Activist hedge-fund manager Elliott Management Corp. sued the London Metal Exchange for more than $456 million, after the exchange earlier this year suspended nickel trading and canceled some trades following wild swings in the metal’s price.

The lawsuit is a fresh headache for the LME, whose actions had already drawn criticism from some market participants and prompted a review by British financial regulators.

Elliott is challenging the exchange’s decision to cancel trades that it says it made in the early hours of March 8, according to Hong Kong Exchanges & Clearing Ltd. , which owns LME.

“The LME management is of the view that the claim is without merit and the LME will contest it vigorously,” HKEX said Monday. Elliott didn’t respond to a request for comment outside U.S. business hours.

The hedge-fund firm, founded by billionaire Paul Singer, argues the metal exchange’s action “was unlawful on public law grounds and/or constituted a violation of the claimants’ human rights,” HKEX said. Elliott has brought the case in the English High Court through two vehicles, Elliott Associates LP and Elliott International LP.

Russia’s invasion of Ukraine sparked sharp gains in many commodities. The nickel market proved particularly turbulent because the price moves upended a massive trade against the metal by Tsingshan Holding Group, a Chinese nickel producer.

The LME stopped nickel trading early on March 8 and retrospectively canceled trades in the eight hours before the suspension. It was the first time the LME had frozen trading for a metal since the collapse of an international tin cartel in 1985 and the 145-year-old exchange came under criticism from traders for the way it handled the crisis.

U.K. financial regulators in April launched a review into the breakdown in nickel trading. The Financial Conduct Authority and the Bank of England said they would look for ways that the LME can improve its governance, market oversight and risk management.

In late April, the exchange’s parent said LME Chief Executive Matthew Chamberlain

would remain in his position, reversing an earlier plan to depart.

HKEX shares rose 0.6% by early afternoon Monday in Hong Kong, underperforming a 1.1% rise in the Hang Seng Index.

Write to Dave Sebastian at dave.sebastian@wsj.com