Euronext.liffe is launching:
- The MATCH Facility for trading Universal Stock Futures directly between wholesale counterparties - available from 28 November 2003
- The FLEX® Facility for tailor-made individual equity option contracts - available from 26 January 2004
- The OTC Facility for the trade administration and clearing of OTC equity derivatives business - available from Q1, 2004
Trades matched by these services will be cleared by the London Clearing House.
These new services are launched as part of Euronext.liffe's drive to be the leading exchange for cross-border equity derivatives trading in Europe. After extensive consultation with customers and the wider over-the-counter (OTC) market, these services are being launched to attract OTC equity derivatives business from across Europe onto the exchange. The launch follows recent regulatory changes which now make it possible for more investors to use derivatives and strong growth in the OTC equity derivatives markets.
The new Wholesale Services combine the advantages of on-exchange and OTC trading, including
- A broad product range including individual equity options, Universal Stock Futures and licensed index products
- Flexibility without publication of trade price and size for OTC business
- Tax-efficient trading - ability to trade UK futures & options free from Stamp Duty
- A solution to counterparty concentration restrictions in the OTC market
- Margin efficiencies between exchange traded and OTC business
- The security of a central counterparty
John Foyle, Executive Director of Euronext.liffe, said: "These Wholesale Services are a colourful new hybrid. They combine the traditional flexibility and choice of OTC markets, with the efficiencies associated with exchange business in trade administration and the efficient use of capital. This is a significant expansion, initially in UK stocks, of our existing services for wholesale market customers. It will increase our ability to provide users of the OTC market with greater flexibility when making closing-out trades, the efficiency of netting open positions and the freeing up of counterparty credit lines."
The MATCH Facility for Universal Stock Futures
Euronext.liffe operates a vibrant central market in Universal Stock Futures (USFs) contracts. USFs enable investors to trade the price movement in a wide range of European blue-chip equities on a single trading platform under a single regulatory regime.
From 28 November 2003, the MATCH Facility will extend the available service in Universal Stock Futures to a further 300 constituent stocks of the FTSE 350 Index. These will be available solely on a bilaterally-negotiated basis to wholesale customers who do not require a central order book. Those UK USFs already listed on LIFFE CONNECT® will continue to be traded in the central order book.
The MATCH facility will provide customers with tax- and capital-efficient trading using a cost-effective, market friendly mechanism. Unlike trading in the underlying stock, trading UK USFs does not attract Stamp Duty.
As of 28 November, all constituent stocks of the FTSEurofirst 80 and 100 indices will be available for trading as Universal Stock Futures, either via the central order book or the MATCH Facility.
The FLEX® Facility for Individual Equity Options
From 26 January 2004 the FLEX® Facility will offer customers European-style options with tailored exercise price and expiry dates out to three years. The facility will initially apply to blue-chip UK equity options.
This facility builds on a parallel "Series-on-Request" service already offered in Amsterdam for Dutch equity options, a service which enables customers to request the intra-day listing of new exercise prices.
The OTC Facility
From Q1 2004 the OTC Facility will provide trade administration and clearing of European equity derivatives business. Initially this will be available for standard and customised equity option trades on UK securities.
The OTC Facility will combine the traditional OTC benefits of flexibility without publication of trade price and size, with the exchange benefits of ease of trade administration, access to a central counterparty, efficient use of capital and the freeing up of credit lines.
The full operational details of the OTC Facility are subject to regulatory approval.
