Magazine article Modern Trader

Liffe Targets CME's Biggest Contract

Magazine article Modern Trader

Liffe Targets CME's Biggest Contract

Article excerpt


When Euronext.Liffe CEO Hugh Freedberg announced the exchange would list futures and options on eurodollars, he said it also would consider dual-listing eurodollars on its U.S.-based exchange, NQLX, at a later time and clear them through a U.S. clearing-house. That possibility, which some regard as the only step that could save the struggling NQLX, could be a step closer as LCH.Clearnet, the clearing-house for Euronext.Liffe, has sought to expand its Derivatives Clearing Organization (DCO) status with the CFTC to include futures and options.

The London Clearing House, fore-runner of LCH.Clearnet, was approved as a DCO in October 2001 for the purpose of clearing OTC contracts. Arthur Hahn, U.S. counsel for LCH.Clearnet, says clearing futures and options was part of the plan all along but that an ambiguity in U.K. law prevented it from holding segregated funds in the United States. That ambiguity has recently been cleared up, allowing LCH to expand its DCO status.

"LCH wanted to be in the U.S. market independent of Liffe," Hahn says.

Hahn emphasizes Euronext.Liffe and LCH.Clearnet are independent of each other, though Euronext.Liffe's parent has a minority stake in the clearinghouse. While Hahn maintains that the timing of LCH.Clearnet's DCO application and Euronext.Liffe's consideration of listing eurodollar contracts is purely coincidental, he acknowledges that LCH.Clearnet likely would compete for that clearing business.

LCH.Clearnet would make sense for NQLX because traders would be able to exploit margin offsets with other shortterm interest rate products cleared through LCH. …

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