Disclosure rule lax, says Liffe

Liffe, the London Futures Exchange, called yesterday for a drastic reduction in market-makers' exemption from disclosing trades. Citing new research commissioned by both itself and the Stock Exchange, Liffe said the argument that market-makers' n on-disclosure privileges were the key to maintaining a liquid market had been exposed as exaggerated.

"The argument that these privileges are essential to preserve liquidity is not true. What is said to be so important is in fact rarely made use of," said Daniel Hodson, chief executive of Liffe.

The research, carried out by two academics from the London School of Economics and the University of Southampton, based on 2.4 million trades in 42 stocks between 1992 and 1994, showed that market makers fully used their privilege not to disclose large trades for 90 minutes in just 15 per cent of cases.

Under Stock Exchange rules, publication of any trade over three times normal market size can be delayed for 90 minutes to let market maker offset risk by unwinding the position before the rest of the market realises a big trade has occured.

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