Liffe

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Liffe
Founded 1982
Headquarters London
Key People Hugh Freedberg, CEO
Products Futures and options
Web site http://www.euronext.com/

Today part of NYSE Euronext, Liffe comprises the derivatives (futures and options on futures) business of Euronext, N.V. originally traded on individual venues in Amsterdam, Brussels, London, Lisbon and Paris markets. Each exchange is under the umbrella of NYSE Euronext. This consolidation occurred in 2004, prior to the NYSE Euronext merger.

All futures and options on futures trading -- which includes such product areas as short-term interest rate and swap products, bonds, equity options, stock indexes, commodity and FX instruments -- are transacted on a single electronic trading platform, LIFFE CONNECT, with central margining and clearing provided by LCH.Clearnet.

Replacement of multiple trading venues with a single market and a single electronic platform was envisioned as having the benefit of making cross-border trading easier and cheaper. In addition, cash and derivatives markets increasingly have begun crossing lines, with technology being imported to add to efficiencies. With Bclear, Liffe has brought the volume of the OTC market within its borders, so to speak.

Contents

History

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Liffe (originally "LIFFE," the acronym for the London International Financial Futures Exchange), was formed in London in 1982.

Following mergers with the London Traded Options Market (LTOM) and the London Commodity Exchange (LCE), Liffe added equity options and a range of soft and agricultural commodity products to its existing financial mix.

Trading on Liffe, like other futures exchanges, originally was conducted by open outcry with each product traded in a designated trading pit. In 1998 Liffe embarked on a course that transfered all of its futures and options from the traditional method of trading to an electronic platform known as LIFFE CONNECT™. By 1998 it among among the top three futures and options exchanges in volume globally.

Euronext acquired LIFFE in 2002 after outbidding the London Stock Exchange for acquisition rights. Euronext then consolidated all of its derivatives trading operations under the "Euronext.liffe" name, now more commonly known to market users as "Liffe." Its parent, Euronext, N.V., became part of NYSE Euronext in 2007 when the New York Stock Exchange (NYSE) completed its major global acquisition.

Products and Services

Bclear

Like other derivatives exchanges that increasingly are committed to diversifying their traditional products and services, Liffe in 2005 created Bclear. Bclear is the on-exchange administration and clearing service that is intended to provide a simple and cost-effective way to register and process wholesale equity derivatives trades through Liffe to clearing at LCH.Clearnet Ltd. Users can register OTC business as an exchange contract for futures and options on European and US blue-chip stocks and indices as well as Variance Futures on the FTSE 100, CAC 40® and AEX® indices. This was created to reduce the counter-party credit, legal and operational risks associated with OTC deals. Bclear enables registration of both "standard exchange" and "flexible" trades in futures and options, allowing customers to execute their business in one single place at a much lower cost.[1]

At the end of January 2008, Bclear further expanded its listings with Universal Stock Futures (USFs) on an additional 112 underlyings and Individual Equity Options on an additional 41 underlyings. The move brings the total number of underlyings on which futures and options contracts are available on Bclear to 970. It also means that Liffe now offers customers more single stock futures on the Dow Jones STOXX® 600 constituents than any other exchange.[2]

In 2007 Bclear processed a record 123m equity derivatives contracts, up 133 percent on 2006. A record 75m Universal Stock Futures contracts were traded, up 155 percent on 2006. This ensured that Liffe ended 2007 as Europe’s leader for single stock futures.[3]

CharacteristicsOTCListedBclear
Automated ProcessNoYesYes
Central CounterpartyNoYesYes
Flexible Trade TermsYesNoYes
Broad Product CoverageYesNoYes
Independent Mark-to-MarketNoYesYes
Low CostYesNoYes
Standardized Corporate ActionsNoYesYes
Exchange Contract CreatedNoYesYes

Interest Rate Derivatives

Liffe’s interest rate products comprise short-term interest rates (STIR), bond futures and options on futures contracts covering the key European, Japanese, UK, Swiss and American benchmarks, and Swapnotes®. One set of trading rules covers all interest rate products. For certain product groups opening hours have been extended to cover additional time zones.

Short-term Interest Rates (STIRs)

Average daily volume (ADV) for Liffe’s short-term interest rate products (STIRs) as of September 2007 exceeded 2.5 million contracts.

Short-Term Interest Rate Products

  • EONIA Futures
  • EURIBOR Futures
  • EURIBOR Options
  • EURIBOR Mid-Curve Options
  • Eurodollar Futures
  • Eurodollar Options
  • Eurodollar Mid-Curve Options
  • Short Sterling Futures
  • Short Sterling Options
  • Short Sterling Mid-Curve Options
  • Euroswiss Futures
  • Euroswiss Options
  • Euroyen Futures

Extension of Asian Hours for EURIBOR

At the end of June 2007, Liffe extended trading hours for EURIBOR futures to capitalize on trading during the Asian trading day. The resulting hours of trading are [4]:

  • London: 01:00 to 21:00 Hrs
  • Paris: 02:00 to 22:00 Hrs
  • Frankfurt: 02:00 to 22:00 Hrs
  • Singapore: 08:00 to 04:00 Hrs
  • Hong Kong: 08:00 to 04:00 Hrs
  • Tokyo: 09:00 to 05:00 Hrs
  • Sydney: 10:00 to 06:00 Hrs
  • Chicago: 19:00 to 15:00 Hrs
  • New York: 20:00 to 16:00 Hrs

Bond Derivatives

Of the three bond derivatives products offered by Liffe, Long Gilt futures and Long Gilt options are the most active products. A Japanese Government Bond (JGB) futures contract also is listed for trading on Liffe.

Swapnote® Futures and Options

A Swapnote® is a bond futures contract referenced to the swap market. Exchange-traded, centrally cleared and cash settled, it can be viewed as a bond futures contract that is priced in line with the euro swap curve. Swapnotes are used as a mechanism for hedging longer-dated non-government yields. The 2-year, 5-year and 10-year euro-denominated products are most active of the Swapnote grouping. ICAP plc Swapnote® is a registered trademark of ICAP plc and has been licensed for use by Liffe. [5]

Swapnote Products include:

  • Two-Year € Swapnote Futures
  • Two-Year € Swapnote Options
  • Five-Year € Swapnote Futures
  • Five-Year € Swapnote Options
  • Ten-Year € Swapnote Futures
  • Ten-Year € Swapnote Options
  • Two-Year $ Swapnote Futures
  • Five-Year $ Swapnote Futures
  • Ten-Year $ Swapnote Futures

Index Derivatives

Of the long list of offerings in index derivatives traded on Liffe, the three most active include: 1) CAC 40 Index futures and options; 2) FTSE 100 Index futures and options (including FLEX options); and 3) AEX Index futures and options (including weekly options).

Index Derivatives products

  • AEX Index® Futures
  • AEX Index® Options
  • AEX Index® Weekly Options
  • BEL 20 Index Futures
  • BEL 20 Index Options
  • CAC 40 Index Futures
  • CAC 40 Index Options (PXA)
  • CAC 40 Index Options (PXL)
  • FTSE 100 Index Futures
  • FTSE 100 Index Options (European- Style)
  • FTSE 100 Index FLEX® Options (European- Style)
  • FTSE 250 Index Futures
  • FTSE EPRA/NAREIT Europe Index Future
  • FTSE EPRA/NAREIT Euro Zone Index Future
  • FTSE Eurotop 100 Index Futures
  • FTSEurofirst 80 Index Futures (Paris)
  • FTSEurofirst 100 Index Futures (Paris)
  • MSCI Euro Index Futures
  • MSCI Pan-Euro Index Futures
  • PSI 20 Futures

Commodity Futures and Options

Liffe commodity futures and options cover softs and other agricultural products, with most trading volume concentrated in cocoa, coffee and sugar.

Commodity products[6]

  • Cocoa Futures
  • Cocoa Options
  • Robusta Coffee Futures
  • Robusta Coffee Options
  • Corn Futures
  • Corn Options
  • Rapeseed Futures
  • Rapeseed Options
  • Rapeseed Oil Futures
  • Rapeseed Oil Options
  • Raw Sugar Futures
  • Raw Sugar Options
  • White Sugar Futures
  • White Sugar Options
  • Feed Wheat Futures
  • Feed Wheat Options
  • Milling Wheat Futures
  • Milling Wheat Options

Trading Calendar 2007/2008: Liffe Commodity Products, London

Trading Calendar 2007/2008: Liffe Commodity Products, Paris

Currency Futures and Options

Liffe offers trading in a limited number of currency futures and options products, based on US dollar and euro relationships[7].

FX products:

  • US Dollar/Euro Futures
  • US Dollar/Euro Options
  • Euro/US Dollar Futures
  • Euro/US Dollar Options

Stock Options

Liffe lists stock options (also known as individual equity options) on more than 250 leading European companies.[8]

Single Stock Futures

More than 700 single stock futures are traded through Liffe. Originally, LIFFE listed about 250, but with the consolidation of Amsterdam, Paris, Brussels, Lisbon and London derivatives markets, that number nearly tripled. [9]

Tracker Options

Tracker Options (Trackers replicate the performance of an index) offer physical delivery of the shares on which they are based (the underlying) and have American-style exercise.

Tracker Options:

  • CAC 40® Master Unit
  • DJ Euro STOXX 50SM Master Unit

LIFFEdata Services

LIFFEdata is the umbrella brand under which Liffe distributes all market data and price information associated with its products. This encompasses real-time, delayed and historical data.[10]

Resources

References

  1. ↑ Bclear. Euronext. Retrieved on Dec. 3, 2007.
  2. ↑ "LIFFE EXPANDS BCLEAR STOCK RANGE FURTHER; No other exchange offers more European stock futures," Jan. 31, 2007. Liffe:NYSE Euronex. Retrieved on Jan. 31, 2008.
  3. ↑ "LIFFE EXPANDS BCLEAR STOCK RANGE FURTHER; No other exchange offers more European stock futures," Jan. 31, 2007. Liffe:NYSE Euronex. Retrieved on Jan. 31, 2008.
  4. ↑ Short Term Interest Rates. NYSE Euronext. Retrieved on Nov. 19, 2007.
  5. ↑ "Swapnote futures and options”. www.euronext.com. Retrieved on Nov. 19, 2007.
  6. ↑ Futures "Liffe commodity products". NYSE Euronext. Retrieved on Nov. 19, 2007.
  7. ↑ "Liffe Currency Products”. www.euronext.com/. Retrieved on Nov. 19, 2007.
  8. ↑ "Stock Options”. www.euronext.com. Retrieved on Nov. 19, 2007.
  9. ↑ "Universal stock futures". www.euronext.com. Retrieved on Nov. 19, 2007.
  10. ↑ "Data Services”. www.liffe.com/. Retrieved on Nov. 19, 2007.
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