LONDON - Hedge fund Elliott Associates on Monday lost an appeal against the dismissal of its lawsuit against the London Metal Exchange over billions of dollars of cancelled nickel trades, which judges said were vital for the stability of the overall market.

The LME suspended trading and annulled $12-billion in nickel trades in March 2022 when prices doubled to records above $100 000 a metric ton in a few hours of chaotic trade.

Elliott sued the LME at London's High Court and its case was dismissed in November 2023. Elliott's bid to overturn that decision was rejected by the Court of Appeal on Monday.

Judge Stephen Males ruled that the extreme price movement on March 8, 2022 was "a once in a generation event" and that the LME acted lawfully in cancelling the trades.

"There was no question of seeking to favour one cohort of traders over another. Rather the decision was taken in the interest of the market as a whole," he said in his written unanimous ruling from a three-judge panel.

"To have allowed the 8th March trades to stand would have meant a real risk of what has been graphically described as a 'death spiral' in the international metals market."

At a hearing in July this year, Elliott urged London's Court of Appeal to overturn the ruling partly because the exchange failed to disclose documents.

Lawyers for Elliott said the LME belatedly released documents in May detailing its "Kill Switch" and "Trade Halt" internal procedures. It also newly disclosed an internal report that Elliott said detailed potential conflicts of interest at the exchange.

A spokesperson for Elliott said it was disappointed with the ruling.

"Elliott is further analysing the decision with its legal team and considering its next steps."

Elliott and market maker Jane Street Global Trading brought a case demanding a combined $472 million in compensation, alleging at a trial in June last year that the 147-year-old exchange had acted unlawfully.

The LME, the world's oldest and largest metals marketplace, welcomed Monday's ruling, which it said confirmed the exchange's power to cancel trades during extreme price movements.

"Now we are focused on looking to the future as we progress our market modernisation strategy," LME Chairman John Williamson said.

Elliott noted that following the events in March 2022, the LME commissioned an independent study and implemented reforms.

"The public scrutiny which its challenge has brought to bear has already resulted in the LME taking numerous steps to improve its systems and processes," Elliott said.

The LME is owned by Hong Kong Exchanges and Clearing.