Euronext.liffe's New FLEX® Facility Available From 26 January 2004

Euronext.liffe launches the second phase of its Wholesale Services for European equity derivatives on Monday 26 January with the launch of its FLEX® Facility.

The FLEX® Facility is a risk management solution tailored to customers' needs. Initially applying to options on the shares of UK blue-chip companies, the FLEX® facility will offer customers new European-style exercise options with the ability to tailor exercise prices and expiry dates out to three years. This enables the customer to define a derivatives contract to accurately match his risk profile. The service complements the existing market in UK American-style equity exercise options.

Fraser Cowie, Director of Marketing at Euronext.liffe said: "The new FLEX® Facility builds on customer demand for the existing FTSE 100 Index FLEX® option already offered by Euronext.liffe. The FLEX® Facility will offer customers the product flexibility of the OTC market combined with the efficiencies of exchange-trading and the security of centralised clearing."

The FLEX® Facility is the second in a series of three Wholesale Services which Euronext.liffe is making available to the market. 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 changes¹ which now make it possible for key institutional investors to make greater use of derivatives.

The MATCH Facility³ (a facility for trading Universal Stock Futures directly between wholesale counterparties) was launched on 28 November 2003. The third service will be the launch of the OTC Facility later in the first quarter of 2004, subject to regulatory approval. This facility will provide trade administration and clearing of OTC equity derivatives, combining the traditional OTC benefits with the exchange-traded advantages of ease of trade administration, access to a central counterparty, efficient use of capital and the freeing up of credit lines.

Background

1. Recent regulatory changes have widened access to derivatives products. Two new directives, known as "UCITS III", came into effect in the UK on 1 November 2002. These give UCITS-compliant funds more opportunity to invest in derivatives and other instruments on recognised investment exchanges. "UCITS" stands for the Undertakings for Collective Investment in Transferable Securities. UCITS are the EU regulations that govern unit trusts and mutual funds whose sole objective is investment in transferable securities.
2. FLEX® is a registered trademark of the Chicago Board Options Exchange Inc. and has been licensed for use by LIFFE Administration and Management.
3. The MATCH Facility, which has already traded a total 1,885 contracts, expands the range of USFs available to trade on Euronext.liffe to well over 400. Euronext.liffe announced the launch of the first 25 USF contracts less than three years ago. Since then the product range has been progressively extended and now encompasses futures on stocks listed in 12 countries and 7 currencies, all traded on a single platform, and cleared and settled under a single regulatory regime. In 2003 the volume of USFs increased by 61% year-on-year.
4. The full operational details of the third Wholesale Service, the OTC Facility, are subject to regulatory approval.