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By Tony Hallett, 3 November 1998 14:30

NEWS The London International Financial Futures and Options Exchange (Liffe) will lay off 600 staff as it moves to an electronic trading platform. The derivatives exchange has faced fierce competition over the past 18 months especially from Eurex, the merged German and Swiss bourses. Eurex, along with other major exchanges, has embraced electronic trading systems, destroying Liffe's share of the important German Bund futures market, and overtaking Liffe as Europe's number one derivatives exchange. Brian Williamson, Liffe's chairman, said: "It's clear that nothing remotely like our current cost base is sustainable and that we shall have to cut jobs to remain competitive." Liffe hopes the cuts - which total 60 per cent of the workforce - will reduce its annual operating costs of £130m by more than 50 per cent. They will take place by the end of 1999. After several months of consulting customers, Liffe said it will now concentrate on reducing costs, overhauling its regulatory framework, and forging new partnerships. Since his appointment in the summer, Williamson has not been drawn on possible alliances or mergers. Eurex, exchanges in the Far East, the London Clearing House and the Chicago Board of Trade (Cbot) - the world's largest derivatives exchange which is itself only just making the transition to full-time electronic systems - are all thought to be likely alliance candidates. The first phase of Liffe's electronic trading system, LiffeConnect, is due to go live at the end of the month. About 70 per cent of Liffe's business is expected to migrate to the electronic system, with the remainder staying with the pit-traders. However, observers have pointed to the example of Matif, the French exchange, whose electronic system was originally meant to run alongside open-outcry, but soon took all trades.