US futures market Eris Exchange, one of three US exchange operators that championed swap futures last year, has reduced the notional size of the instruments by 90% ahead of next week’s swap clearing mandate.
Eris have lowered the notional amount for swap futures to US$100,000 from US$1 million due to user demand for increased granularity of trade allocations ahead of the 10 June Dodd-Frank Act deadline that will force most asset managers to begin centrally clearing OTC derivatives transactions.
As part of the changes, Eris also reduced its pricing to US$0.50 per contract side, in a bid to garner increased flow to swap futures from swaps ahead of next week’s deadline.
“The shift to a $100,000 notional contract size allows our traders to execute Eris Exchange swap futures for significantly more accounts,” said Michael O’Brien, vice president and director of global trading at US buy-side firm Eaton Vance Investment Managers.
“Eris Exchange futures’ ease of execution and futures processing provide significant value to the asset manager community working to accommodate the upcoming swap clearing mandate. Certain beneficial owner accounts and complex orders that we work in the market require additional granularity, and Eris’ $100,000 notional size makes these sub-account allocations straightforward,” he said.
Divergent rules governing swaps compared to swap futures has led future operators of swap execution facilities (SEFs) to call for a set of standard rules for both instrument types. Earlier this year, Bloomberg launched legal action against the Commodity Futures Trading Commission to amend the rules, which it claimed were anti-competitive.