Liffe looks at flexible exchange options

LIFFE, the London International Financial Futures and Options Exchange, is considering launching a new type of flexible options contract in a campaign to double its equity options business in two years, writes Lisa Vaughan.

Flexible exchange options have been successfully traded on the Chicago Board Options Exchange, based on the S&P 500 stock index, since February. They are geared for institutional investors, such as pension funds, unit trusts and insurance companies, and combine the advantages of standard contracts on a regulated exchange, which are backed by clearing house guarantees in case of default, with the flexibility of the over- the-counter derivatives market, where contracts are tailored to a user's needs.

Aspects of Flex options that can be customised include the price and the expiration date, up to five years.

Daniel Hodson, Liffe's chief executive, said that Liffe was researching Flex options, encouraged by the success of the CBOE, whose Flex options have traded a notional value of dollars 5bn. The American Stock Exchange in New York launches flexible options this week.

Now Europe's biggest derivatives market, Liffe has grown rapidly in its 10-year history, but mostly in futures. Last month the Liffe board approved a multi-million- pound budget for options marketing and product development. It is also researching futures and options based on the new FT-SE 250 and 350 stock indices, and on planned FT-SE share indices from specific industrial sectors.