enormous. contracts that would have taken some time to establish themselves in a pit can be quickly listed on screen at relatively little cost. trading is now possible in such diverse commodities as electricity, telecoms bandwidth and even the weather. the organisers of this event may, in future, be able to hedge their exposure to fluctuating wine prices using exchange - traded futures based on the finest premier cru, i suspect this is one contract where traders would be happy to go to physical delivery. we central bankers will have to stick to our usual vin ordinaire. in any event it will be fascinating to see what other contracts emerge over the coming months. of course, not all contracts that are launched will be successful, and it ’ s interesting to reflect on what makes a successful derivative contract. lessons can often be learned from looking back to the past. not far from this location is the home of the london metal exchange. its origins can be traced back to 1571, when traders in metal and a range of other commodities began meeting at the royal exchange. what was originally a domestic market in physical metal became a major global market, and by the early 19th century traders had been forced to use nearby coffee shops. as the uk started importing large quantities of metal from abroad during the industrial revolution, the need emerged for importers to protect themselves against price movements during the long voyage from places like chile and malaysia. the “ futures ” market which developed from those humble beginnings continued to grow and, in 1877, the london metal exchange company was formed. that market was successful for a number of reasons. volatility in the price of the underlying product made the contract attractive to hedgers and speculators alike. technology - the telegraph would you believe! - encouraged the market ’ s growth by making shipment arrival dates more predictable. the lme had a first mover advantage that still stands. liquidity flourished as traders followed one another in using the new market. so there are a number of lessons for today ’ s exchanges, to do with the need to respond to market needs, the need to make full use of available technology, and so on. role of clearing houses it will be very little surprise to many of you that, as the central bank, the aspect of these developments which interests us most is the management of risk. clearing houses have traditionally played a central role in the derivatives markets and continue to do so as those markets expand. they are also increasingly active in the underlying cash markets.

strong growth, unemployment is significantly lower, real incomes are higher. based on some of the reporting, you might be forgiven for thinking that forward guidance is far more complicated than this. to take just one example, let me read to you the opening sentence of an article last month reporting on the mpc ’ s november inflation report. under the headline “ forward guidance fails ”, the article began : “ the bank of england now expects the economy to grow strongly next year, highlighting the fact that its policy of forward guidance has effectively failed. ” strong growth, falling unemployment : if that ’ s failure, i wish i ’ d failed long before now! the aim of the committee ’ s guidance isn ’ t to provide a commitment that interest rates won ’ t rise until some particular date in the future. monetary policy has to respond to the changing state of the economy. we can no more commit to keeping our prices and quantities unchanged irrespective of economic circumstances than you can. rather, our guidance should reassure you that, absent risks to either price stability or financial stability, we will tighten policy only when we are well along the road to recovery. yes : interest rates will rise at some point. but only against a far stronger economic backdrop, when your output is higher, your order books are fuller, and you and your customers are better able to withstand a rise in borrowing costs. moreover, although still some way in the distance, we shouldn ’ t look at the prospect of an eventual rise in interest rates with a sense of dread and fear. assuming that interest rates rise due to the vigour and durability of the recovery, rather than concerns about either inflation or financial stability, we should see interest rates beginning to rise as a sign of the strength of our economy. as a sign that that we are well on the way to making a full recovery. as a sign that the emergency life - support measures put in place since the crisis are no longer required. the mpc is fully aware that extraordinary low interest rates are likely to be needed for some time yet. but when they cease to be, this will be a sign that we have finally turned the corner for home. conclusion let me summarise at long last, we appear to be moving back to an economic environment of which eddie would have approved. one in which the economy is growing robustly and inflation is close to target. a recovery appears to have finally taken hold, spurred by reduced uncertainty and easier credit conditions. there