The Managed Funds Association has made a formal complaint to the London Metal Exchange, alleging it failed to perform its regulatory functions when it cancelled thousands of nickel trades in March.
The letter from the MFA, which represents many of the world’s biggest hedge funds, came three months after the LME provoked uproar among some users for cancelling eight hours’ worth of activity in its nickel market.
A squeeze on a short seller forced the price of the metal up 250 per cent in just a couple of days, to touch $100,000 a tonne. The LME’s parent, Hong Kong Exchanges and Clearing, said earlier this week that the LME decision was taken because the market had become “disorderly”.
The MFA complaint follows calls for a judicial review into the cancellations filed by both US activist group Elliott Management and market maker Jane Street. They are seeking $456mn and $15mn respectively.
“The LME has undermined confidence in its ability to oversee markets by failing to perform its regulatory obligations to maintain an orderly market, manage conflicts of interest and protect investors in the nickel market,” said Jennifer Han, chief counsel at the MFA said. The MFA complaint also alleged the exchange was seeking to protect its clearing house.