Liffe's new futures under the weather

Two working days after launching its weather futures contracts, the London International Financial Futures and Options Exchange (Liffe) has yet to see a trade. Despite this, Ian Dudden, director of non-financial products at the London-based exchange - currently being bought by pan-European derivatives exchange Euronext - remains hopeful.

Dudden said good bid-offer spreads have been witnessed for a London-based temparature contract, and this contract is likely be the first traded - Liffe also offers Paris and Berlin-based contracts, but bid-offer spreads have yet to be favourable.Dudden added that a number of over-the-counter (OTC) weather market participants had demonstrated their commitment to Liffe’s exchange-traded plans, despite the lack of trading activity.

Stuart Jones, business development manager for weather risk at Accord Energy, the trading subsidiary of UK energy firm Centrica, said he intends to “participate actively in the Liffe weather futures market". But Dudden could not divulge whether Accord was likely to be the first firm to buy a Liffe contract.

Liffe is initially targeting the energy, insurance and reinsurance industries – sectors already involved in the OTC market – but said in the long term it plans to market its contracts to retailers who may be affected by seasonal variations in temperature. The exchange is also considering the addition of other locations in Europe, the US and Asia. But any such plans will likely rely on the success of the current contract offerings.