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. Last Updated: 07/27/2016

LIFFE Dealers Greet Electronic Trading System




LONDON -- London option traders belatedly joined the electronic era Monday when a new trading system made its debut as the London futures and options market LIFFE tried to put a traumatic period behind it.


On Friday, the final day of open-outcry trading in stock options, business meandered to an uneventful close, with many traders not even showing up.


"Most people are out celebrating. ... It is the end of an era. There has not been a lot of business down here. We are here, we have staff manning our booth and our phones, but we are pretty much on our own," one floor trader said.


Initially handling only individual equity options, LIFFE was forced to bring in the new Connect system and move away from traditional "open outcry" after a dramatic loss of business to the German-Swiss electronic exchange Eurex, which overtook LIFFE to become Europe's largest derivatives market earlier this year.


From Monday, individual stock options are no longer traded by screaming dealers in colorful blazers, a style that has become familiar in London's financial district in recent years.


Trade in busier and high-profile financial contracts such as British government bond - or gilt - futures will migrate to the screen in 1999. There are hopes that the introduction will rejuvenate LIFFE, which recently launched a strategic overhaul, though the system's ultimate impact remains to be seen.


"On the whole I am reasonably bullish of LIFFE's system. I think it is pretty good. On the dummy sessions the volume going through is much bigger than happens on the market and it has worked well," a senior dealer at one floor trading firm said.


"It bodes well for the future, but it will not happen overnight," a director with a specialist options company said.


At present, there are around 75 individual equity option contracts traded in LIFFE's traditional open-outcry pits, but business is fragmented and volumes are lackluster at times.


"Screen trading is clearly the way of the future. Therefore, the sooner we get into it, the sooner we as a firm get good at it and the sooner we as a firm can compete with everyone else who is doing it on other exchanges in the world," the director said.


In the run-up to Connect's launch, LIFFE has managed to sign up more members for equity options trading as well, with numbers doubling. However, many of the new participants already trade as customers of existing firms. On Friday there were some 25 firms dealing on the floor. But as of Monday, 47 members are entitled to trade on the screens, of which six firms will be newcomers.


"That is extremely encouraging for us. When we set out on the development leg, if we had been able to transfer all of those firms on the floor we would have been happy - to have 47 is exceeding our expectations," Tony Hawes, project director for LIFFE Connect equity options said.