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LME faced ‘death spiral’ with as many as a dozen firms at risk of default amid nickel chaos: lawyer
- Collapse of firms due to US$19.7 billion in margin calls in March 2022 would have depleted bourse’s default fund, LME lawyer said on final day of trial
- Bourse would have been forced to seek additional funds from members, spurring further defaults, lawyer said
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Chad Brayin London
The London Metal Exchange (LME) faced a “death spiral” in nickel and its other metals markets with as many as a dozen of its members at risk of default if it failed to step in and stabilise the nickel market during a period of chaos last year, a lawyer for the bourse told a London court on Thursday.
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US hedge fund Elliott Associates and Jane Street Global Trading, which describes itself as a market maker, have sued the Hong Kong Exchanges and Clearing (HKEX)-owned bourse in London’s high court over its decision to cancel billions of dollars of nickel trades in March 2022. They are seeking a combined US$472 million.
The 146-year-old bourse initially believed five of its more than 40 members were at risk of default as nickel prices spiked on March 8, 2022, said Jonathan Crow, a lawyer for the LME.
The LME now believes as many as seven were facing default, which would have depleted the capital set aside for its clearing arm to close out positions of defaulted members, Crow said.
That would have required the bourse to seek an additional US$220 million from non-defaulting members for the fund, which would have pushed an additional five members into default and led to a dozen defaults in total, he said.
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