NYSE Liffe

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NYSE Liffe
Nyse liffe.jpg
Founded 1982
Headquarters London
Key People Finbarr Hutcheson, Co-CEO, NYSE Liffe U.K.
Products Futures and options
Website www.euronext.com/

Also see: NYSE Liffe US

NYSE Liffe is the global derivatives business of the former NYSE Euronext, and is now part of the Intercontinental Exchange Group Inc. ICE purchased the parent company of NYSE Liffe, NYSE Euronext in November 2013.

As NYSE Liffe, it comprised the derivatives (futures and options on futures) business of NYSE Euronext, N.V.

NYSE Liffe was the name given to the exchange previously known as LIFFE, which was acquired by Euronext in 2002.

After that acquisition, Euronext consolidated all of its derivatives trading operations under the "Euronext.liffe" name, and then its parent, Euronext, N.V., was acquired by the New York Stock Exchange.

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 ICE Clear Europe.

History

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, as on other futures exchanges, was originally 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.

LIFFE was acquired by Euronext in 2002 and re-named Euronext.liffe. Euronext was in turn acquired by the New York Stock Exchange on Apr. 4, 2007, and LIFFE became NYSE Liffe.

In April 2011, Nasdaq OMX and ICE teamed up to make a hostile bid for NYSE Euronext, a 19% premium to the Deutsche Boerse bid that was announced earlier in the year. The Nasdaq/ICE combination would have allocated the Liffe platform to ICE while the rest of NYSE Euronext would have gone to Nasdaq. [1]

In July 2013, all NYSE Liffe clearing functions were switched from LCH.Clearnet to ICE Clear Europe.[2]

Contract Volume

Year Total Annual Volume* Percent Change
2012 1,951,376,420 (-) 14.5%
2011 2,283,472,810 (+) 6.0%
2010 2,154,742,282 (+) 24.6%
2009 1,729,965,293 (+) 3.2%
2008 1,675,791,242 (+) 9.9%
2007 1,525,247,465 (+) 29.95%

(*)Volumes include NYSE Liffe U.S. and NYSE Liffe Europe. [3]

Products and Services

Bclear

Liffe created Bclear in 2005 as the on-exchange administration and clearing service for equity and commodity derivatives. Users can register OTC business as an exchange contract for futures and options on European and US blue-chip and mid-cap 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.[4]

As of April 2012, Bclear has cleared over a billion contracts and [5]

NYSE Euronext became the first exchange to clear credit default swaps, in December 2008, on the Bclear platform when they launched credit default swap index contracts. [6] A month after its launch, however, the new clearing service for credit derivatives, launched by London-based LCH.Clearnet and futures market Liffe, had yet to execute a single trade, despite expectation that banks would use the system following regulatory pressure to pare risk in the market.[7]

Interest Rate Derivatives

Liffe’s interest rate products comprise short-term interest rates (STIR), bond futures and options 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.

  • Liffe's flagship contract suite - the EURIBOR three-month interest rate contracts, including EURIBOR futures, EURIBOR options, and EURIBOR Mid-Curve Options - had a total volume of 242 million contracts in 2011. [8]
  • Short Sterling products, including futures, options and mid-curve options, were second most active of Liffe's short-term interest rate offerings.

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

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. [9]

Swapnote products include both dollar- and euro-denominated two-year, five-year, and ten-year futures and options.

On April 3, 2014, Intercontinental Exchange Group announced that NYSE Liffe would launch European Government Bond futures and Swapnote futures contracts. The exchange said it expects the following contracts will be available for trading on May 27, 2014, subject to regulatory approval:[10]

  • NYSE Liffe European Government Bond Futures
  • German Government Bond futures (2, 5, 10 and 30 year contracts)
  • Swiss Government Bond futures (5 and 10 year contracts)
  • Italian Government Bond futures (2, 5 and 10 year contracts)
  • Spanish Government Bond futures (2, 5 and 10 year contracts)

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
  • MSCI Equity Indices

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 include futures and options on:[11]

  • Cocoa
  • Robusta Coffee
  • Corn
  • Rapeseed
  • Rapeseed Oil
  • Raw Sugar
  • White Sugar
  • Feed Wheat
  • Milling Wheat
  • Malting Barley
  • Skimmed Milk Powder

Currency Futures and Options

Liffe offers trading in a limited number of currency futures and options products, based on U.S. dollar and euro relationships.[12]

Stock Options

Liffe lists stock options (also known as individual equity options) on more than 250 leading European companies.[13]

Single Stock Futures

More than 1000 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. As of 2012, equities from 21 countries are available to trade on the firm's platforms.

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.[14]

John Lothian News Interviews

Paul MacGregor of NYSE Liffe Discusses New Products & the Interest Rate Market Outlook
NYSE Euronext continues to develop its interest rate offerings, challenging competitors in the space, such as CME Group. Paul MacGregor, executive director, head of fixed income, NYSE Liffe (the global derivatives business of NYSE Euronext) sat down recently with JLN’s Managing Editor, Christine Nielsen, to discuss the outlook for the interest rate market and new products on the horizon for the exchange. Published May 10, 2012. [15]

Resources

References

  1. UPDATE: Nasdaq, ICE Offer To Buy NYSE Euronext For $11.3 Billion. Nasdaq.
  2. NYSE Liffe Sets July 1 Clearing Transition to ICE Clear Europe. NYSE Euronext.
  3. Trading Volume Statistics. Futures Industry.com.
  4. Liffe Expands Bclear Into Russia And Eastern Europe. Mondo Visione.
  5. Bclear - Equities. Liffe:NYSE Euronex.
  6. Liffe and LCH.Clearnet Lead the way with the Launch of Credit Default Swaps on Bclear. NYSE.
  7. Financial News:Liffe CDS Clearing Has No Trades In 1st Month. Euronext.
  8. Annual Volume Survey. Futures Industry Association.
  9. "Swapnote futures and options”. www.euronext.com.
  10. ICE Announces New NYSE Liffe European Government Bond Futures and Swapnote Futures. ICE via MondoVisione.
  11. Futures "Liffe commodity products". NYSE Euronext.
  12. "Liffe Currency Products”. www.euronext.com/.
  13. "Stock Options”. www.euronext.com.
  14. "Data Services”. www.liffe.com/.
  15. Paul MacGregor of NYSE Liffe Discusses New Products & the Interest Rate Market Outlook. John Lothian News.