ICE reveals a design for Liffe
IntercontinentalExchange has revealed further details of its plans for the Liffe business that came as part of its acquisition of NYSE Euronext in November.
ICE’s acquisition of NYSE Euronext was a memorable reversal of fortunes, the purchase of a centuries-old pillar of the financial markets (NYSE) by an upstart company founded in 2001. The deal, completed on 13 November, wasdriven by ICE’s desire to get its hands on Liffe, the derivatives business of the exchange group. Virtually all the group’s other business lines – including Euronext, the NYSE equities market and NYSE Technologies – were merely an unwanted ‘extra’ to that deal, and as such ICE plans to float, sell off or close down those assets as soon as possible.
Once the Liffe and Euronext businesses have been separated in the first quarter of 2014, ICE plans to move Liffe contracts to the ICE trading platform and to the ICE Futures Europe exchange, starting with agricultural commodity contracts in the summer of 2014. Liffe equity derivatives contracts, including indices and single stock futures and options and interest rates contracts are expected to move in the third and fourth quarters, with Liffe to be fully integrated by the end of 2014.
Shifting Liffe’s contracts to ICE Futures Europe is a technical challenge, because it involves expanding the ability of the ICE trading platform to include the allocation-based matching algorithm that plays an important role in the short-term interest rate market. The ICE platform will also bring other changes, such as the pre- and post-trade risk management functions and the interval price limit circuit breaker and high-frequency messaging policies that are in place on the other ICE markets. All Liffe contracts will be added to ICE’s trading front end WebICE. ICE’s London office will serve as the firm’s European headquarters for the combined operations of Liffe and ICE.
ICE plans to keep the UK data centre in Basildon Essex and the matching engines for Liffe markets will continue to operate from there. Customers will be able to continue using their existing colocation facilities and the NYSE Technologies SFTI network connections for trading Liffe markets on the ICE platform after the transition.
In mid-2014, ICE plans to move the listing of Eurodollar and DTCC GCF repo futures contracts from Liffe US to the Liffe exchange in the UK. The clearing will move from New York Portfolio Clearing to ICE Clear Europe in London. Precious metals and MSCI equity index futures contracts also listed on Liffe US but cleared at the Options Clearing Corporation will be listed on ICE Futures US and cleared by ICE Clear US.
The realignment under ICE also has regulatory and post-trade implications. Under EMIR, ICE Clear Europe plans to report all futures and options to ICE Trade Vault Europe, its own trade repository, which was approved by ESMA in November.