Liffe trader loses pounds 750,000 on futures bet

FORTY LONDON futures traders have been temporarily put out of business after a trader lost pounds 750,000 on Friday on a bet in gilt futures on the Liffe market.

The incident comes less than nine months after Griffin, a London futures clearing house, was brought down when trader John Park lost pounds 10m on German government bond futures.

Steven Humphries, who worked for Sussex Futures, was badly wrong-footed when the gilt market slumped on Friday after strong US employment figures. Mr Humphries had used Liffe's new electronic screen based system, Liffe Connect, to buy 1,100 lots of gilt futures, a large position for a bank let alone an individual.

Traders said yesterday that the latest incident raised questions once again about whether electronic trading systems are sufficiently fool-proof to cope with volatile futures markets.

The size of his loss was only discovered after Mr Humphries, an experienced floor trader who recently switched to screen-based trading, had left the office.

Back office staff had earlier queried the size of the position, which far exceeded the limit authorised by the firm. Following the discovery, officials from the Financial Services Authority were called into the firm late on Friday night.

John Sussex, head of Sussex Futures, is understood to have made good the losses from his own pocket so that the 40 traders will be able to resume work as soon as possible.

The FSA yesterday imposed temporary trading restrictions on Sussex Futures. It is hoped that they will be removed in the next day or two and there is no question of the firm going under.

No decision has yet been taken as to whether any further action will be necessary. The FSA has refused to comment on the situation.

Although Mr Humphries has not returned to work, he has been in telephone communication with Mr Sussex.

Mr Humphries was unable to be contacted last night.