The startup derivatives market Eris Exchange on May 18 will go live with a new trading system intended to broaden access to its interest-rate swap futures.
The same technology used to power the currency-trading platform Currenex will underlie Eris’ nascent markets, which are designed to offer swift, efficient trading in products that typically are traded privately between investors and banks.
“It’s a huge step up in terms of distribution capability and scalability,” said Neal Brady, chief executive of Eris, in an interview.
The Chicago-based exchange is backed by five major proprietary trading groups including DRW Holdings, Getco LLC and Infinium Capital Management. Trading on its all-electronic markets went live in late July, and to date about $24 billion worth of interest-rate swap futures have changed hands on the platform.
Interest-rate swaps are customized derivatives arranged to shield holders against shifts in key funding rates. The market, estimated at $347.5 trillion globally by the Bank for International Settlements, is the biggest sector of over-the-counter derivatives trade and has long been the dominion of the biggest Wall Street banks.
Devised by some of the biggest firms in high-speed electronic trading, the Eris model converts such swap deals to futures contracts to make them easier to trade and clear, the latter through an arrangement with neighboring CME Group Inc..
Most of Eris’ business to date has been driven by a few major customers like the French futures brokerage Newedge, which said it has cleared more than $20 billion worth of transactions on Eris. Upgrading the exchange’s technology to the system developed by State Street Corp. (STT), which also owns Currenex, will open up the market to far more potential customers and dramatically increase the amount of business Eris can handle, according to Brady.
Brady, a former CME executive, has broadened Eris’ management team and brought aboard Christopher Rodriguez as head of corporate development, who previously worked in that capacity for both CME and its now-subsidiary New York Mercantile Exchange. Michael Riddle, another CME alum who oversaw that company’s relations with exchanges in Latin America and Asia, has joined as Eris’ chief operating officer.
Stephen Humenik, a former advisor to Commissioner Scott O’Malia at the Commodity Futures Trading Commission, was hired as Eris’ general counsel last fall.
Eris currently operates as a CFTC-designated “exempt board of trade” but intends soon to register as a designated contract market, Brady said. The move would place it alongside established U.S. futures exchanges run by CME and IntercontinentalExchange Inc. (ICE), and make it more efficient for customers doing business at both Eris and its clearing-services provider CME.
Eris has also sealed an agreement with the National Futures Association to provide compliance services.
