On September 30, 1982, Sir Brian Williamson established a futures exchange known as the London International Financial Futures and Options Exchange (LIFFE). Patterned after the Chicago Mercantile Exchange and the Chicago Board of Trade, starting out, this London exchange offered investors the opportunity to trade in options and futures contracts with short term interest rates.
In 1992, LIFFE added equity options to its range of LIFFE commodities by merging with the London Traded Options Market. Four years later, in 1996, the resulting company, London International Financial Futures and Options Exchange, merged with the London Commodity Exchange. With this latter merger, LIFFE commodities came to include soft and agricultural contracts as well.
In the early days, traders traded LIFFE commodities through an “open outcry” system. Traders used hand signals, as well as shouting, to transmit order information among the buyers and the sellers. These well-known exchanges all took place among the chaoticness on the trading floor, commonly known as “the pit.”
After hours when the trading pit was closed, LIFFE commodities continued to be traded with the use of a screen based platform system called the Automated Pit Trading (APT). Launched in 1989, the APT system mimicked the “open outcry” method of trading commodities, but by running electronically, it extended the trading day since actual traders on the trading pit floor were not needed to effectuate futures orders.
By the year 2000, all LIFFE commodities, including contracts with short-term interest rate derivatives, were being traded worldwide through a new APT electronic platform called LIFFE CONNECT. LIFFE CONNECT was so revolutionary, LIFFE later sold its technology to three other exchanges.
It was also during this time that LIFFE suffered a great loss when the market for one of its largest trading products, Bund futures contract, evaporated. Plans to expand LIFFE with a larger building being developed in the Spitafields Market in the City of London were scrapped.
In 2002, LIFFE was purchased by Euronext. This joined the London exchange with the European exchanges located in Amsterdam, Brussels, Paris, and Lisbon. Today this organization is now known as Euronext.liffe.
Just like any product being offered in the stock exchange market, LIFFE commodities can bring a big profit or huge losses. Despite this, many traders still continue to invest in LIFFE commodities. In fact, trading in commodity futures has gradually increased over the years, signaling a strong belief among investors that investing in commodity futures is a profitable and worthwhile investment.
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