Eris Preps for Swaps Clearing

Terry Flanagan

In the few days remaining until the Dodd-Frank June 10 Category II Swap Clearing Mandate takes effect, Eris Exchange has modified the size of its swap futures contract and announced that Trading Technologies has implemented its live connection to the Eris SwapBook electronic trading platform.

Both moves are designed to enhance market access and allocation precision, market sources said.

“In addition to broadening the appeal of Eris Standards and Eris Flexes to funds looking to transact in more granular size, moving to a $100,000 contract (from a $1 million contract notional size) provides asset managers and other relative-value traders with an increased level of precision for trading spreads,” Eris Chief Executive Neal Brady said.

Traders can now tailor strategies with more precision for curve trades of multiple Eris futures, or for swap spreads of Eris futures against U.S. government bonds, while maintaining the flexibility to execute electronically using tools such as TT X_TRADER, or over the phone using block trades and Exchanges for Physical, Brady added.

Many Eris traders preferred the larger notional value contract size, but ultimately, those who hoped for a reduction to $100,000 won out, sources familiar with the client feedback told Markets Media. The reduced contract size (and corresponding reduction in pricing from $5 a side to 50 cents for the Eris swap futures) enacted this week makes the contract more similar to the CME Treasury futures.

Trading Technologies announced its connectivity to Eris Standards June 4, and said its new gateway would also give hedge funds, non-swap dealer banks, insurance firms and all active traders the ability to access and trade intra-exchange and cross-market spreads via GovEx, State Street’s eExchange which lists highly liquid on-the-run, when-issued and first-available off-the-run U.S. Treasury bills, notes and bonds.

Eris’ Brady said the distribution of Eris Standards on TT opens up access to thousands of global futures traders already using Trading Technologies’ software and related services. Given current regulatory changes and market conditions, these derivatives professionals will be very interested in the new market and trading opportunities it represents, agreed TT Chief Executive Harris Brumfield.

Currently, Eris has open interest of just over 30,000. While the clearing mandate has driven customers to the exchange, Eris has focused on making deep liquidity visible to attract even more anticipated institutional trading in its markets.  The two announcements this week align with Eris’ value proposition – good products, good and familiar tools like TT, and good institutional liquidity provided by Eris market makers and Treasury swap dealers, an officer of Eris told Markets Media.

Eris Exchange was created in 2010 by five of Chicago’s largest proprietary trading firms: Chicago Trading Company, DRW Trading Group, Getco, Infinium Capital Management, and Nico Holdings. It added State Street and Devonshire Investments as equity partners and in 2011, was approved by CFTC as a DCM.  Morgan Stanley became an equity partner in 2012.

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