Backing grows for Liffe to break into America

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The Independent Online
SUPPORT is gathering on both sides of the Atlantic to install Liffe trading screens in the US after it emerged this week that the Prime Minister, Tony Blair, took up the issue during a recent visit to Chicago, birthplace of the futures market.

The Cannon Street-based London International Financial Futures and Options Exchange has, since the beginning of the year, been locked in a battle with US financial regulators to gain the same status as Liffe's German rival, Eurex. The US allows its financial firms to trade in eurobunds through the German screens but does not allow them to trade in euro money markets through Liffe Connect screens.

The ban was put in place to allow the US futures and options market to develop its own screen-based trading system before exposing itself entirely to competition.

In a last-ditch attempt to enter the US market, Brian Williamson, chairman of Liffe, last week asked the US for a waiver from its ban on foreign exchanges in the same way as Germany has been granted one.

It is a critical matter for Liffe because of the huge size of the US financial market. Liffe needs a decision from the US quickly, because global financial centres are reluctant to install any new electronic equipment too close to the start of the new millennium.

"All we are complaining about is that there is clearly a difference how this foreign exchange is dealt with compared to others. All we want is parity," said Mr Williamson.

"We clearly have to be in there before the second half of the year, otherwise it is likely the exchange will have to wait until 1 January, 2000. It's critical we get this as soon as possible. I can't believe they [US regulators] will let it drag on any further."

Mr Williamson said when he took up the job as chairman last August he was given the impression by the US regulators that the issue could be sorted out by January. Even though it has not yet received clearance, Liffe is investing pounds 5m in installing telephone exchange "hubs" in the US.

"We have decided, given the amount of public support, to spend the money. But why should an exchange have to take this risk just because an injustice hasn't been rectified?" he asked.

Liffe is finding more and more allies as every moment passes. Mr Blair took up the issue on a visit to the US. In a speech to the Economic Club of Chicago on 22 April called mainly to discuss the war in the Balkans, Mr Blair said: "The London Futures Exchange looks forward to receiving early approval from the CFTC for its system to be installed here."

The big US banks are also increasingly concerned that they will not be able to trade in euro money market derivatives cheaply through the Liffe Connect screens, which take over the transactions from Liffe traders in September.

A number of Commissioners of the US Commodity Futures Trading Commission (CFTC) have called for a lifting of the rule barring US customers from computer access to foreign futures exchanges.

Ninety per cent of the euro money market futures and options are traded in London.