London International Financial Futures and Options Exchange - Arbitrage

Arbitrage

What probably sustained LIFFE's trading floor alongside other electronic exchanges such as DTB for some time was the opportunity for arbitrage. The contracts on the German Bund traded at LIFFE and DTB were financially equivalent, opening up arbitrage opportunities between the marketplaces. A bund contract being offered at 98.15 at LIFFE, simultaneously being bid for 98.18 on DTB could result in a risk-free profit of 3 Ticks buying at LIFFE and simultaneously selling on DTB, but would leave an open position in each separate exchange. Arbitrage was frequently conducted, due to the complex prerequisites restricted mostly to institutional market participants. Prior to the move to Cannon Street, the LIFFE social life was certainly wilder around the Royal Exchange. The Greenhouse in front of the market was the champagne bar of choice during the day, but the drinking & dancing on the bar at the Arbitrager won't be forgotten amongst the traders of the late 80's.