LONDON: The London Metal Exchange cancelled $12 billion worth of trades when nickel prices went haywire in March 2022 to “save” China’s Tsingshan, lawyers for two financial firms suing the exchange told London’s High Court on Tuesday.

US-based hedge fund Elliott Associates and market maker Jane Street Global Trading say the LME unlawfully cancelled trades made on March 8, 2022, after the nickel price doubled in a matter of hours.

The 146-year-old exchange argues it was justified in closing the market and cancelling trades because $19.7 billion of margin calls would otherwise have led to the defaults of multiple clearing members and created systemic risk.

Elliott and Jane Street, which are seeking a combined $472 million in damages, accept the LME has the power to cancel trades in “exceptional cases”. But their lawyers argued at London’s High Court that the LME had no power to unwind transactions to prevent defaults or tackle systemic risks.

Jane Street’s lawyer James Segan said the LSE had provided a “multi-billion-dollar bailout” to Tsingshan, owned by Chinese tycoon Xiang Guangda, which held large short positions that helped spur the explosive rise in nickel prices.

He said the LME’s actions meant Jane Street was forced to give up profitable trades “to save one person (Xiang) ... from enormous losses”.

Segan also said that Tsingshan’s “short squeeze” was the main cause of nickel price volatility, a fact he said was “staring the LME in the face”.

LME Chief Executive Matthew Chamberlain, in his witness statement, rejected the suggestion trades were cancelled “in the interests of particular market participants, in particular entities within the Tsingshan Holding Group”.