NYSE Euronext-owned derivatives exchange Liffe claims its technology and experience will defend it against the threat of a new rival, dubbed Project Rainbow, whose launch has been reported by the Financial Times.
A group of Europe's largest banks are planning to unveil the Project Rainbow trading platform for financial derivatives to compete with the region's stock exchanges, the FT reported.
The new European derivatives exchange will inject competition in trading with traditional exchanges, and attempt to drive down trading costs, the newspaper said.
The new platform will initially offer trading in two key contracts - the short term interest rate futures denominated in sterling and in Euribor. It will therefore go head to head with trades that are among those most actively traded on Liffe.
But Jean-Francois Theodore, deputy chief executive at Liffe, said the exchange's technology and years of experience would help it to defend itself against the upstart when it launches.
Theodore said: "We believe that we have a good capital play. We have state-of-the-art technology with Liffe Connect. We have a strong position in Rainbow and also we have some kind of thinking about what our current organisation should be."
Project Rainbow's backers include Barclays, Deutsche Bank, Goldman Sachs Group, JP Morgan, MF Global, NewEdge and UBS, the FT said. The group is understood to be close to choosing a technology provider to run its platform.
Calls to Barclays and Deutsche Bank were not returned at the time of writing. UBS declined to comment.
Project Rainbow will be in competition not just with Liffe but with other trading systems that are set to launch, such as Turquoise, a multi-lateral trading facility (MTF) established by nine leading European investment banks.
Last week Turquoise moved a step closer to launching after selecting Progress Software and Detica partners for a real-time trading surveillance system. Turquoise will combine Progress Apama Complex Event Processing (CEP) Platform and Detica's market surveillance to provide surveillance data to root out trading irregularities, spot breaches of trading rules and deliver detailed analysis of trading on the platform. Cinnober Financial Technology has been chosen to supply the technology.
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