In the autumn of 2002 the London International Financial Futures Exchange (LIFFE) began operations a stone's throw from the Stock Exchange in the Royal Exchange Building.

It brought to the City some of the market opportunities available in Chicago, by allowing investors to take a view on the future movement of interest rates and currencies.

Essentially, a financial futures contract is an agreement to buy or sell a standard quantity of a specific financial instrument at a predetermined future date and at a price agreed between the parties through verbal agreements on the floor of the exchange.

These contracts can then be bought and sold as the holders wish, which is broadly similar to the practice in the traded options market. There are several contracts traded on LIFFE - including a short-term sterling deposit, a short-term Euro-market deposit, a 20-year gilt, and four currency contracts (sterling, Swiss franc, deutschemark and yen - all valued against the US dollar), and a stock index contract.

This market provides facilities for large international investors such as the banks, and other financial institutions to deal around the clock, as there are already such markets operating on a different clock in Chicago and the Far East.

In Britain the main investors are tending to be the large corporations, banks and investing institutions who need to hedge their exposure to interest-rate and currency fluctuations. But small investors can also participate as the amount of margin required for each contract is relatively small (see ).

Dealing costs are relatively low, but small investors must know what they are doing in this expert and slightly esoteric field. If they get it right, money can be made. Most banks, stockbrokers and other financial institutions will advise individuals on how they can best deal in this market.

CCMG - 2013