Talks on futures exchange

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The controversy surrounding the future of the London Commodity Exchange heated up yesterday when Liffe, the financial futures and options exchange announced that it had entered into talks with the commodity market to consider the feasibility of forming a strategic partnership.

The talks, which are at an exploratory stage, are one of a number of talks which LCE is holding with other exchanges. A preliminary report will be delivered to next week.

The announcement comes on the same day as New York's Coffee, Sugar & Cocoa Exchange confirmed that it had begun discussions to acquire the capital shares of the LCE.

The New York exchange, which trades mainly in coffee futures, is trying to establish a global market in its contracts. Sceptics also suggest that it is seeking an overseas acquisition to defend itself from unwelcome overtures by Nymex, the ambitious New York energy exchange. A spokesman for the CSCE said that LCE's negotiations with Liffe would not deter their takeover attempts.

The news has renewed speculation that the threat of an American takeover may encourage amalgamation of the three London exchanges - Liffe, LCE and the International Petroleum Exchange - to establish a central futures exchange under one roof in the City.

The idea received quiet support from senior Liffe members. "There may be many synergies and economies associated with such an idea," Jack Wigglesworth, the chairman, said.