Liffe offers locals pounds 25,000 cash payouts to quit pits
Thursday 09 September 1999
The offer is meant to go some way towards defraying the costs for freelancers, or locals, of setting themselves up as self-employed screen-based traders.
However, some locals say the move runs counter to the express view of Liffe officials that the two systems should be allowed to coexist as long as there is demand and that ultimately the market should decide.
Most locals have already either set themselves up as screen-based traders or quit altogether. But a diehard group of around 30 locals is holding out, claiming the pit still offers advantages, particularly in the very short-dated interest rate futures where London excels.
They say their claims were borne out by the reaction to yesterday's UK interest rate increase which showed that the screen-based Liffe Connect system was unable to cope.
Rather than risk the relatively untried Connect system, the big trading houses who were desperate to cover their positions switched the majority of their deals through to the pit, where some 206,000 contracts were traded against 60,000 through Liffe Connect. Liffe only introduced trading on Connect for the short-term interest rate "Stir" contracts on Monday.
The dissident locals also claim that Liffe is adding after-hours figures to their official volume statistics for Liffe Connect in an attempt to persuade the big houses to move their business away from the floor.
Liffe is under pressure to shift business on to Connect because the cost of maintaining the pits has become prohibitive."Liffe is going broke with floor trading," one trader said. A similar approach was adopted in Paris where the Matif exchange offered compensation packages to traders who went on to screens.
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