The London Stock Exchange (LSE) has abandoned plans to launch an exchange traded contract for difference (ETcfds) service following discussions with bank and broker clients.
The innovative service - which would have allowed CFDs to trade alongside the underlying equity in SETS - went into testing in the first quarter and was supposed to go live in mid-2009.
The service was designed to combine the flexibility of a CFD contract with the benefits of a standardised, centrally traded and cleared product - particularly advantageous in these stressed market conditions.
By bringing CFDs "on-book" the LSE said it would be able to provide users with an additional way to trade the share market, manage risk and enhance portfolio returns, and in so doing, attract new participants, new flow and new trading opportunities - increasing liquidity and market efficiency to the benefit of the market as a whole.
However, despite claiming "good progress" on the project alongside LCH.Clearnet and customers, the plans have now been scrapped.
In a statement, the exchange says "challenging market conditions have developed which have significantly impacted our customers' development capacity, particularly for new product innovation. Having listened to client feedback, we do not consider it appropriate to proceed at this point in time, and have taken the decision to halt the project indefinitely."
LCH.Clearnet is to continue developing CFD clearing.
The project had made the financial markets trading section of Finextra's Innovation Showcase earlier this year.