Hedge fund AQR demands British judge force LME to hand over transcripts (updated)

Flow Traders

16/12/2022 18:52

(Updates with hearing)
    By Nell Mackenzie and Eric Onstad
       LONDON, Dec 16 (Reuters) - 
    Hedge fund AQR Capital Management and four others asked a
British judge on Friday to force the London Metal Exchange (LME)
to hand over phone call transcripts and meeting notes about the
LME's March decision to cancel trades.
  
    AQR and others filed legal action in September after a wild
price spike in nickel spurred the LME to cancel deals worth
billions of dollars, which they said led to "significant losses"
for market participants.
        Paul McGrath, a lawyer for the group led by AQR, said it
was difficult to understand why his clients could not obtain
documents which would further explain the LME's conduct. 
  
        He said their request would possibly uncover whether a
relationship between billionaire Xiang Guangda and his Tsingshan
Holding Group (THG) and the Hong Kong Exchange  0388.HK , the
LME's owner, had anything to do with the decision to halt
trading. 
  
        "At heart of our interest is whether certain market
participants were favoured over other certain market
participants - as opposed to just restoring market order," he
said. 
  
        THG, one of the world's top nickel producers, faced
massive losses on its short positions after 
    prices soared
     to more than $100,000 per tonne on March 8 and trading was
halted.  
  
        "There's a lot of smoke here that justifies real
concerns that a decision may have been taken in circumstances
that give rise to bad faith."
  
        James McClelland, lawyer for the LME, said this was
misleading. He referred to a 7,000-word explanation the LME had
already provided as to why trading in nickel had been halted. 
  
        Chiefly among the reasons, he said, was to prevent a
"Lehman-like event" in which many participants would face
defaults, and to preserve market order, referring to the U.S.
investment bank that collapsed during the global financial
crisis in 2008.
  
        "They seek to go behind the information that has been
provided," McClelland said. "They want to know the explanation
is false and go on a fishing expedition to establish that."  
  
        Justice Adrian Beltrami paused proceedings to consider
the arguments before determining his decision. Kirkland and
Ellis worked as the law firm for AQR and others, while Hogan
Lovells represented the LME. 
  
    The other claimants in the filing at the London Commercial
Court were Winton Capital Management, Capstone Investment
Advisors, Flow Traders  FLOW.AS  and DRW Commodities.
    The LME is also facing lawsuits from U.S. hedge fund Elliott
Associates and Jane Street Global Trading, which are suing the
LME for $456 million and $15.3 million, respectively, for the
cancelled nickel trades.
 (Reporting by Eric Onstad and Nell Mackenzie in London
Editing by Matthew Lewis and Paul Simao)
 ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO;
 Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))