Eris Exchange, a US-based futures exchange, today announced the December 10 launch of Eris Standards — quarterly Interest Rate Swap Futures contracts that are expected to offer margin savings of 40-80% compared to cleared OTC interest rate swaps. Eris Standards are 2, 5, 10 and 30-year swap futures contracts with quarterly effective dates, pre-determined fixed rates, and cash settlement upon maturity. Additionally, on December 3, Eris Exchange launched the next generation of its Eris SwapBookTM electronic trading platform.
“Faced with the increasing complexity and cost of trading OTC swaps, market participants are discovering compelling value in the familiar regulatory framework and capital-efficient model of futures,” said Neal Brady, CEO of Eris Exchange. “The unique design of Eris Standards takes the recent trend of the futurization of swaps to its logical conclusion: End users can trade in and out of the quarterly contract with the ease of automatic netting, or hold a position and let it roll down the curve as a capital-efficient future replicating swap economics for up to 30 years.”
The innovative product design of Eris Standards includes the following unique features:
• Familiar OTC trading protocols, with bids to pay fixed and offers to receive fixed in traditional swap NPV
• Embedded Price Alignment Interest (PAI)
• Daily settlement based on the CME Clearing OTC swap curves
• The flexibility to be held in futures form for the full 2, 5, 10 or 30-year life of the contract, without physical delivery of an OTC swap
Eris Standards are cleared by CME Clearing using the SPAN margin methodology. Margin offsets with correlated positions in CME Eurodollars, Treasury Futures, and Deliverable Interest Rate Swap Futures allow market participants to reduce further their initial margin requirements. Eris Exchange will continue to offer its innovative Eris Flexible Futures — highly-customizable swap futures cleared by CME Clearing using the HVaR margin methodology.
Eris Standards and Eris Flexes can be traded electronically on the Eris SwapBook platform, with market makers streaming continuous, two-sided markets at benchmark points. Execution is also available through bilateral negotiation of block trades and EFP’s, subject to Eris Exchange rules. The next generation release of Eris SwapBook provides end users with enhanced tools to trade two-legged spreads without execution risk. In addition to curve trades and calendar rolls between Eris Exchange swap futures, it also provides market participants with riskless execution of inter-market swap spreads between Eris Exchange swap futures and on-the-run US Government Debt Securities.
