Eris Exchange has expanded its product suite with the launch of five new maturities for its existing hybrid swap futures contracts. It has also added a set of new forward-starting futures contracts and a set of contracts that allow traders to mimic over-the-counter invoice swaps with a futures-versus-futures alternative.
The exchange’s existing Standard Swap Futures, which provide swap-like exposure within a futures contract, have now been expanded to include tenors of three, four, 12, 15, and 20 years. The Exchange originally offered maturities of two, five, seven, 10 and 30-year instruments.
Ultra Forward Standard Swap Futures will allow users to trade futures that mimic forward-starting swaps, which begin at a fixed point in the future. Those contracts are offered in the same 10 tenors as the Standard contracts, with the forward-starting dates coming on quarterly Effective Dates for the next five years. The Exchange says the contracts are particularly popular amongst long-dated hedgers.
The exchange’s Invoice Swap Standard Swap Futures will reference maturity dates that match Treasury bonds deliverable into CME Group’s Treasury Futures contracts.
Traders match OTC swaps against CME Treasury futures contracts with the same maturity to offset rate exposures, reduce market risk, and lower margin costs – depending on the case.
Market participants say the market for invoice spread trades – once a robust corner of activity – has died down markedly over the past year following a CME decision to change its rules around transacting ‘exchange-for-related-positions’ – an exchange mechanism used to enact an invoice swap.
Eris says its new Invoice Swap Futures may result in 75% margin savings relative to OTC invoice spreads.
“The Eris product design is best in class – and this launch represents a quantum leap forward in terms of extending the product to a wider set of structures that capture the valuable flexibility previously only found in OTC swaps,” said John Coleman, director of fixed income at RJ O’Brien & Associates, in a statement.
“Now mortgage hedgers can better manage risk in the 12- to 15-year points on the curve, banks can efficiently manage swap spread risk, and insurance companies can address long-dated liabilities.”