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The MATCH Facility will enable customers to pre-negotiate bilateral trades in standardized Universal Stock Futures contracts on almost 300 UK stocks. The new facility extends to wholesale market users the benefits of trading on a regulated market and clearing through the London Clearing House. The MATCH Facility offers a means of achieving exposure to UK stock price movements, as well as a substantial reduction in counterparty and credit risk not normally available when trading off-exchange. Significantly, unlike trading the underlying stocks, USFs do not attract stamp duty.
The MATCH Facility will initially be available for Universal Stock Futures based on equities in the FTSE 350 Index. By the end of the year, 297 USFs will be available to trade through the MATCH Facility. This range will be extended to include further contracts on other international stocks during 2004.
Fraser Cowie, Executive Director of Euronext.liffe, said: "On Friday we are launching the first of three new Wholesale Services designed to meet the needs of a growing number of institutional investors who are now able to use derivatives more effectively in their investment strategies. The first of these, the MATCH Facility, builds on the success of our Universal Stock Futures products, and offers trading in contracts on almost three hundred more UK stocks, with more to follow. We want to help our customers take advantage of the benefits of trading on our market, including greater capital efficiency, while retaining the flexibility and choice which characterise wholesale business".
Euronext.liffe's plans for Wholesale Services have received an enthusiastic response:
Doug Shaw, Chief Financial Officer of TCI Fund, says: "This new facility offers the great advantage of enabling the market to trade Contracts For Difference (CFDs) business on-exchange. It will bring the benefits of increased transparency whilst reducing counterparty risk."
Other market participants believe that the MATCH Facility could help to enhance the fund management industry's ability to maximise value for its customers.
Barry Marshall, Chief Operating Officer of the Investment Division at Gartmore Investment Management plc says that "Best execution is so obviously an essential criterion for managing clients' money that some can assume that every fund manager must be able to implement it easily. The capability to use the MATCH product could become as useful an objective measure of a fund manager's implementation ability as the possession of a genuine electronic order management system."
The flexibility of the MATCH Facility offered by Euronext.liffe has been welcomed positively by banks providing services in equity derivatives and financing.
Warren Touwen, Vice President of Equity Linked Product Marketing at Merrill Lynch International in London says: "USFs are an ideal tool for investors looking for capitally efficient tactical exposure to individual stocks which is free from stamp duty costs. Moreover, the MATCH Facility provides a solution to the counterparty limits associated with OTC products".
