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Setback for hedge funds amid London Metal Exchange nickel strife: Ongoing row over decision to cancel lucrative trades this year
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Hedge funds have taken a beating in their fight against the London Metal Exchange (LME).
A group of investors led by AQR Capital Management demanded transcripts of phone calls and meeting notes regarding the exchange’s decision to cancel lucrative nickel trading this year.
AQR, along with Winton Capital Management, Capstone Investment Advisors, Flow Traders and DRW Commodities, were among the companies that lost millions of pounds as a result.
Something to cheer about: the scandal took place on March 8, when the price of nickel started to rise due to fears of the Russian invasion of Ukraine
But Supreme Court Justice Adrian Beltrami dismissed the case yesterday, saying the merits were “weak.”
The scandal took place on March 8, when the price of nickel began to rise amid fears of the Russian invasion of Ukraine.
Some investors shorted nickel, meaning they were betting that the price would fall. One of the biggest shorts was Tsingshan Holding Group, a Chinese nickel producer accused of being an LME ‘buddy’.
When the LME decided to cancel trading in nickel when the price skyrocketed, it limited the losses Tsingshan suffered. But it also meant that hedge funds and other city companies would profit from the rising price they lost.
AQR said it was reviewing all legal options following the decision. The hedge funds have 21 days to decide whether to appeal.
AQR said it was disappointed with the ruling following the LME’s “unprecedented decision”.
The LME said: ‘This application was misconceived from the start – the LME has already provided a detailed explanation of its decision-making.’
The 145-year-old exchange continues to face lawsuits from US hedge fund Elliott Associates and Jane Street Global Trading, suing for £363m and £13m respectively.