Liffe adds to stock futures line-up

The London International Financial Futures and Options Exchange (Liffe) will list a further 22 European universal stock futures from April 18 2002. From that date, a total of 118 universal stock futures will be available on blue-chip stocks from 12 European countries, listed in five currencies across 12 exchanges, with an underlying market capitalisation of €7.69 trillion. Liffe said it increased its line-up due to requests from traders in European hedge funds and equity funds.

Single-stock futures are futures contracts based on individual equity stocks through which investors agree to buy or sell blocks of the particular underlying equity asset, at a specified future date, at an agreed price, allowing investors to bet on the future direction of stock markets. Nasdaq Liffe Markets, an electronic alliance between Nasdaq and Liffe, plans to start trading US universal stock futures in April, subject to US regulatory approval. Single-stock futures were banned in the US for nearly 20 years until Congress lifted it two years ago.

The latest Liffe tranche includes contracts based on eight French stocks, four from Germany and three each from the Netherlands, Switzerland and the UK. Liffe also said market demand has resulted in the inclusion of a contract based on an Irish stock – pharmaceutical firm Elan - for the first time. A Liffe spokesman told RiskNews that additions to the European product line-up are likely over the forthcoming months.

“The strong trading performance of the existing contracts, coupled with increasing interest from new customers and brokers, demonstrates that universal stock futures are making the transition from innovative new offering to established trading tool for investors around the world. In time, as the equity market expertise of Euronext comes to bear, particularly in France and the Netherlands, we hope to see further volume growth in these instruments,” said Simon Raybould, Liffe managing director of sales and marketing.

Liffe was recently purchased by pan-European stock exchange Euronext, and the combined derivatives business of the two exchanges make Euronext.Liffe the world’s second largest derivatives exchange, in terms of value, after Eurex. Trading in February 2002 rose by 37% over the same period last year.

The equity business saw the strongest growth, with year-to-date volume up by 64% in individual equity futures and options, and 38% in equity index products. Short-term interest rate products grew by 28%, and non-financial products grew by 13%, year-to-date.