Magazine article Modern Trader

Liffe Put on Bidding Block

Magazine article Modern Trader

Liffe Put on Bidding Block

Article excerpt



The recently knighted Sir Brian Williamson helped build the London International Financial Futures Exchange (Liffe) into one of the world's leading derivatives exchanges before retiring as chairman in 1988. A decade later, he came back to rescue it from the brink of oblivion. The way things are going now, he could soon find himself acting as non-executive chairman of a combined entity formed from the merger of Liffe and the London Stock Exchange (LSE). If that happens, hell be working alongside former Liffe executive Clara Furse, who is the LSE's chief executive.

That's one of the scenarios that began bouncing around London after the LSE entered a preliminary bid to purchase Liffe in October. At this writing, the exchanges were awaiting a competing bid from the Dutch-Belgian-French exchange Euronext and anyone else interested in picking up the property. The Chicago Mercantile Exchange and Nasdaq were considered in the running, but Euronext was the only other exchange to have made formal overtures. Of the two,

Euronext can offer more cash and gain more synergies with its existing business, but the LSE can capitalize on the sentiments of the London brokerage community and is more hungry to deal. That's partly because in its current state it could be gobbled up by either Euronext or Germany's Deutsche Borse (DB), and also because London is the only major European financial center that does not have an integrated equities and derivatives exchange. That leaves it both unable to offer cross-margining among cash and derivatives products and less diversified.

However, some analysts, say that hooking up with Euronext makes better business sense. The reason: Euronext's business model already is based on offering both equities and derivatives, but its derivatives business is miniscule compared to Eurex. …

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