Pit trading draws to a close on Liffe

Pit trading at the London International Financial Futures and Options Exchange (Liffe) ended last Friday, bar a few options pits that will be kept going in the face of electronic, screen-based buying and selling.

Liffe introduced its electronic platform, Liffe Connect, in two stages. The first, for equity options went live a year ago, and then financial futures contracts - the type that Swiss-German Eurex had been successfully whisking away from Liffe with its all-electronic system - made the move across in spring this year.

The introduction of short-term interest rate products this summer finally showed the higher-ups at Liffe what they had long suspected - that nearly any contract which traders thought was best-suited to the pit-based, 'open-outcry' system could be traded effectively electronically.

Hugh Freedberg, Liffe's chief executive, recently admitted: "We had planned for a transition period [from pits to screens] of several months, recognising that it would take short-term interest rate contracts time to migrate to the screen. However, the transfer has occurred faster than expected."

Mike Stiller, director at Global Direct Dealing, a provider of electronic trading software, said: "It was inevitable. The electronic platform will eventually make trading more transparent and, contrary to what some people were saying, more liquid."

Stiller added that Liffe Connect and its international counterparts are likely to prove robust enough even to withstand days of heavy trading during market crashes or interest rate changes, for example.

But while some traders have decided to chance their arms with electronic terminals, estimates are being bandied about that less than 20 per cent will stay in the business of buying and selling derivatives.

Experts now say the next exchanges to abandon the floor are likely to be the London Metal Exchange and the venerable Chicago Board of Trade, in the city where futures trading first took off.