Futures traders silenced by German rival

TRADERS on the London International Financial Futures and Options Exchange (Liffe) marked the expiry of the June German bund futures contract on Friday with a minute's silence, amid speculation that the exchange will lose what's left of its bund trading business to Germany's Deutsche Terminborse (DTB).

Although more than 31,000 September contracts were traded on Liffe on Friday, they were mostly contracts rolled over from June, traders said. Liffe's bund business is now dwarfed by that of the Frankfurt-based DTB, where more than 270,800 contracts traded the same day.

The German exchange's electronic trading system has won almost all of Liffe's bund business in the past year as investors judged the German exchange's electronic system cheaper and quicker than Liffe's open-outcry floor trading system. Liffe maintains its dominance in short-term interest- rate contracts, which are more difficult to trade on computer screens.

"The bund is gone," said Graham Newall, managing director of Bank Austria Creditanstalt Futures Group, which has moved its bund futures trading to the DTB from Liffe. "Liffe failed to recognise that what they had was totally different to what the DTB was offering."

Open-outcry trading continues in the September futures contract on Liffe for the 10-year bund future, although if trading falls to a level too low to guarantee fair prices, the contract could be switched to Liffe's own electronic system. A spokesman for Liffe declined to comment on Friday's activity in the bund futures pit, except to say that trading in the pit is continuing.

Last month, the DTB's overall trading futures and options contracts for all markets topped that of Liffe. On the DTB, 15.6 million contracts were traded while Liffe traded 15.08 million, according to Deutsche Borse, which controls the DTB and Frankfurt stock exchange.

Last month's top product was the 10-year German government futures, of which 5.7 million contracts traded on the DTB. Liffe traded 1.2 million contracts of the same product.

Copyright IOS & Bloomberg.