40 Years Later: A LIFFE Story
It’s curious that there are zero official celebrations in the air this week but 40 years ago today the then Bank of England Governor Gordon Richardson cut a ribbon hanging in the Royal Exchange and ceremonially pre-empted the first bell being run to start trading.
From there on, the City of London’s presence in derivatives, already on exchange in commodity forms at various venues, had entered the ‘modern’ (what I prefer to term “Sandorian”) era of markets. Across the road, the options traders added some colour to the suits on the London Stock Exchange floor but soon LIFFE had captured the imagination as the dynamic market right in the heart of a building rebuilt often since being originally constructed by Sir Thomas Gresham and opened by the original Queen Elizabeth in 1571.
HRH Queen Elizabeth II would, as I noted the other week, visit LIFFE when it moved to CannonBridge on 11th February 1992. Throughout both incarnations of the LIFFE floor, the whole market was a thriving hotbed of international trade. Originally it copycatted key US markets and added the British yield curve as well as currencies but soon it would develop into UK stock index futures and much more.
I was not there on day one — relieved to say I was far too young! — but it was a fantastic place to learn markets, make friends and experience something which digital markets still cannot replicate, the cacophony of thousands of voices seeking to make markets and bring Liquidity, Accessibility and Transparency to the world.
LIFFE was founded after IPE, LFOX and LME within the Square Mile and it followed the great floors of Chicago and New York as major titans of exchange commerce and it lives on to this day trading via the ether as a balance sheet powerhouse within the magnificent portfolio of ICE.
Of course, the lessons to take away from this episode is that with the rose tint of history it all looked obvious. Futures were a great idea which succeeded on a smooth ar oc acceptance to become mainstream. Yet (as the British government has been discovering this week) the force of reaction is powerful within the establishment and even when LIFFE traded its 1 millionth contract on August 5th 1983 and 2 million by March 9th 1984, there were still vast swathes of cynicism. Cofounder and twice Chairman of LIFFE Sir Brian Williamson used to note that The Economist Magazine took years to stop dismissing the concept of LIFFE for instance before finally getting on board with the success of exchange traded derivatives years after the reality was voluminously obvious.
After 4 decades of success, it appears LIFFE is enjoying a somewhat muted anniversary but those who worked on the floor or for the exchange itself retain a remarkable unifying bond and later today I am sure I will not be alone in raising a glass to a great market that did so much to accelerate the world of derivatives trading. It’s a great lesson in vision (thanks to all who persevere and built the original market — even when the Bank of England was itself cynical it would work) and a very useful lesson concerning a rather low latency media / public opinion forming process and the wider blob whose short-termism cum narrow minded perspectives on the future usually involves a rush to judgement before the facts have been established.
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