Outlook: Liffe

WHEN PRESSED to define his vision of what the London International Futures and Options Exchange will look like when he has finished with it, Brian Williamson, the new chairman, has a maddening tendency to slip into vague abstraction. So it is just as well that what Liffe seems to need most at the moment is less of the vision thing than a hefty dose of old fashioned cost-cutting.

Liffe's decline and fall is in fact more apparent than real. The air of crisis stems from the loss of one contract, albeit a very important one. Until earlier this year, Liffe enjoyed a monopoly of trade in the German government bond or Bund future. When it challenged that position with its screen based dealing systems, Frankfurt found it was pushing at an open door. In September, Liffe did precisely 48,000 bund futures contracts. A year ago it did 3.6m.

Yet overall business at Liffe remains brisk. The total value of contracts is up this year from an average daily value of pounds 217bn to pounds 264bn. Even so, it remains highly vulnerable.

The fact that in an area such as derivatives which is at the forefront of financial innovation, London had established an institution which others wanted to emulate, was quite rightly seen in the 1980s and early 1990s as proof that the City of London could reinvent itself. But times have moved on.

London has survived the relative decline of once great institutions like the stock exchange and Lloyds of London. Liffe will survive not by dwelling on what its future means for the City of London. The City's competitive advantage lies not in bodies like the stock exchange or Liffe but in the abilities of the people who work there to be unsentimental and look for the next opportunity.

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