Home Business Three months after the London nickel scandal, hedge funds sued LME for $456 million in compensation from London Gold Exchange: the other party has no legal basis – yqqlm

Three months after the London nickel scandal, hedge funds sued LME for $456 million in compensation from London Gold Exchange: the other party has no legal basis – yqqlm

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Three months after the London nickel scandal, hedge funds sued LME for $456 million in compensation from London Gold Exchange: the other party has no legal basis – yqqlm


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 Original title: Three months after the Nickel scandal, hedge funds sued the LME for $456 million. The London Gold Exchange responded to every reporter: the other party has no legal basis

Every reporter Ye Xiaodan

On the morning of June 6, the Hong Kong Stock Exchange (0388.HK) disclosed the latest announcement that LME (London Metal Exchange), a wholly-owned subsidiary of the Hong Kong Stock Exchange, and LME Clear Limited (‘LME Clear’) were acquired by Elliott Associates, LP. and Elliott International, LP. It sued the British High Court and asked the LME to pay $456 million in compensation.

The origin of this litigation dispute is related to the London nickel futures turmoil that received high international and domestic attention three months ago.

On the afternoon of June 6, the LME said in a reply to an email interview with the “Daily Economic News” reporter: “At any time, the LME and LME Clear are acting in the interests of the entire market. Therefore, the LME believes that Elliott’s complaint has no grounds. legal basis, and the LME will vigorously respond to any judicial review process.”

Rewind time to three months ago.

On March 7 (London time), the nickel market price suddenly rose significantly, and the London nickel futures surged to $55,000/ton. On March 8, the price of LME nickel futures continued the upward trend of the previous day, breaking through the $100,000/ton mark during the session. After the extreme event, the LME announced the suspension of nickel trading, and the price of nickel was set at $80,000/ton. In two trading days, the price of nickel futures surged 240%, setting a new record for price surges in the 145-year history of the LME.

The London Metal Exchange suspends nickel trading. On March 8, 2022, local time, in London, England, the price of nickel is displayed on the screen. Picture source:Visual China-VCG111372382510.

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According to the announcement of the Hong Kong Stock Exchange, in the early morning of March 8, 2022 (UK time), the price of nickel rose sharply in a short period of time. After discussions with LME Clear, the LME has decided to suspend trading in all nickel contracts from 08:15 UK time on the current day and cancel all transactions executed on or after 00:00 UK time on March 8, 2022.

But for this move by the LME, the plaintiff Elliott Associates, LP. and Elliott International, LP. considered that the decision was unlawful under public law and/or constituted a violation of the plaintiff’s human rights.

However, the Hong Kong Stock Exchange claimed that the decision to suspend trading was due to the disorder in the nickel market. The LME retroactively cancelled the transaction in order to return the market to the last point in time when the LME could be confident that the market was functioning in an orderly manner. “It is important to stress that the LME has always acted in the overall interest of the market. LME nickel trading subsequently resumed on March 16, 2022 on all LME venues where trades are executed.”

Image source: Announcement screenshotImage source: Announcement screenshot

Therefore, LME management believes that the claim has no legal basis and the LME will vigorously defend it.

It is understood that Elliott Associates, LP. and Elliott International, LP. is a hedge fund owned by investment management firm Elliott Management. Elliott Management was founded in 1977 by Paul Singer, a well-known American hedge fund manager. As of December 31, 2021, Elliott managed about $51.5 billion in assets. The firm has 480 employees at its Florida headquarters and offices in the United States, Europe and Asia, nearly half of which are dedicated to portfolio management and analysis, trading and research.

On the afternoon of June 6, the LME said in response to an email interview with the “Daily Economic News” reporter: “As the world‘s leading industrial metal exchange, the LME plays an important role in ensuring that the market is fair and orderly to all participants. From the perspective of the LME, the nickel market in the early hours of March 8, 2022 has become disorderly, and after consultation with LME Clear, the LME has decided to suspend trading in all nickel contracts from 08:15 UK time, and cancel the UK time. All trades executed after 00:00 on March 8 to bring the market back to the last point in time when the LME can be confident that the market is operating in an orderly manner. At all times, the LME and LME Clear are acting in the interest of the market as a whole. Therefore , the LME believes that Elliott’s grounds for complaint have no legal basis and the LME will vigorously respond to any judicial review process.”

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On June 6, as of press time, the LME nickel price was reported at US$29,080/ton, an increase of 3.42%. It is worth noting that since April, the price of nickel nickel has been hovering around the price of 30,000 US dollars / ton.

On June 2, some media quotedGuotai JunanAccording to Shao Wanjie, senior researcher of futures non-ferrous metals, the liquidity of domestic and foreign nickel futures contracts has dropped to a low level, and the trading volume and open interest of both Shanghai nickel contracts and LME nickel futures contracts are at historically low levels, and the overall liquidity risk of the market is relatively high. high.

From the perspective of fundamentals and transactions, Shao Wanmei said that the contradictions in the London nickel transaction have not been completely resolved. In the low inventory situation, the LME warehouse receipt concentration remained above 50%. Since the abnormal fluctuation of the LME nickel price in March, the margin of the LME warehouse-to-stock ratio has continued to decline, but it has not yet returned to the normal range. The risk of contradictions in overseas transactions needs to be vigilant.

On June 6, in a telephone interview with a reporter from “Daily Economic News”, Jiang Xinbin, senior analyst of non-ferrous metals of Zheshang Futures, analyzed that with the release of high nickel matte production capacity produced by Tsingshan and other enterprises in Indonesia, many raw materials for new energy have been released. It is possible to switch from pure nickel to intermediate products such as high matte nickel, which also indirectly affects the supply and demand of the nickel futures market. It is expected that the price of nickel futures in the second half of the year is more likely to go down than to go up.

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At the same time, Jiang Xinbin said that due to the high price of nickel in the past, nickel salt companies even had a situation where profits were inverted for a time. After the demon nickel storm in March, some companies reduced the use of pure nickel in order to maintain profits.

Regarding the current poor liquidity of LME nickel futures, Jiang Xinbin believes that foreign traders may maintain a wait-and-see attitude towards the participation of LME nickel futures for a long time. In this context, the U.S. CME (Chicago Mercantile Exchange) intends to launch a nickel futures contract to fill the market vacancy, and domestic traders are also expected to increase the trading volume of the Shanghai Futures Exchange, thereby further enhancing the pricing power of domestic commodities.

On the afternoon of June 6, the reporter also sent an interview email to the Hong Kong Stock Exchange to inquire about matters related to the case. The Hong Kong Stock Exchange replied that for details, please refer to the previous announcement issued by the Hong Kong Stock Exchange. As of the close on June 6, the Hong Kong Stock Exchange closed at HK$347.6 per share, an increase of 1.64% that day, with a total market value of HK$440.7 billion.

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Responsible editor: Peng Jiabing

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