Outlook: Liffe threatening

ANY CREDIBLE financial centre has to have a big futures market, and though a great deal of derivatives activity these days is customised and over the counter, a vibrant futures exchange is an absolute necessity. Liffe used so effortlessly to occupy this position, that it is small wonder it became complacent.

First it was caught napping by Frankfurt's low cost screen dealing systems. Now it has suffered another blow - the collapse of Griffin Trading. This has highlighted quite serious regulatory failings.

Strictly speaking this is not Liffe's fault, as it is not responsible for regulating Griffin, nor is this a particularly significant collapse in the scale of things. "Only" pounds 6.25m seems to be at risk as a result of the activities of John Ho (Ho) Park, and no more than 100 "locals", or traders, have been hit by Griffin's failure adequately to ring fence their money from Mr Park's recklessness.

Nonetheless, the mud is sticking. First Liffe is accused of charging far too much. Now it is accused of failing to safeguard its traders' money. In most rival futures exchanges, it would apparently be quite illegal to "pool" traders' interests in the way that seems to have happened at Griffin. Elsewhere, strict segregation is the order of the day, as it is in nearly all transactions involving money. For Brian Williamson, Liffe's new chairman, the Griffin debacle could hardly have come at a worse time.