The Johannesburg Stock Exchange (JSE) has signed a multi-year licensing agreement with Eris Exchange to list swap futures contracts.
JSE becomes the latest exchange to strike a deal with Eris, following in the footsteps of Intercontinental Exchange and the Montreal Exchange.
The agreements allow the exchanges to use the Eris methodology for constructing swap futures which replicate the economics of OTC swaps, which are becoming increasingly expensive to trade under new global regulations.
As a result, swap futures could become a viable and cost-effective alternative, though only time will tell if the new products will succeed as regulations begin to take hold.
“We consulted with our market participants to garner their needs and we believe that providing these swap futures products via the JSE will offer our clients the regulatory certainty of futures and allow market participants to operate within the familiar eco-system of futures while broadening their international exposure,” said Warren Geers, head of interest rates and currencies at JSE.
JSE said its initial focus will be to list and trade interest rate swap futures based on the Johannesburg Interbank Agreed Rate and denominated in South African Rand.
The products will follow the standard South African swap market conventions while using the Eris Methodology, allowing the contracts to replicate the cash flows of OTC swaps.