the UK FCA to open an enforcement investigation into LME conduct, systems & control. UK FCA & Bank of England: “Commodity markets around the world have experienced volatility and difficult liquidity conditions making the continued evolution of exchange controls an important but challenging priority across the sector. Since the suspension the FCA has made clear its expectation that the LME should consider carefully how the events of March 2022 should shape its future approach on market structure, including the role of transparency in facilitating effective risk management … … The FCA has reviewed the events surrounding the suspension of the nickel market and has opened an enforcement investigation into some of the LME’s conduct and systems and controls in place in the period between 1 January 2022 and the time of suspension on 8 March 2022. The FCA has confirmed an investigation in light of the public interest in these matters and will not make any further comment in line with normal policy. The nature of global commodity markets means that having a strong role in international regulatory discussions is key. The FCA is working closely with other regulatory partners, supervisors, and global standard-setting bodies to strengthen international standards for commodity derivatives markets.” In 2022 Dec, a United Kingdom (UK) court in London has dismissed a hedge fund lawsuit against London Metal Exchange (LME) to disclose documents including transcripts & meeting notes for LME nickel trades suspension & cancellation in March 2022. More info below.
UK Financial Conduct Authority & Bank of England Released Joint Statement on London Metal Exchange Nickel Market Suspension in April 2022
The Financial Conduct Authority announces an update to its April 2022 statement regarding the London Metal Exchange’s suspension of its nickel market.
3rd March 2023 – In April 2022, the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and the Bank of England issued a joint statement regarding the London Metal Exchange’s (LME) decision to suspend trading on its nickel market on 8 March 2022.
Commodity markets around the world have experienced volatility and difficult liquidity conditions making the continued evolution of exchange controls an important but challenging priority across the sector. Since the suspension the FCA has made clear its expectation that the LME should consider carefully how the events of March 2022 should shape its future approach on market structure, including the role of transparency in facilitating effective risk management.
The LME has implemented changes to its control framework and committed to a wider package of market reform, informed by the recommendations of an external review LME and LME Clear jointly commissioned.
The FCA is encouraged by the LME’s focus on increasing the transparency of OTC trading to support robust risk management in its on-exchange trading. The oversight exercised by the LME Board to drive the effective and timely execution of this programme is being monitored closely by the FCA. The proposed changes to the LME Board will enlarge the skills and experience available to it. The FCA will also work closely with the Bank of England as the programme progresses.
The FCA has reviewed the events surrounding the suspension of the nickel market and has opened an enforcement investigation into some of the LME’s conduct and systems and controls in place in the period between 1 January 2022 and the time of suspension on 8 March 2022. The FCA has confirmed an investigation in light of the public interest in these matters and will not make any further comment in line with normal policy.
The nature of global commodity markets means that having a strong role in international regulatory discussions is key. The FCA is working closely with other regulatory partners, supervisors, and global standard-setting bodies to strengthen international standards for commodity derivatives markets.
UK Court Dismissed Hedge Funds Lawsuit Against London Metal Exchange to Disclose Documents for Nickel Trades Suspension & Cancellation, Other Lawsuits Pending Including $15 Billion Jane Street & $51 Billion Elliot Management
29th December 2022 – A United Kingdom (UK) court in London has dismissed a hedge fund lawsuit against London Metal Exchange (LME) to disclose documents including transcripts & meeting notes for LME nickel trades suspension & cancellation in March 2022. The hedge funds (AQR Capital Management, Winton Capital Management, Capstone Investment Advisors, Flow Traders, DRW Commodities) had filed the lawsuit to access the documents that will help them to evaluate their LME’s responsibility and possible liabilities, which have caused the hedge funds to suffer significant losses after the LME nickel trades suspension & cancellation in March 2022. Other lawsuits pending includes $15 billion Jane Street suing for $15.3 million & $51 billion Elliot Management suing for $456 million. The hedge funds (AQR Capital Management, Winton Capital Management, Capstone Investment Advisors, Flow Traders, DRW Commodities) has the right to appeal within 21 days. London Metal Exchange (LME) is a subsidiary of Hong Kong Exchange Group (HKEX).
Hong Kong Exchange Statement
HKEX: “As explained in LME Notice 22/057 published on 10 March 2022, during 7 March 2022 (UK time), significant upward price movements were observed in the nickel market. However, the LME considered that trading activity up to and including close of trading that evening had been orderly. In the early hours of 8 March 2022 (UK time) nickel prices then increased dramatically over a short period of time. After consultation with LME Clear, the LME took the decision 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 2022.
This decision to suspend trading was taken because the nickel market had become disorderly. Cancellations were made retrospectively 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 manner. It should be stressed that the LME always acted in the interests of the market as a whole. LME nickel trading later resumed on 16 March 2022 on all LME execution venues. The claim seeks to challenge the decisions giving effect to and maintaining the cancellation of the Claimants’ alleged trades in nickel contracts executed on or after 00:00 UK time on 8 March 2022. The Claimants have alleged that this was unlawful on public law grounds and/or constituted a violation of the Claimants’ human rights. The amount claimed by the Claimants is US$456,391,500. The LME management is of the view that the claim is without merit and the LME will contest it vigorously.”
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