A London court has agreed to allow Elliott Investment Management and Jane Street to Sue the London Metal Exchange over its handling of a controversial short squeeze in the nickel market in March, Bloomberg News reported.
The companies applied in June for a so-called judicial review of the LME's conduct during the nickel crisis, when the exchange responded to an unprecedented price surge by suspending trading for a week and cancelling billions of dollars worth of deals.
The LME's action effectively helped top nickel producer Tsingshan Holdings Group Co LTD and eased pressure on brokers facing huge margin calls. But on the other side of the market, high-profit contracts for hedge funds and other traders have been torn up. Elliott is seeking $456 million in damages, while Jane Street is seeking $15 million, saying the LME acted illegally in canceling the deal.
An LME spokesman confirmed the London High Court's decision.
"This decision is entirely procedural and in no way a ruling on the merits of these claims. The LME continues to prepare its defence and we look forward to presenting our arguments in due course, "the spokesperson said.
In the United Kingdom, judicial review is a legal process used to challenge the legality of a decision by a public body. Although the LME is a private company owned by Hong Kong Exchanges and Clearing Limited, it has a regulatory role in the metals market and has been sued through judicial reviews in the past.
Reuters earlier reported the court ruling.
The LME also faces legal action from a number of companies, including hedge fund AQR Capital Management LLC, which filed a commercial court case in London in September.
