Liffe boosted by Nasdaq deal

Sunny times ahead for Liffe and Nasdaq

Nasdaq, the US technology market has partnered with the London International Financial Futures and Options Exchange (Liffe) to sell single-stock futures.

Nasdaq would use Liffe's computer system - called Connect - to trade the futures contracts electronically.

The London exchange hopes that Nasdaq's well-known name will enhance the reputation of the Connect platform, which cost £100m to develop and has suffered some setbacks in the past.

The partnership was launched ahead of regulatory changes expected later this year which will allow US investors to trade the single-stock futures for the first time in almost 20 years.

Single-stock futures allow investors to gamble on the price of an individual equity stock both rising and falling.

"The strength of Nasdaq's brand and its pre-eminent position in the US equity market will make our single-stock futures offering a compelling choice for both retail and institutional customers in the US, as well as in Europe and beyond," said Liffe chairman Brian Williamson.

More to Liffe Connect

Liffe has been trying to sell its Connect platform to other exchanges for some time but it received a subdued reception when it was launched last year.

Connect's reputation was then damaged in January after it crashed twice in one day for periods of several hours while market sensitive data was being released in the UK and US.

Last year, Liffe failed to close a deal to provide screen-based trading technology to the London Metal Exchange.

The exchange lost out to OM Gruppen, the Swedish company that tried to take over the London Stock Exchange last year.

Liffe started trading its "Universal Stock Futures" on Connect on 29 January. It used the world's most liquid stocks, including Vodafone and the Nasdaq-listed internet networking firm Cisco Systems and chipmaker Intel.

No launch date

The partners gave no indication of when the venture will be launched or how many stocks it will cover.

Liffe and Nasdaq will invest equally in the unnamed venture and will share equally in any profits but din not disclose the financial details of the deal.

Trade cannot begin until the repeal of US legislation outlawing trade in single-stock futures comes into effect on 21 December.

The Shad-Johnson accord was introduced almost two decades ago to try and prevent manipulation of the stock market.

Liffe will also extend its opening hours until 2030 GMT from 0600 at the end of June.

Last week the exchange announced that it had returned to profit after two years of losses.

Exchange consolidation

The partnership is the latest example of collaboration between international exchanges. Such ventures avoid the regulatory and shareholder minefield that comes with full-blown mergers.

The deal comes six months after the London Stock Exchange pulled out of its merger with Germany's Deutsche Boerse to defend itself from a hostile bid by Sweden's OM Gruppen.

When London and Frankfurt broke off their talks, Nasdaq was left hanging without a European partner.

Nasdaq needs a third hub, supplementing its own exchanges in New York and Tokyo, to create a global exchange that would offer 24-hour trading.

Nasdaq is also expected to buy a controlling stake in the ailing pan-European stock exchange Easdaq, but chairman Frank Zarb has declined to comment on such a deal.