LSE to take on Eurex and Liffe in derivatives

The London Stock Exchange (LSE) yesterday said it was to take on Europe’s two dominant derivatives exchanges within a year, to broaden its footprint beyond its traditional share trading base.

Eurex, controlled by Deutsche Boerse and Liffe, part of transatlantic exchange NYSE Euronext, has long dominated exchange traded derivatives in Europe.

“We are on track, within the next nine months to offer a credible alternative to our two established European competitors,” LSE chief executive Xavier Rolet said at the annual derivatives conference.

Rolet seeks to exploit regulatory momentum blowing in his direction as the European Union sets to approve sweeping new rules over the coming months in a bid to learn from the financial crisis. Policymakers are planning to push more trading in the vast $615 trillion (£427 trillion) over-the-counter (OTC) derivatives sector onto exchanges to increase transparency and cut risk after the sector’s key role in the demise of two banks, Lehman Brothers and Bear Stearns.

Such changes raise the prospect of huge new revenue streams for exchanges at a time when margins in equities trading are being squeezed.