ERIS SWAP FUTURES TRADING EFFICIENCY CAPITAL SAVINGS REGULATORY CERTAINTY

Transcription

1 ERIS SWAP FUTURES TRADING EFFICIENCY CAPITAL SAVINGS REGULATORY CERTAINTY

2 Global Benchmark Alternative to OTC Geographical and Asset Class Expansion Exchange and Clearing House Partners Interest Rate Swap Futures Index Product Name Currency Exchange CCP Listing Status LIBOR Eris Standards Eris Flexes USD Eris Exchange CME Clearing Live Today Euribor LIBOR JIBAR Eris Standard EUR Interest Rate Future Eris Standard GBP Interest Rate Future JSE Eris Interest Rate Swap Future EUR ICE ICE Live Today GBP ICE ICE Live Today ZAR JSE JSE Clear Live Today CDOR To Be Announced CAD Montréal Exchange CDCC Sep Credit Default Swap Futures Index Product Name Currency Exchange CCP CDX.NA.IG CDX.NA.HY itraxx Main itraxx Crossover Eris CDX IG Credit Future (5Y) Eris CDX HY Credit Future (5Y) Eris itraxx Main Credit Future (5Y) Eris itraxx Crossover Credit Future (5Y) Listing Status USD ICE Futures US ICE Clear US Live Today USD ICE Futures US ICE Clear US Live Today EUR ICE Futures US ICE Clear US 2H2016 EUR ICE Futures US ICE Clear US 2H2016 2

3 The Product: Eris Swap Futures Eris Methodology TM : Proprietary design replicates OTC Swap economics Collateralized IRS OTC Cash Flows Collateral posted Fixed and floating payments Interest paid on collateral Up-front and termination payments Variation Margin Contracts can be held until final Maturity as futures contracts (no physical delivery or mandatory early termination) 3

4 Eris Exchange USD Interest Rate Swap Futures Swap Economics, Futures Benefits USD LIBOR Interest Rate Swap Futures cleared at CME Clearing Access for anyone with a futures account Anonymous central limit order book offered by multiple ISVs, open API Leading compression & basket trading tools Remain as futures through maturity date No forced physical delivery or early termination Eris Standards consolidate liquidity in benchmark tenors IMM Effective Dates, coupons and other conventions match MAC swaps Low Initial Margin On and Off-The-Run contracts, optional rolls Effective dates as far out as 10 years Eris Flexes offer customized dates and rates Low Balance Sheet Product 1 1 Expectation of PFE Add-on of 0.5% when calculating Total Leverage Exposure (TLE) 4

5 Eris Standard OI (Contracts) 5Y Stnd: Average Bid / Offer (in bps) Eris USD Swap Futures: Accelerating Activity Recent Trading Highlights Eris Standards Open Interest set a new high of 124,116 contracts on July 6 Eris Standards OI = 72% of total Weekly average best bid / ask reached tightest levels to date 5Y Stnd: 0.37bps 10Y Stnd: 0.43bps Trade count for 30Y Stnds increased >500% in 1H16 vs 2H15 Eris, The Global Leader in Swap Futures OI Eris Standard Open Interest 125, , , , , ,000 Record $12,411,600,000 Mar Apr May Jun Jul Average Bid / Offer (5Y Standard) On Average 2/10ths from Mid Jan Feb Mar Apr May Jun Eris Methodology 16% 20% Trade Count by Tenor (Past 12mo) 2Y, 30Y, Other 4% Volume by Tenor (Past 12mo) 2Y, 3Y, 7Y, 30Y, Other 14% Traditional Cash Settled Deliverable Both pie charts as of 7/7/2016 5

6 Eris Standards: Quarterly Swap Futures Liquidity, transparency and efficiency of futures OTC Swap-like yield curve granularity resulting in more accurate hedging, curve trading, and spreading against Treasury Futures Three Types of Eris Standards: 1) Primary Standards 10 tenors: 2, 3, 4, 5, 7, 10, 12, 15, 20, Forward Starting Contracts Next 2 quarterly IMM Effective Dates 50+ Aged Primary contracts: Effective Date prior today Coupons match OTC MAC (Market Agreed Coupon) Swaps 2) Ultra Forward Standards 10 tenors: Same as Primaries Quarterly IMM Effective Dates as far out as 10 years At launch in January 2016: 3 rd to 21 st and 41st quarterly IMM date Over time: Effective Dates for each quarterly IMM date out 10 years, in addition to aged contracts that have rolled down the curve Coupons distinct from coupons of Primaries 3) Standard Invoice Swap Futures SHARED BENEFITS Low margins (2 day VaR) until Maturity Replicates cleared swap cash flows Ability to roll or hold contracts to maturity Remain as futures until maturity Standard swap conventions Preset coupons Coupons and Maturity Date match Cheapest-to-Deliver (CTD) Treasury Bonds in the deliverable basket of Treasury Futures contract Contracts available against 2-Y T-Note, 5-Y T-Note, 10-Y T-Note, Ultra 10-Y T-Note, US Treasury Bond, Ultra US Treasury Bond Two Invoice Swap Futures listed for trading against each Treasury futures contract: CTD and next most likely to become the CTD 6

7 Eris Standards Look-Up Page The Standards Look-Up page allows users to easily retrieve details for all Eris Standards erisfutures.com/lookup Use the search bar to find specific contract details by typing in Bloomberg Code, Coupon rate, etc. Clicking the dropdown arrow will display detailed contract information Search for contract details by selecting the Type, Underlying Tenor, Effective Year, and/or Effective Month 7 All Rights Reserved 2016

8 Eris Flexes: Date Flexible Swap Futures Yield curve granularity with accounting treatment of OTC swaps Spot starting contracts for benchmark tenors Streaming quotes in par rate terms Fixed rate assigned at execution Effective Dates: Any good business day up to 10 yrs. out Maturity Dates: Any good business day up to 30 yrs. following the Effective Date Each rate and date combination is a distinct contract; millions of potential contracts Compression tools available for line item management 5 day VaR margin RFQ for contracts not being streamed $100k contract size 8

9 Instant Access to Significant Screen Liquidity ~2mm of DV01 being streamed; Bid/offer ~0.4 bps EMSX and TSOX Passport Global Electronic access is available through open FIX-based APIs and many market leading front-end platforms: Live quotes and historical tick data Free GUI for Eris SwapBook CLOB trading Open FIX APIs Market Data API Order Routing API NPVs expressed in Par Rate equivalents FIX FIX FIX ERIS APIs 9

10 Eris Margin Efficiency and Trading Flexibility Margin Efficiency 2 day VaR for Eris Standards Eris Primary Standard Margins Simple margin offsets (futures vs futures) including CME DSF, Eurodollars, Eurodollar Bundle Futures, Treasury Futures Maturity Initial Margin for Eris Primary Standards Savings vs. OTC Automatic offsets available to client and house accounts Eris USD Interest Rate Swap Futures are cleared by CME Clearing Flexible Block Trading Voice trading without leg risk for any size for packages including OTC or cash products Blocks are measured as the sum of the notional amount of all legs of a trade Block size minimums decrease during Other Trading Hours (OTH) Trading Hours: $400 (0.40% of notional) $550 (0.55% of notional) $650 (0.65% of notional) $900 (0.90% of notional) $1,250 (1.25% of notional) $1,750 (1.75% of notional) $1,950 (1.95% of notional) $2,350 (2.35% of notional) 47% 54% 60% 53% 55% 55% 57% 56% 20 $3,300 (3.30% of notional) 52% 30 $4,600 (4.60% of notional) 55% as of 07/05/

11 Efficient Clearing and Capital Treatment Multiple factors drive lower clearing costs 8% capital requirement for FCMs (based on total client Initial Margin) is lower for swap futures Futures guarantee fund larger and more diverse (products and clearing firms) which lowers required capital contributions Omnibus structure less expensive than LSOC Liquidity Add-on charges do not apply to futures Clearing Charges Futures OTC Clearing Ticket charges Zero High Tax on IM Zero High All-in cost Low High Low Balance Sheet product under Basel 3 (Interest Rate Swap Futures) Beneficial treatment under SLR relative to analogous products (cleared swaps) Applies to banks principal trading activity and client clearing Potential for significantly lower Total Leverage Exposure calculation Variation margin offsets current mark-to-market exposures Low / no PFE due to daily reset of exposure (daily settlement) associated with futures CDS Index Futures: Full tenor of futures contract (5 years) allows for reduction of effective notional principal amount of sold credit protection 11

12 Use Eris Swap Futures in Place of OTC IRS Traders Corner Web Page for Trade Related Information Eris Swap Futures can be used to replicate familiar trading and hedging strategies that have traditionally been executed with OTC Swaps The Eris platform allows for efficient voice execution of a variety of packaged transactions, including swap spreads, curve trades, delta neutral swaptions, and more Ability to use autospreading tools to trade Eris vs. other CLOB products (futures, Treasuries) 12

13 Additional Benefits of Eris Swap Futures Pre-Trade Credit Controls No post-trade fails FCMs have full control and kill switch Easy Unwind & Compression Unwind multiple legs w/single price Net credit checks Spreadsheet integration Familiar Swap Conventions Eris SLICE Swap-futures Line Item Compression and Elimination All contracts quoted in rate or NPV NPV contracts can be expressed in par rate equivalents Buy = Pay Fixed No forced rolls Par rates can be viewed on the TT X_TRADER and through the Eris Bloomberg spreadsheet CME Post-Trade Tools Automatic allocations, futures give-ups and average pricing Hedge Accounting & Tax Treatment Available upon request at: sales@erisfutures.com Pre Trade Post Trade Allocations EGUS 3 rd Party Tax Opinion Displayed on: 13

14 Call Your FCM to Get Started Today 14

15 Eris Exchange Contact Information Eris Control Center , select 1 ecc@erisfutures.com Client Services clientservices@erisfutures.com Chicago Office 227 West Monroe Street, Suite 2070 Chicago, IL Sales , select 2 sales@erisfutures.com Market Regulation , select 3 marketreg@erisfutures.com New York Office 111 Broadway, Suite 805 New York, NY Follow us on Linkedin Follow us on Twitter 2014 Fixed Income Exchange of the Year 2011 Best New Exchange 2012 Innovation Award 2014 Best New Technology 15

16 Eris Exchange Legal Notices Version Created 07/26/2016 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 located in the United Kingdom. The materials contained in this communication are directed only at persons with investment experience (i.e., investment professionals ). Persons who do not have professional experience in matters relating to investments should not rely on any of the information herein. The investment activities to which these materials relate are only available to persons with investment experience. Any request to engage in the investment activities to which these materials relate, by persons other than those with investment experience, shall be denied. Eris Exchange, Eris, and the Eris Logo are registered trademarks of Eris Exchange, LLC. Eris SwapBook, Eris BlockBox, Eris Methodology, and Eris PAI are trademarks of Eris Exchange, LLC or its affiliate. Copyright 2016 Eris Exchange LLC. All rights reserved. If found please contact legal@erisfutures.com. 16