Swap futures

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Swap futures are futures contracts based on interest rate swaps. They are designed to give fixed-income market participants a new way to hedge spread risk, for example from mortgage-backed securities, corporate bonds and Agency debentures.[1] Swap futures are alternatives to OTC cleared swaps that are required to trade on swap execution facilities known as SEFs.[2]

The CBOT was the first to launch swap futures in the U.S. It was acquired by the CME Group, which now offers the CBOT swap futures. Its futures products include:

Eris Exchange was founded in 2010 specifically as an alternative to the OTC swaps market as regulatory developments in the wake of the financial crisis pushed more trading activity onto centrally cleared markets. Eris swap futures are cleared by CME Clearing. Eris' primary products fall into two buckets: Eris Standards and Eris Flexes.

Eris' swap futures methodology is also licensed to other exchanges - CBOE, Montreal Exchange, Johannesburg Stock Exchange and Intercontinental Exchange all have licensing agreements with Eris.

Germany's Eurex launched Europe's first deliverable swap future in September 2014. However, volumes over its first two months of trading have been low.[3]

References

  1. Swap Futures: On the Verge of Success. Futures Industry Magazine.
  2. ICE Licenses Swap Futures Methodology From Eris Exchange. WallStreet & Technology.
  3. CME Europe plans Q1 swap future launch. FOW.