Liffe, the London futures exchange, became the first City institution to gear up for the euro yesterday, announcing that two of its most important new contracts can be settled against a common currency interest rate. The Euromark and short sterling contracts to be posted next week will be the first opportunity to fix interest rates beyond the 1 January 1999 start date for European Monetary Union set in the Maastricht Treaty.
"London and Liffe is saying we are prepared for the euro, and ready to take the initiative," said Daniel Hodson, the exchange's chief executive
Liffe said it will be catering for whether EMU goes ahead or not. "We are not saying whether the euro will come in on time, but we feel it is most important investors have certainty about the options if it does or doesn't," Mr Hodson said.
The Euromark contract, which will be listed on 19 March, with a March 1999 delivery month, will be worded in such a way that it can be settled against the euro. The same will be true for the short sterling contract to be posted on 21 March.
"If EMU does go ahead, there will be a developed money market in euros immediately. For clarity, we are saying that those trading the deutschmark contract will be settled against the euro interest rate. If there is no EMU, then it will just continue as now and be settled against the mark rate," Mr Hodson said.