Eris Exchange

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Eris Exchange
Eris Primary-RGB-2Cl-BLK-MD.jpg
Founded 2010
Headquarters Chicago
Key People Neal Brady, CEO
Twitter @ErisFutures
LinkedIn Profile
Website www.erisfutures.com
Releases Company News

Eris Exchange is a U.S. futures exchange that offers listed interest rate swap futures, and also licenses its swap futures methodology to other exchanges. The exchange offers an alternative to the $615 trillion over-the-counter derivatives market, which is largely shifting to the central counterparty (CCP) clearing model due to regulatory changes in the US and Europe. Eris' contracts are designed to mitigate the complexities of the Dodd-Frank regulations. The contracts combine the margin savings and regulatory certainty of futures with the flexibility of OTC Interest Rate Swaps.

Eris Exchange ranked 49th in global derivative exchange volume in 2017 with 435,881 contracts traded, a 8.1 percent decrease from the previous year, according to the FIA Annual Volume Report.[1]

Ownership

Eris was created in 2010 by five of Chicago's largest proprietary trading firms, DRW, GETCO, Nico Holdings, Infinium and CTC Holdings.[2]

In September 2012 Eris Exchange added State Street, Devonshire Investments (the private equity arm of Fidelity Investments), and Morgan Stanley to the ownership structure.

In March 2015, Societe Generale Prime Services – formerly Newedge - announced it had taken an equity stake in Eris Exchange. Societe Generale Prime Services business had been a leading clearer for Eris Swap Futures for several years previous. [3]

In May of 2016, CBOE Holdings made a minority equity investment in Eris's parent, Eris Exchange Holdings, LLC. Concurrent with the investment, CBOE joined Eris' board of directors. CBOE and Eris launched the strategic partnership to develop products to address the impact of international regulatory reforms, including Basel III, European swap clearing and trading mandates, and margin for un-cleared swaps, the exchanges said.[4]

Licensing Agreements, Product Launches, and other Historical Highlights

Eris Exchange initially launched interest rate swap futures in late summer of 2010 clearing trades through CME Group’s clearing services. The Commodity Futures Trading Commission (CFTC) approved the exchange's application to become a designated contract market (DCM) in October 2011.

In 2012, CBOE launched variance swap futures contracts based on the Eris methodology.[5]

In September 2014, TMX's Montréal Exchange (MX) and Eris Exchange announced a licensing agreement for MX and Canadian Derivatives Clearing Corporation (CDCC) to offer trading and clearing of Canadian Dollar swap futures and options based on the Eris Methodology.[6]

In December 2014, Intercontinental Exchange and Eris Exchange announced a multi-year license agreement for ICE exchanges to list European and U.S. credit default swap futures and options based on the Eris Methodology, Eris’ product design for constructing swap futures in a capital-efficient manner. The first product launch under the license agreement was CDS futures based on the Markit CDX North American Investment Grade and High Yield indices, listed on ICE Futures U.S. and cleared at ICE Clear U.S.[7] These products went live on ICE Futures U.S. on April 27, 2015.[8] The deal with ICE follows in the same path as one signed with the Montreal Exchange.[9]

The agreement also included following those with other swap futures based on the methodology in 2015, including interest rate swap futures denominated in EUR (Euro) and GBP (Pound Sterling), listed on ICE Futures Europe and based on the product design of Eris’ US dollar-denominated Eris Standard Swap Futures and Eris Flex Swap Futures, available on the ICE trading platform. On June 16, 2015, the Intercontinental Exchange announced that it would launch Eris standard interest rate futures contracts denominated in Euro (EUR) and Pound Sterling (GBP) on June 29, 2015. The new contracts, Eris Standard EUR Interest Rate futures and Eris Standard GBP Interest Rate futures, are based on the design of Eris's US dollar-denominated Eris Standard Swap future and Eris Flex Swap future contracts.[10]

In April 2015, Eris signed a multi-year licensing agreement with the Johannesburg Stock Exchange to list swap futures contracts. The agreement allows the JSE to use the Eris methodology for constructing swap futures which replicate the economics of OTC swaps. JSE will begin by focusing on listing and trading interest rate swap futures based on the Johannesburg Interbank Agreed Rate and denominated in South African Rand.[11]

In June of 2018, BlueCrest Capital Management and Virtu Financial joined Eris as equity partners. As part of the partnerships, both BlueCrest and Virtu began trading Eris Swap Futures. Virtu CEO Doug Cifu joined Eris's board of directors.[12]

On October 3, 2018, Eris announced plans to launch a new cryptocurrency trading platform called ErisX. The launch is backed by investors DRW Venture Capital, Valor Equity Partners, TD Ameritrade, Virtu Financial, NEX Opportunities, Cboe Global Markets, CTC Group Investments, Digital Currency Group, Nico Trading, Pantera Capital and Third Stone Partners. ErisX will offer Bitcoin, Ethereum and Litecoin spot and futures contracts.[13] Thomas Chippas will be ErisX's CEO.

Products

Eris Exchange offers two main IR swap products: Eris Standards and Eris Flexes.

In December 2012, the exchange launched Eris Standard contracts, which are quarterly IMM-dated interest rate swap futures designed to offer margin savings of 40 to 80 percent (compared to cleared OTC interest rate swaps). Eris Standards are available in five benchmark tenors: 2, 5, 7, 10 and 30 year swap futures contracts. These contracts feature quarterly IMM effective dates, pre-determined fixed rates, and cash settlement upon maturity.

Eris Flex contracts offer the yield curve granularity and the accounting treatment of OTC swaps. Eris Flexes can be spot-starting and also feature flexible forward contracts that can be extended to any business day, with an effective date out to 10 years, and a maturity date of any good business day up to 30 years following the effective date. Both contracts offer significant margin offsets against the CME Group’s Eurodollar and Treasury Futures.

Execution

Electronic Execution (CLOB)

Eris Exchange offers many methods to execute trades electronically through the central limit order book (CLOB). Eris SwapBook TM is the anonymous CLOB platform, and a free GUI is available for trade execution. The Eris SwapBook trading platform is powered by State Street Global Markets Currenex technology with global distribution. It features immediate trade acceptance, third party distribution, and all-to-all request for quote (RFQs) functionality for bespoke Eris Flex contracts.

Users can also directly connect to Eris Exchange through open APIs and view live markets through one of the many Independent Software Providers (ISVs) supporting Eris contracts, such as Trading Technologies, Bloomberg, Thomson Reuters Eikon, FfastFill, RTS Realtime Systems, SkyRoad, RiskVal, TradingScreen, and SwapsHub.


Voice Execution, Block Trades, and Off-Exchange Transactions

Eris BlockBoxTM is a platform designed for voice and off-exchange execution trade reporting for all Eris contracts. It offers immediate credit and trade acceptance as well as spread trading and basket trading without leg risk. Block trades must be reported to the Exchange within 15 minutes while off exchange EDRPs must be submitted for clearing by the end of the business day with no separate reporting requirements. Eris block trading sizes are $50mm inside of 5 years and $25mm 5 years and longer. For multi-legged trades, blocks are measured as the sum of the notional of each leg.


Awards and Recognition

Eris Exchange received the 2011 FOW Award for Best Innovation by an Exchange in the Field of Product Design for North America. The award recognized Eris Exchange’s introduction of the Interest Rate Swap Futures contract that embeds the cash flows of a fully collateralized OTC interest rate swap into a futures contract.

Eris Exchange was named to “Risk 25 Firms of the Future” by Risk Magazine in August 2012.

In December 2012, Eris Exchange was awarded Best New Exchange by FOW. The award recognizes the exchange as a leader in the listed derivatives space for offering futurized interest rate swaps, acting as standardized versions of complex OTC interest rate swaps.

Key People

Contract Volume

Year Total Annual Volume Percent Change
2017 435,881 (-)8.1%
2016 474,094 (-)28.2%
2015 660,462 26.0%
2014 489,305 60.9%
2013 304,080 --

References

  1. 2017 Annual Volume Survey. FIA.
  2. Fight over Dodd-Frank stymies year-old Eris in OTC swaps trading. Crain's Chicago Business.
  3. Societe Generale Corporate & Investment Banking takes an Equity Stake in Eris Exchange. Societe Generale.
  4. CBOE Holdings Takes Equity Stake in Eris Exchange Holdings. CBOE Holdings.
  5. CBOE, DRW teaming up to launch swap-like futures. MarketWatch.
  6. Montréal Exchange and Eris Exchange Announce Swap Futures Licensing Agreement. PR Newswire.
  7. Intercontinental Exchange and Eris Exchange Announce Global Swap Futures Licensing Agreement. Press release via Businesswire.
  8. ICE Relaunches Credit Swap Futures. Wall Street Journal.
  9. ICE Licenses Swap Futures Methodology From Eris Exchange. WallStreet & Technology.
  10. ICE to Launch Eris Standard Interest Rate Futures on June 29; Introduction will Include Euro and Sterling Rates. ICE.
  11. Swap futures to reach South African markets. The Trade.
  12. BlueCrest and Virtu join Eris Exchange as equity partners. Finextra.
  13. ErisX Announces New Exchange for Digital Asset Investors and Traders. ErisX press release via Businesswire.
  14. Proprietary Traders Plan Eris Exchange For OTC Derivatives. Dow Jones Newswires.