Setback for hedge funds amid London Metal Exchange nickel battle

Hedge funds have been dealt a blow in their battle against the London Metal Exchange (LME). 

A group of investors led by AQR Capital Management were demanding phone call transcripts and meeting notes about the exchange’s decision to cancel lucrative nickel trades this year.

AQR, along with Winton Capital Management, Capstone Investment Advisors, Flow Traders and DRW Commodities, were among the firms which lost millions of pounds as a result. 

But High Court judge Justice Adrian Beltrami dismissed the case yesterday, saying its merits were ‘weak’. 

The scandal occurred on March 8, when the price of nickel began to rise due to fears over Russia’s invasion of Ukraine. 

Some investors were shorting nickel – meaning they were betting that its price would fall. One of the largest shorters was Tsingshan Holding Group, a Chinese nickel producer accused of being an LME ‘crony’. 

When the LME decided to cancel nickel trades as the price rocketed, this limited the losses suffered by Tsingshan. But it also meant hedge funds and other City firms that stood to benefit from the rising price lost out. 

AQR said it was looking at all legal options following the decision. The hedge funds have 21 days to decide if they will appeal. 

AQR said it was disappointed with the judgement following the LME’s ‘unprecedented decision’. 

The LME said: ‘This application was misconceived from the start – the LME having already provided a detailed explanation of its decision-making.’ 

The 145-year-old exchange still faces lawsuits from US hedge fund Elliott Associates and Jane Street Global Trading, which are suing for £363m and £13m respectively.