Swap futures venue Eris Exchange last week surpassed US$10 billion in notional value for its key swaps futures products, which its chief has attributed to the wide appeal of the instruments as traditional swaps trading faces costly regulatory demands.
Eris Exchange has doubled its US dollar interest rate swaps futures volume from 50,000 contracts in September to 100,000 this month. It is a 400% rise on the January 2012 figure of just over 20,000.
Neal Brady, CEO of Eris Exchange, told theTRADEnews.com a wide range of participant types had actively begun trading on the system after on-going interest in the lead up to mandatory swap execution facility (SEF) trading, which began in mid-February.
“In the past few weeks we've seen a cluster of buy-side participants join the platform and begin trading as well as dealers and execution brokers that operate an agency trading model,” he said.
Currently, 21 SEFs have received temporary approval from the Commodity Futures Trading Commission to operate request-for-quote and central limit order book markets for swaps. Mandatory trading began for US firms on 18 February in line with ‘made available to trade’ rulings by the Commission.
SEF fees, combined with central clearing requirements under the Dodd-Frank Act, have increased overall buy-side swaps trading costs, increasing the appeal of swap futures, which mimic the more standard swaps.
“Demand for swap futures has increased with the beginning of mandatory trading on SEFs, which has had a direct impact on swap futures demand,” Brady said.
Brady did not speculate on future volume targets for the exchange, but said as more products fall under ‘made available to trade’ rulings, the appeal of swap futures products would continue to increase.