It's a wonderful LIFFE


January 23, 1998

This book about LIFFE, the London International Financial Futures Exchange, founded in 1982, from March 1992 the Futures and Options Exchange, is not a coffee-table book to display alongside Country Life.

The author, David Kynaston, a professional historian and a senior research fellow at the centre for business history at the University of Leeds, states that "contemporary history always involves a strong element of oral history, and I was able to interview over 70 people." But the personal flavour derived from interviews does not find its way into the pages.

The product is therefore a contemporary financial history book, deeply rooted in admirable research and rock-solid sources.

However, as a market practitioner, who operated in London from 1983 to 1996, I can fill in the gaps and provide myself with the dramatisation of the script, using direct knowledge of some of the characters to whom the author refers.

I can therefore unreservedly recommend this very conscientious piece of work. In particular, it should be compulsory reading for all the pin-striped masses and even the jeans brigade who negotiate their way to Liverpool Street or Bank station every morning.

During my early London days I often indulged in a smoked salmon sandwich and a glass of champagne at Green's wine bar next to the Royal Exchange. So I remember well the multi-coloured jackets, the bragging and the drinking of the LIFFE traders in those exciting first few years. I was a spectator on the floor of the Exchange on a couple of occasions and I can still taste the adrenaline. What I had forgotten, and I thank Kynaston for reminding me, is just how difficult it was for the pioneers of LIFFE to get the show on the road against powerful and entrenched vested interests, against financial Luddites and against all the prejudices of ignorance.

One cannot avoid thinking that without Eddie George and his enlightened colleagues at the Bank of England, like Pen Kent, LIFFE might never have come to life and London might have been consigned to the backwaters of financial history.

And yet, when it comes to self-congratulation and speeches about the vitality of the City, the contribution of such strong personalities as John Barkshire, Michael Jenkins and David Burton is often overlooked. All praise to the author for giving them their due credit, despite the strictures of over-reliance on written records.

Even today, vested interests and financial Luddites continue to represent a danger to the City's ability to foster financial innovation and to stay at the forefront of global financial activity. This book should serve as a warning as to how small and provincial the future could look if they are allowed to prevail.

It was hilarious and sad at the same time to read that, when trading was already taking place globally and around the clock, the decision to advance LIFFE's opening time from 9.30am to 9.00am in 1986 required great diplomacy and extended and highly political negotiations with the Stock Exchange.

At times it appears almost as if LIFFE got more support and encouragement from competing exchanges in Chicago, which saw LIFFE as a catalyst for increased global volumes of activity, than from its own constituencies in London. With that background knowledge, it is much easier to understand how all the great glories of British merchant banking fell one by one into the hands of respectively American and continental European institutions: modern finance was considered more of a threat than an opportunity by the barons of the British financial establishment.

Kynaston dedicates a remarkable amount of analysis to the work and discipline required to determine market demand for new contracts, to the products of LIFFE and to their design, but also to the painful soul-searching that takes place before a contract is dropped. This highlights the positive culture of LIFFE, which from the beginning cultivated sound research and market hygiene in preference to backroom deals and expensive compromises.

Whatever the future of LIFFE, its early history is an example other markets and regulators in the UK should study. This book should help them to do so.

Rudi Bogni is chief executive, private banking division, Swiss Bank Corporation.

LIFFE: A Market and its Makers

Author - David Kynaston
ISBN - 1 85757 056 1
Publisher - Granta Books
Price - £25.00
Pages - 340

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