Euronext.Liffe slashes prices for equity option trading

Euronext.Liffe, the European derivatives exchange, will cut its fees for trading equity options through its electronic trading platform, Liffe Connect, from November 1.

The price cuts, which will be available for trades in London, Amsterdam, Paris and Brussels, will amount to around 25% on an average transaction.

Fraser Cowie, executive director of marketing at Euronext.Liffe, said the reductions in operating costs provided by the firm's electronic trading platform have allowed it to cut its fees.

Currently, 70% of equity options trading is over-the-counter. Cowie believes 80% of this is in vanilla products that could easily be done through an exchange.

He said the introduction of the Basel II capital Accord, which will require banks to book regulatory capital when doing OTC trades, would make exchange-traded options more attractive.

But the head of equity derivatives at a leading European investment bank was dubious about how much extra business the exchange could generate. “Exchange fees in Europe are the highest in the world," he said. "What the OTC derivatives market really needs is a clearing and confirmation service, which can generate cost and time savings to the traders.”

The London Stock Exchange, via its EDX platform, and the Depository Trust and Clearing Corporation are both launching an equity derivatives matching service to meet this demand.