In the second trade note published in his ongoing Strategy Series, Thomas Browne demonstrates from first principles how Eris Swap Futures track the P&L of underlying interest rate swaps.
The paper further shows that the Eris price more accurately reflects the total return of a swap than comparing changes in par swap rates.
Finally, using regression analyses, Browne proves that even with different coupons and start dates, Eris Swap Futures can provide equivalent market exposure and substantially the same economic return as an IRS, acting as a highly effective replacement for OTC swaps.
Read the white paper here
In the first trade note of his Strategy Series, Thomas Browne provides a detailed introduction to Eris Swap Futures, put into context with Eurodollar futures and OTC interest rate swaps.
Eris Swap Futures can provide higher duration exposure than other fixed income futures, including convexity, making for a more natural fit for longer dated fixed income trading
Compared to OTC IRS, Eris offers concentrated liquidity using IMM dates, futures margin benefits, greater accessibility, and efficiency of unwinds
Eris Swap Futures, quoted in price and tracking total return, can allow for more simple mean reversion trading opportunities than OTC swaps with weights calculated using only yield
View the white paper here
In its Q1 update, CME Group highlighted its margin optimization capabilities to generate record savings for clients.
Responding to client feedback, CME Group noted new work being done to expand the products available for portfolio margining vs cleared swaps, specifically including Eris Swap Futures.
Read the full newsletter here.
In the latest BALM newsletter, Ira Kawaller discusses the convergence of exchange traded futures and over-the-counter markets following Dodd-Frank legislation and the evolution of swap futures at CME Group that followed.
In addition to contract details and pricing conventions, Kawaller addresses GAAP accounting concerns for reporting entities, including preferred methods for prospective and retrospective effectiveness testing of swap futures.
The article concludes that while cleared swaps and swap futures can both serve the same economic functions with similar cash flow processing, futures will have a number of comparative advantages and effectiveness testing requirements should be easy to satisfy.
Click here to access the full article.
In the first trade note of his Strategy Series, Thomas Browne provides a detailed introduction to Eris Swap Futures, put into context with Eurodollar futures and OTC interest rate swaps.
Eris Swap Futures can provide higher duration exposure than other fixed income futures, including convexity, making for a more natural fit for longer dated fixed income trading
Compared to OTC IRS, Eris offers concentrated liquidity using IMM dates, futures margin benefits, greater accessibility, and efficiency of unwinds
Eris Swap Futures, quoted in price and tracking total return, can allow for more simple mean reversion trading opportunities than OTC swaps with weights calculated using only yield
Click here to request the full white paper.
In the second trade note published in his ongoing Strategy Series, Thomas Browne demonstrates from first principles how Eris Swap Futures track the P&L of underlying interest rate swaps.
The paper further shows that the Eris price more accurately reflects the total return of a swap than comparing changes in par swap rates.
Finally, using regression analyses, Browne proves that even with different coupons and start dates, Eris Swap Futures can provide equivalent market exposure and substantially the same economic return as an IRS, acting as a highly effective replacement for OTC swaps.
Click here to request the full white paper.
Eris was asked to present at the October 2019 conference hosted by the Association for Financial Professionals. The panel provided an introduction to Eris swap futures as an alternative to OTC swaps for treasury and risk management teams, with a focus on mechanics, p&l tracking, and reporting.
Watch a video playback of the session here.
Eris contracts have experienced strong growth as CME Group products, and in its July Rates Recap, CME highlights the following:
Average daily volume (ADV) of 15.1k contracts ($1.51bn), +760% from the 2018 pre-CME average
More than $15mm in DV01 traded in June
Front month open interest (OI) now stands at 84k contracts ($8.4bn), +500% YOY
97 participants were active in Swap Futures (Eris & MAC) in June
Read more here
Eris Swap Futures at CME Group set a new monthly volume record of 181,442 contracts in the first 9 trading days of June, surpassing the previous record of 173,330 set in March. Average daily volume for the first 9 days in June was 20,160 contracts.
Eris 5-day average daily volume peaked at 26,104 contracts during the June/September roll, 9 times the June high a year earlier.
Excluding roll volume, Eris outright volume is now over 3.5 times the 2018 pre-CME average.
This volume record comes on the heels of record front contract open interest, resulting in record quarterly roll volume
for full newsletter post: https://myemail.constantcontact.com/Eris-Sets-New-Monthly-Volume-Record-in-First-9-Trading-Days.html?soid=1114009586514&aid=5hehwGSdJ84
