eris exchange overview - eris futures · clears at cme group clearing ... • dealers went from...

© 2018 All Rights Reserved

© 2018 All Rights Reserved 05142018

ERIS OVERVIEW


Global Leader in Swap Futures

• US-based futures exchange group

Designed and patented Eris Methodology® enabling a cash-

settled futures product to replicate the cash flows and the

convexity of an OTC swap

• Unique contract design

Operational benefits and cost efficiency of listed, exchange-

traded instruments

Risk profile and yield curve granularity of OTC swaps

Eris Swap Futures may be used as short term trading or

hedging instruments, or held for their entire tenor with the

potential to be designated as eligible FASB hedges

• Eris operates a CFTC regulated futures exchange

Lists Eris USD Swap Futures

Clears at CME Group Clearing

License methodology to other exchange groups

Exchange and

CCP Partners

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Mark-to-Market Collateral Pledge

Up-front and termination payments

Eris Futures Price &

Variation Margin

Using the Eris Pricing Engine™

Collateralized OTC IRS

• Replicates all OTC swap cash flows

• OTC swap interest on collateral is included in daily settlement of Eris Futures Price

• May be held until final maturity and matches OTC swap exactly

• No physical delivery or mandatory early termination

Superior Product Design: Eris Methodology®

3

Fixed and floating

payments

A + B - C + 100 = Eris

Futures Price

NPV of future cash flows A

B

Interest on collateral

C


Eris USD IR Swap Futures Overview

4

USD Interest Rate

Swap Futures listed

on Eris Exchange

Eris Standards

synonymous with

MAC swaps

No physical delivery

or mandatory early

termination

2-, 3-, 4-, 5-, 7-, 10-,

12-, 15-, 20-, 30-

Year tenors

Cleared at CME Clearing

(Futures Guarantee Fund)

• Standardized coupons that match

MAC swaps

• IMM effective dates

• Standard rolls and conventions

• Roll quarterly or hold past

effective date

Full curve of tenors

Effective dates as far out as

10 years

Remains a futures contract

to underlying maturity


Catalysts for Adoption of Eris

• Listed swap futures contract, cleared at CME

• Standardization & reduction of OTC line items

• Simple design; all cash flows settle daily in VM

• Accounting simplification for many

Product Design

• Equally accessible to all participants

• Anonymous trading; participants leave no footprints

• Pricing transparency & firm quotes in CLOB market

• Electronic CLOB facilitates fully electronic algorithmic execution

• Ease of TCA & best execution reporting

• Exchange handles trade disclosure reporting

Market Structure & Ecosystem

• 20-60% stand alone margin savings relative to OTC

• Middle office productivity improvements

• Easy setup

• IRS section 1256 contracts with 60/40 tax treatment

Cost Savings

Regulation

• Productivity improvements

• Regulatory changes forcing OTC into rigid frameworks

• Downward ROE pressure at banks due to OTC global market businesses

• Standardization of markets

• Mandatory margining rules


Market Evolution

6

Pre-regulatory OTC Market Post-regulatory OTC Market

BANKS BANKS

Underserved/no access Underserved/no access

Client Hierarchy Client Hierarchy

• Banks sit at the center of the OTC risk transfer process

• Bank of England research paper on the January 2015 Swiss Franc

de-pegging found OTC market structure failed end users

• Dealers went from liquidity providers to liquidity takers

• Post crisis regulations have reduced bank risk and driven up costs for

participants

• Large class of users underserved or with no access to OTC markets

OTC Market

Banks, HFTs,

PTGs

Open

Access

Transparent

No Hierarchy

• Market open to all

• New risk capital enters the market,

reducing reliance on banks

• Removal of OTC client hierarchy

• New clients bring opportunities for

service providers: FCMs, execution

brokers, trading technology

Exchange Traded


• OTC SEF rules dis-intermediates the client-dealer relationship

• Trade Eris direct and re-establish client-dealer relationships

• Trade transparently in the Central Limit Order Book

• Voice negotiate block trades like traditional OTC swaps

Low block threshold of 100 contracts, $10mm

No minimum thresholds for EFPs & EFRs

Eris Execution Advantages

7


Clients face their FCM and CME Clearing

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DCO* CME Clearing

FCM* A FCM* B A B

DCM* Eris Exchange

• Eris lists Futures Contract “X” for trading on its DCM, with clearing on DCO/CME Clearing

• Before any trading may occur, Client A and B must first:

Establish trading accounts and credit limits for Eris Futures Contracts with their FCMs

Deposit funds ($) into their FCM account to meet Initial Margin requirements

• Client A submits a BUY order to Eris DCM that is within its pre-approved credit limits at FCM A

• Client B submits a SELL order to the DCM that is within its pre-approved credit limits at FCM B

• Orders match and automatically clear at the DCO

• DCM/Eris only operates the trade matching facility, DCO/CME Clearing carries the offsetting

client positions and manages the credit risk of all participants

(*)CFTC Regulated Entities DCO: Designated Clearing Organization DCM: Designated Contract Market FCM: Futures Clearing Merchant


Easy to Use Electronic Order Book

• IMM start dates in 2-, 3-, 4-, 5-, 7-, 10-, and 30-year tenors

• Eris contract design allows absorption of liquidity to be transferred into Eris, as needed

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Invoice Spread in basis points vs.

CME Group Treasury Futures


• Interest rate swaps are typically quoted in rate or NPV while futures

and cash products are generally quoted in price format

• Past dated (no longer spot start) OTC swaps trade on NPV

• Eris Standards are quoted in NPV, but pricing is easily converted to

par rate or price

Example: 5 Year June Standard, 2.000% Coupon, $48.78 PV01 (Per $100k)

Multiple Pricing Alternatives for Eris

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NPV Price Par Rate

-$3,035 1.378% 96.9686

NPV =

(Par Rate - Coupon) x

PV01 x 100

Par Rate =

Coupon + (NPV /

(PV01 x 100))

Price =

100 + NPV +

(Hist. Pmts. – PAI)

-$3,035 =

(1.378% - 2.000%) x

48.78 x 100

1.378% =

2.00% + (-3,035 /

(48.78 x 100))

96.9686 =

100 – 3.035 +

(0 + 0.0036)


2-day VaR (SPAN)

Margin Offsets with Eris Standards, Eris

Flexes, Eurodollar Futures, Treasury Futures,

and CME DSF

Offsets available for both Customer

and House Accounts

Eris Margin Offsets

Liquidity add-on charges do not apply as with OTC Swap Clearing

Up to 60% Savings over OTC Cleared

Eris Standards Initial Margins

Tenor Pay/Rec Fixed(%) Pay/Rec Fixed ($)

2yr 0.40% $400

3yr 0.40% $400

4yr 0.55% $550

5yr 0.70% $700

7yr 1.25% $1,250

10yr 1.35% $1,350

12yr 1.75% $1,750

15yr 2.10% $2,100

20yr 3.00% $3,000

30yr 3.60% $3,600

Margin Tables as of April 11, 2018

Daily updated margining, maintenance margin levels are available

in the Live Eris Swap Curve data feed

Initial Margins and Available Margin Offsets


Margin Savings Matter • Maintenance margins of exchange traded Eris Swap Futures are a fraction of OTC swap margins

• The cost of financing this margin is more significant than many appreciate

• Financing savings from using Eris can be over 50% of the net DV01, i.e. 0.50 bps per annum

Maintenance Margins, % of Notional

Tenor LCH (Pay) LCH (Rec) ERIS

2Y 0.76% 0.88% 0.40%

3Y 1.16% 1.36% 0.40%

5Y 2.07% 2.20% 0.70%

10Y 4.54% 4.00% 1.35%

30Y 11.71% 7.82% 3.60%

10y Recv Fixed, 1 year hold period

LCH and Eris Exchange prevailing margin schedules

Eris savings can be greater than bid/mid execution cost

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Margin data as of 3/28/18

$100MM 10y Recv Fixed OTC Swap Eris Future

DV01 risk 88,000

Execution Cost from Mid 0.2 0.2

Initial Margin (% of Notional) 4.00% 1.35%

Initial Margin ($) $4,000,000 $1,350,000

Cost to Finance IM (FF: 1.75%) $70,000 $23,625

Cost of Financing IM/DV01 0.80 0.27

Effective Spread from Mid 1.00 0.47

Eris Savings vs. OTC 0.53 bps of the DV01


Clearing Firms

Clearing Firms:

Contact Information:

Chicago 227 West Monroe St., Suite 2070

Chicago, IL 60606

New York 211 East 43rd St., Suite 1600

New York, NY 10017

London* 68 King William Street

London EC4N 7DZ

888-587-2699, select 2

[email protected]


~2.5mm of DV01 being streamed; Bid/offer ~0.4 bps

Electronic access is available through open FIX-based APIs and many market leading front-end platforms: http://www.erisfutures.com/ISVs

Instant Access to Significant Screen Liquidity

Passport Global EMSX and TSOX

• Free GUI for Eris

SwapBook CLOB trading

www.erisfutures.com

FIX

FIX

FIX

ERIS

APIs

Open FIX APIs

• Market Data API

• Order Routing API

• Live quotes and

historical tick data

NPVs expressed in

Par Rate equivalents

14

http://www.erisfutures.com/ISVs

http://www.erisfutures.com/


www.erisfutures.com

Eris Control Center 888-587-2699, select 1

[email protected]

Sales 888-587-2699, select 2 [email protected]

Client Services 646-961-4480 [email protected]

Follow us

on Linkedin

Follow us

on Twitter

Market Regulation 888-587-2699, select 3 [email protected]

Get Started Today: Contact Information

Chicago 227 West Monroe St., Suite 2070

Chicago, IL 60606

New York 211 East 43rd St., Suite 1600

New York, NY 10017

London* 68 King William Street

London EC4N 7DZ

*Eris Marketing Europe, Ltd. +44 203 514 6583

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FAQs:

www.erisfutures.com/FAQs


Version Created 05/14/2018

Eris Exchange is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission, whose relationship with

persons utilizing the Exchange is governed solely by its Rulebook and certain other ancillary documentation. All information contained herein is

made subject to and superseded by the Eris Exchange rules. Current rules should be consulted in all cases concerning contract specifications.

Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage

of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders

should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any

one trade because they cannot expect to profit on every trade. All references to options refer to options on futures.

The contents of this document have been provided to you for informational purposes only and are intended as a broad overview of certain

aspects of Eris Exchange. Eris Exchange assumes no responsibility for any errors or omissions. Additionally, all examples in this document

are hypothetical situations, used for explanation purposes only, and should not be considered as investment advice, legal advice, or tax

advice. Nothing in this document should be taken as a public offer to sell or to buy any applicable financial instruments or securities.

Notice to individuals in the UK and Europe. This communication does not constitute a Prospectus, nor is it a recommendation to buy, sell or

retain any specific investment. This communication is for the exclusive use of Eligible Counterparties, Professional Clients, or investment

professionals and must not be relied upon by any other class of person and is therefore not intended for private individuals or those who would

be classified as Retail Clients. Circulation should be restricted accordingly. Issued by Eris Marketing Europe Limited.

Copyright © 2018. Eris, Eris Exchange, Eris SwapBook, Eris BlockBox, Eris PAI, Eris Methodology, Eris Pricing Engine and the Eris Logo are

trademarks of Eris Exchange and its affiliates. Other trademarks, service marks, trade names, product names and logos contained herein are

the property of their respective owners. Certain elements of the contract design and pricing construct are covered by U.S. Patent No. 9,747,641.

Other patents-pending. All Rights Reserved.

If found please contact [email protected].

Eris Exchange Legal Notices

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eris exchange overview - eris futures · clears at cme group clearing ... • dealers went from...

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