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The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') was a
futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity o ...
based in London. In 2014, following a series of takeovers, LIFFE became part of
Intercontinental Exchange Intercontinental Exchange, Inc. (ICE) is an American company formed in 2000 that operates global financial exchanges and clearing houses and provides mortgage technology, data and listing services. Listed on the Fortune 500, S&P 500, and Russ ...
, and was renamed ICE Futures Europe.
Euronext Euronext N.V. (short for European New Exchange Technology) is a pan-European bourse that offers various trading and post-trade services. Traded assets include regulated equities, exchange-traded funds (ETF), warrants and certificates, bonds, ...
acquired LIFFE in 2002, and were then in turn taken over by
NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...
in 2007, to form
NYSE Euronext NYSE Euronext, Inc. was a transatlantic multinational financial services corporation that operated multiple securities exchanges, including the New York Stock Exchange, Euronext and NYSE Arca (formerly known as ArcaEx). NYSE merged with Archi ...
. The main rationale for this transaction was to gain ownership of LIFFE. In the same manner, Intercontinental Exchange then purchased NYSE Euronext in 2013, principally to acquire LIFFE.


History

The London International Financial Futures Exchange (LIFFE), established by Sir Brian Williamson started life on 30 September 1982, to take advantage of the removal of currency controls in the UK in 1979. The exchange modelled itself after the
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...
and the
Chicago Mercantile Exchange The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an ...
. It initially offered
futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...
s and options linked to short-term interest rates. In 1993 LIFFE merged with the ''London Traded Options Market'' (LTOM), adding equity options to its product range. This is when it changed its name to the London International Financial Futures ''and Options'' Exchange. In 1996 it merged with the ''London Commodity Exchange'' (LCE), and, as a result, a range of soft and agricultural commodity contracts was added to its products offering. Trading was conducted by
open outcry Open outcry is a method of communication between professionals on a stock exchange or futures exchange, typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orde ...
, where traders meet on the trading floor (in what is called ''the pit'') to conduct trades. The Exchange was originally housed in the historic Royal Exchange building near Bank but then moved to Cannon Bridge in 1991. By the end of 1996, LIFFE was by far the biggest futures exchange in Europe, followed by the
MATIF MATIF SA ( French: ''Marché à Terme International de France'') is a private corporation which is both a futures exchange and a clearing house in France. It was absorbed in the merger of the Paris Bourse with Euronext NV to form Euronext Paris. ...
in Paris and the Deutsche Terminbörse (DTB) in
Frankfurt Frankfurt, officially Frankfurt am Main (; Hessian: , " Frank ford on the Main"), is the most populous city in the German state of Hesse. Its 791,000 inhabitants as of 2022 make it the fifth-most populous city in Germany. Located on it ...
. The DTB was an electronic exchange founded in 1990 and the predecessor to
Eurex Eurex Exchange is an international exchange which primarily offers trading in European based derivatives. It is the largest European futures and options market. The products traded on this exchange vary from German and Swiss debt instruments to E ...
. LIFFE's most-traded product was a
futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...
on ''Bunds'', the 10-year German Government Bond. The DTB offered an identical product but, as an electronic exchange, it had a lower cost base. The progress of DTB can be gauged from the fact that in mid-1997 the DTB had less than 25% of the market. By October, it had more than 50%, and a couple of months later LIFFE was left with only 10%. The Bund represented about a third of LIFFE's business. The exchange, which had turned in a profit of £57m in 1997, reported a loss of £64m in 1998. Its ambitious plans for enlarged trading floor and offices on a site near Spitalfields market were dropped (and became the ABN Amro UK HQ).


Move to electronic trading

LIFFE had had big plans to expand, and intended to redevelop
Spitalfields Market Spitalfields Market is a traders' market as well as a food and art market located in Spitalfields, Central London. Traders began operating around 1666, after the Great Fire of London, where the market stands today. The Spitalfields regeneration pr ...
in the
City of London The City of London is a city, ceremonial county and local government district that contains the historic centre and constitutes, alongside Canary Wharf, the primary central business district (CBD) of London. It constituted most of London f ...
as they needed a larger building for their open outcry. With the loss of the market for their main product, Bund futures contracts, all expansion plans were shelved. LIFFE realised that, to compete, it had urgently to develop an
electronic trading platform In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products ...
instead. It already had an electronic platform called Automated Pit Trading (APT), which was used in
after-hours trading Extended-hours trading (or electronic trading hours, ETH) is stock trading that happens either before or after the trading day of a stock exchange, i.e., pre-market trading or after-hours trading. After-hours trading is the name for buying and ...
when the trading pit was closed. LIFFE now developed a new trading platform, LIFFE CONNECT, for all trading, including the exchange's range of short-term
interest rate derivative In finance, an interest rate derivative (IRD) is a derivative whose payments are determined through calculation techniques where the underlying benchmark product is an interest rate, or set of different interest rates. There are a multitude of diff ...
s contracts. After the creation of the euro in 1999 the exchange won the lion's share of trading in euro-denominated short-term interest rate derivatives – the EURIBOR contract. On Friday 24 November 2000, at 5 pm, the last three of the once 26 open outcry pits were permanently closed. The design of LIFFE CONNECT made it possible for customers to choose which trading software they would use. LIFFE intended that this flexibility would encourage traders around the world to link to the exchange. And, by the beginning of 2002, customers in 25 countries around the world were trading on LIFFE. This completed a revolution in LIFFE's business: whereas traders had once had to come to LIFFE; now, through LIFFE CONNECT, LIFFE took its market to its customers wherever they were in the world. Seeing LIFFE CONNECT's potential, the
Blackstone Group Blackstone Inc. is an American alternative investment management company based in New York City. Blackstone's private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate bu ...
and
Battery Ventures Battery Ventures is an American technology-focused investment firm. Founded in 1983, the firm makes venture-capital and private-equity investments in markets across the globe from offices in Boston, Silicon Valley, San Francisco, Israel and Lon ...
invested £44m in Liffe to finance the commercial development of the trading platform so that it could be sold to other exchanges. Liffe went on to sell the technology to three exchanges, TIFFE (now renamed the
Tokyo Financial Exchange is a futures exchange and established in April 1989 under the ''Financial Futures Trading Law'' of Japan. It principally deals in financial instrument markets that handles securities as well as market derivatives. History The Tokyo Financial Ex ...
) (2001), the
Chicago Board of Trade The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other exch ...
(2003) and the
Tokyo Stock Exchange The , abbreviated as Tosho () or TSE/TYO, is a stock exchange located in Tokyo, Japan. It is the third largest stock exchange in the world by aggregate market capitalization of its listed companies, and the largest in Asia. It had 2,292 listed ...
(2008). Early in 2001 LIFFE said that it had returned to profit. In September that year the exchange announced that it had received a number of expressions of interest in buying the business. In January 2002, LIFFE was acquired by
Euronext Euronext N.V. (short for European New Exchange Technology) is a pan-European bourse that offers various trading and post-trade services. Traded assets include regulated equities, exchange-traded funds (ETF), warrants and certificates, bonds, ...
, joining the exchanges of
Amsterdam Amsterdam ( , , , lit. ''The Dam on the River Amstel'') is the capital and most populous city of the Netherlands, with The Hague being the seat of government. It has a population of 907,976 within the city proper, 1,558,755 in the urban ar ...
, Brussels, Paris and
Lisbon Lisbon (; pt, Lisboa ) is the capital and largest city of Portugal, with an estimated population of 544,851 within its administrative limits in an area of 100.05 km2. Lisbon's urban area extends beyond the city's administrative limits w ...
.


References

*Durica, Dr. Michael (2006). Product Development for Electronic Derivative Exchanges: The case of the German ifo business climate index as underlying for exchange traded derivatives to hedge business cycle risk. Pro Business. Berlin.


External links


LIFFE

LIFFE Investor history


{{DEFAULTSORT:London International Financial Futures And Options Exchange Financial services companies established in 1982 Economy of London Commodity exchanges in the United Kingdom NYSE Euronext Organisations based in the City of London Futures exchanges 1982 establishments in the United Kingdom Organizations established in 1982