Sir,
I read your article on contracts for differences (CFDs - Euromoney, March 1999, page 12) with interest. However, it is not correct to say that Chase was the first bank to start pushing the CFD concept. When I was at Charterhouse Bank I developed what was called a FENS (foreign exchange net settlement) contract which is identical in formulation to the contract set out in your article.
You may also be interested to know that around this time [1992] Chase was one of the banks we approached to start up the market in such contracts. We also took the idea to Peter Allsopp at the Bank of England (who was then head of the Basle committee on settlement risk), and to Bob Blower at the BBA (who is now at Reuters), but we could not secure any sort of sponsorship from either institution. This, coupled with the lack of support from the major banks in the London market, meant that the contract was quietly shelved.
Perhaps the contract was the Martin Peters of the financial world - 10 years ahead of its time!
Yours sincerely,
Paul Roby, head of credit trading and credit derivatives, The Royal Bank of Scotland