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Exchange Information

Exchange Background

Chicago-based Eris Exchange is a registered Designated Contract Market (DCM) that lists Spot and Forward Starting Interest Rate Swap (IRS) Futures that replicate the cash flows of traditional OTC Interest Rate Swaps. The GovEx exchange is a secondary market available through Eris for trading US Treasury Securities, and lists When-Issued (WI), On-The-Runs (OTR), and Off-The-Runs (OLD) TBills, TNotes, and TBonds.

The Eris SwapBook™ electronic trading platform is based on State Street’s e-Exchange industry-leading Currenex and GovEx platforms and distribution network, and includes a state-of-the-art central limit order book (CLOB) and RFQ matching engine customized specifically for Eris Exchange. The platform supports open application programming interfaces (APIs) based on the FIX protocol.

Matching Engine

The Eris/GovEx Gateway allows customers to trade both Eris and GovEx products, which are available through the same FIX session. Orders for both Eris and GovEx are matched at the same matching engine located in Chicago (Cermak-CH1). Eris trades are cleared through CME Clearing in Chicago; all GovEx trades are cleared by NewEdge.

Matching Algorithms

Eris/GovEx orders are matched solely on a First-In First-Out (FIFO) basis.

Available Products

The Eris/GovEx Gateway supports trading of the following products:

  • Eris Interest Rate Swap (IRS) Benchmark Swap Futures
    • IMM Dated 2-, 5-, 10-, and 30-year Forward Starting Interest Rate Swap Futures
    • Eris leg of the Invoice Spread
    • Spread products between the IMM Dated Forward Starting Interest Rate Swap Futures
  • All GovEx US Treasury outright contracts (T-Bills, T-Notes, T-Bonds)

Trading Hours

For the Eris Exchange, the Trading Hours are: Monday through Friday, 8:20 AM to 4:30 PM Eastern Time (ET).

For GovEx: Monday through Friday, 8:20 AM to 5:30 PM Eastern Time (ET).

Supported Exchange Functionality

The following lists exchange functionality that TT currently supports:

  • Asset Classes:
    • Futures
    • Bonds
    • Spreads
  • Order Types:
    • Market
    • Limit
    • Iceberg (GovEx products only)
  • On behalf (Give Up) functionality

Unsupported Exchange Functionality

P&L calculations will not be supported for the following GovEx products: All TBill (1M, 3M, 6M and 1Y) products and All WI (When Issued) TNote and TBond products (2Y, 5Y, 7Y, 10Y, 30Y).

The following lists exchange functionality that TT does not currently support:

  • Stop Orders (supported via Synthetic SE only)
  • Trading of Spot Starting Benchmark Swap Futures
  • User Defined Swap Futures
    • Spot Starting
    • Forward Starting

Trading Eris Invoice Spreads in X_TRADER®

For a demonstration of trading Eris Invoice Spreads on the Eris/Govex Gateway using X_TRADER® and Autospreader® 7.17, refer to the TT video tutorial.

Eris Invoice Spreads Overview

The Eris/GovEx Gateway supports the trading of Eris Invoice Spreads, which are constructed using the Eris Invoice spread leg Futures contract as the LIBOR leg of the trade and the CTD (Cheapest-to-Deliver) CME US Treasury Future with the matching tenor as the second leg. Eris Interest Rate Swap Futures contract prices are quoted in NPV.

The price of the Eris Invoice Spread is quoted as a differential between the two legs of the transaction. The US Treasury Futures leg is defined as the forward yield of the CTD using the price implied by the trading level of the futures contract. The LIBOR leg is defined as the par rate for a swap whose terms (Effective Date, Reset Dates, and Maturity Date) match the CTD. The invoice spread level is the difference between the par swap rate and the forward yield on the CTD.X_TRADER®’s Autospreader® and MD Trader® 7.17 provide the ability to display Eris Exchange’s NPV quoting convention for Interest Rate Swap Futures as an implied par rate, which simplifies the process of creating Eris Invoice spreads and strategies.

MD Trader® Impact

The Eris Interest Rate Swap Futures’ quoted NPV can be converted to a par rate and viewed in the MD Trader price ladder.

In MD Trader’s Advanced Properties window (version 7.17), there is an option to display the NPV as a par rate (select Par Rate). When selected, the Coupon rate is automatically populated and the user is prompted to enter the “PV01” Conversion factor, which is needed to convert the quoted NPV value of a contract to the corresponding par rate.

PV01 is defined as the change in the NPV value of a contract for a 1bp (basis point) change in the fixed rate of that contract. Once the LIBOR rates and discount factors for a specific day are determined, change the fixed rate of the contract by one basis point and re-calculate the NPV. The NPV difference will give the PV01 value.

Note

X_TRADER 7.17 or higher is an optional dependency that includes the ability to convert NPV quoted prices to yield.

To convert the price of the US Treasury futures contract to a yield to maturity (YTM) rate, do the following:

  • Determine the CTD corresponding to the CME 10 Year UST future
  • Enter the CTD details in MD Trader’s MD Advanced Properties window and convert the UST futures traded price to YTM.

Autospreader Impact

Eris Invoice Spreads are traded as the price difference between the par swap rate of the Eris IRS Future and the forward yield of the CME Group treasury.

Before creating the Invoice Spread in Autospreader, you need the following values:

  • Find the CTD (Cheapest-to-Deliver) of the underlying treasuries corresponding to the 10 year US treasury futures contract.
  • Calculate the PV01 value

To construct an Eris Invoice Spread using Autospreader, do the following:

  1. Select the two legs of the Invoice Spread:
    • Eris Invoice Spread leg futures contract
    • CME 10 Year US treasury (UST) futures contract
  2. Convert the 10 Year US treasury futures contract traded price to YTM (Yield To Maturity)

    In MD Trader, enter the CTD corresponding to the 10 year US Treasury Futures contract and convert it to YTM.

  3. Convert the Eris Invoice Spread futures contract traded NPV to Par Rate.

    In MD Trader, enter the PV01 associated with the Eris contract and convert the NPV to a Par Rate.

  4. Determine the spread price: Spread Price=Eris Swap Par Rate - UST YTM
  5. Select the appropriate Spread Ratio and Spread Multiplier in the Autospreader configuration window.
Note

As is the case with invoice spread transactions that include OTC interest rate swaps, changes in market conditions may result in a different Treasury security becoming the CTD. An invoice spread that has been executed with an Eris contract will remain in its original form, and it is up to the traders whether or not to change the structure of the LIBOR leg of the transaction.