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Speed prompts futures exchange to consider move to U.S.

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One of London’s largest financial markets could be moved from the U.K. to the U.S. by its new American owner.  

Moving  the London International Financial Futures Exchange (or LIFFE  as it is known) to the U.S. would save money and give the edge to American traders.  But could this be a big miscalculation? 

Shifting LIFFE’s computer system to the States would save an estimated $30 million a year, and it would allow American-based traders to deal a hundred milliseconds faster than smaller London-based traders. That’s a tenth of a second– that’s an eternity in today’s speed-obsessed electronic trading.

“High Frequency traders tend to trade in nano seconds, which is one billionth of a second,” says Will Mitting , editor of Futures and Options World magazine. “If your  strategy is purely based on your ability to respond to market news swiftly, then you’re really going to see a difference in that hundred milliseconds.”  

And favoring American traders seems to make good commercial sense since the U.S. is the biggest derivatives market in the world. But does it? At least one London trader questions the logic of the move.

“It will alienate a lot of London traders,”  says Neil Crammond of the FUTEX trading house, pointing out that there are plenty of other places to do business when you are based in the British capital.

“We now see the  Nasdaq Exchange offering the same contracts as LIFFE , the  Chicago Mercantile Exchange is offering the same contracts as LIFFE.  So is EUREX.  We can now pick and choose where we’re going to go,” claims Crammond.  

Why have NASDAQ, and the CME and EUREX moved to London in the last year or so? Crammond says they’re fighting for a slice of LIFFE’s multi-trillion dollar business. He believes that by putting speed and cost cutting above all other considerations, the exchange’s new American owners are making a big mistake. This — he says — could be the beginning of the end of LIFFE as we know it.

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