LONDON - The London Metal Exchange (LME) on Wednesday won a legal battle against US financial firms demanding $472-million in compensation after the exchange cancelled billions of dollars in nickel trades last year after a surge in prices.

The London lawsuit was brought by hedge fund Elliott Associates and market maker Jane Street Global Trading after the world's largest metals marketplace cancelled $12-billion in trades when prices shot to records above $100 000 a metric ton in a few hours of chaotic trade in March 2022.

In its written ruling, the High Court said the LME did have the power to cancel trades in exceptional circumstances and that the exchange was not under a duty to consult Elliott and Jane Street prior to its decision.

Judge Jonathan Swift and Judge Robert Bright said in the ruling that they accepted LME Chief Executive Matthew Chamberlain's evidence that consulting participants would not have revealed anything the exchange did not already know.

"It seems obvious to us that everyone involved was aware both that the suspension and cancellation decisions were momentous, and of the likely effects on all market participants – including those in the position of the claimants."

Elliott and Jane Street were argued the exchange acted unlawfully.

The LME countered that it had both the power and the duty to unwind the trades because a record $20-billion in margin calls could have led to at least seven clearing members defaulting, systemic risk and a potential "death spiral".

The judges said that Elliott and Jane Street had been critical of Chamberlain for taking account of the possible adverse consequences for some members.

"It is difficult to think of anything more likely to make the nickel market disorderly. Further, it would not only have affected the nickel market; the failure of an LME member, let alone a clearing member, would have had a serious impact on the global commodities market more broadly."

Other exchanges were closely watching this case as a decision against the LME could have had an impact their ability to react in crisis situations.

"The judgment raises fundamental questions for UK market participants who trade not only on the LME but more broadly on other exchanges, about an absence of trade certainty prior to settlement," Elliott Associates said in a statement.

"We therefore intend to appeal the judgment."