ERIS OVERVIEW 01112018
Global Leader in Swap Futures Institutional Partners Exchange operator Eris Exchange Designated Contract Market (DCM) USD Interest Rate Swap Futures Exchange and CCP Partners Unique contract design Rates, credit and equity Replicates OTC swap cash flows A Fidelity Company Eris futures on other exchanges IRS Futures: EUR, GBP, ZAR CDS Index Futures: IG & HY CDX Equity Variance Futures: S&P 500 2
Superior Product Design: Eris Methodology TM Replicates all OTC swap cash flows OTC swap interest on collateral is included in daily settlement of Eris Futures Price May be held until final maturity and matches OTC swap exactly No physical delivery or mandatory early termination A + B - C + 100 = Eris Futures Price Collateralized OTC IRS B A NPV of future cash flows Fixed and floating payments Mark-to-Market Collateral Pledge C Up-front and termination payments Interest on collateral Eris Futures Price & Variation Margin 3
Eris USD IR Swap Futures Overview Cleared at CME Clearing (Futures Guarantee Fund) Standardized coupons that match MAC swaps IMM effective dates Standard rolls and conventions Roll quarterly or hold past effective date USD Interest Rate Swap Futures listed on Eris Exchange Eris Standards synonymous with MAC swaps 2-, 3-, 4-, 5-, 7-, 10-, 12-, 15-, 20-, 30- Year tenors No physical delivery or mandatory early termination Full curve of tenors Effective dates as far out as 10 years Remains a futures contract to underlying maturity 4
Catalysts for Adoption of Eris Product Design Listed swap futures contract, cleared at CME Standardization & reduction of OTC line items Simple design; all cash flows settle daily in VM Accounting simplification for many Market Structure & Ecosystem Equally accessible to all participants Anonymous trading; participants leave no footprints Pricing transparency & firm quotes in CLOB market Electronic CLOB facilitates fully electronic algorithmic execution Ease of TCA & best execution reporting Exchange handles trade disclosure reporting Cost Savings 20-60% stand alone margin savings relative to OTC Middle office productivity improvements Easy setup IRS section 1256 contracts with 60/40 tax treatment Regulation Productivity improvements Regulatory changes forcing OTC into rigid frameworks Downward ROE pressure at banks due to OTC global market businesses Standardization of markets Mandatory margining rules 5
Market Evolution Pre-regulatory OTC Market Client Hierarchy OTC Market Post-regulatory OTC Market Client Hierarchy Exchange Traded Open Access BANKS BANKS Banks, HFTs, PTGs Transparent Underserved/no access Underserved/no access No Hierarchy Banks sit at the center of the OTC risk transfer process Bank of England research paper on the January 2015 Swiss Franc de-pegging found OTC market structure failed end users Dealers went from liquidity providers to liquidity takers Post crisis regulations have reduced bank risk and driven up costs for participants Large class of users underserved or with no access to OTC markets Market open to all New risk capital enters the market, reducing reliance on banks Removal of OTC client hierarchy New clients bring opportunities for service providers: FCMs, execution brokers, trading technology 6
Eris Execution Advantages OTC SEF rules dis-intermediates the client-dealer relationship Trade Eris direct and re-establish client-dealer relationships Trade transparently in the Central Limit Order Book Voice negotiate block trades like traditional OTC swaps Low block threshold of 100 contracts, $10mm No minimum thresholds for EFPs & EFRs 7
Clients face their FCM and CME Clearing A FCM* A DCO* CME Clearing FCM* B B (*)CFTC Regulated Entities DCO: Designated Clearing Organization DCM: Designated Contract Market FCM: Futures Clearing Merchant DCM* Eris Exchange Eris lists Futures Contract X for trading on its DCM, with clearing on DCO/CME Clearing Before any trading may occur, Client A and B must first: Establish trading accounts and credit limits for Eris Futures Contracts with their FCMs Deposit funds ($) into their FCM account to meet Initial Margin requirements Client A submits a BUY order to Eris DCM that is within its pre-approved credit limits at FCM A Client B submits a SELL order to the DCM that is within its pre-approved credit limits at FCM B Orders match and automatically clear at the DCO DCM/Eris only operates the trade matching facility, DCO/CME Clearing carries the offsetting client positions and manages the credit risk of all participants 8
Easy to Use Electronic Order Book IMM start dates in 2-, 3-, 4-, 5-, 7-, 10-, and 30-year tenors Eris contract design allows absorption of liquidity to be transferred into Eris, as needed Invoice Spread in basis points vs. CME Group Treasury Futures 9
Multiple Pricing Alternatives for Eris Interest rate swaps are typically quoted in rate or NPV while futures and cash products are generally quoted in price format Past dated (no longer spot start) OTC swaps trade on NPV Eris Standards are quoted in NPV, but pricing is easily converted to par rate or price Example: 5 Year June Standard, 2.000% Coupon, $48.78 PV01 (Per $100k) NPV Par Rate Price -$3,035 1.378% 96.9686 NPV = (Par Rate - Coupon) x PV01 x 100 -$3,035 = (1.378% - 2.000%) x 48.78 x 100 Par Rate = Coupon + (NPV / (PV01 x 100)) 1.378% = 2.00% + (-3,035 / (48.78 x 100)) Price = 100 + NPV + (Hist. Pmts. PAI) 96.9686 = 100 3.035 + (0 + 0.0036) 10
Initial Margins and Available Margin Offsets Margin Tables as of January 11, 2018 Eris Margin Offsets 2-day VaR (SPAN) Margin Offsets with Eris Standards, Eris Flexes, Eurodollar Futures, Treasury Futures, and CME DSF Offsets available for both Customer and House Accounts Eris Standards Initial Margins Tenor Pay/Rec Fixed(%) Pay/Rec Fixed ($) 2yr 0.40% $400 3yr 0.40% $400 4yr 0.55% $550 5yr 0.70% $700 7yr 1.25% $1,250 10yr 1.35% $1,350 12yr 1.75% $1,750 15yr 2.10% $2,100 20yr 3.00% $3,000 30yr 3.60% $3,600 Liquidity add-on charges do not apply as with OTC Swap Clearing Up to 64% Savings over OTC Cleared Daily updated margining, maintenance margin levels are available in the Live Eris Swap Curve data feed 11
Eris Standard vs. MAC Swap: Cost Analysis Pay-fixed, $50mm Notional, 10Y rolled quarterly for 1 year MAC Cleared Swap Eris Standard Initial Margin (% of Notional) 4.39% 1.75% Initial Margin ($) $2,195,000 $875,000 Cost of Financing Initial Margin $16,463 $6,563 Exchange and/or CCP Fees $2,880 $2,000 FCM Fees $18,863 $6,000 Total Cost $38,205 $14,563 Savings Using Eris 62% Notes/Assumptions Tenor 10Y IMM Eff. Date Eris FCM Ticketing Fee (per $100k) $1.50 Hold Period Roll quarterly for 1 year IRS CCP Fee (per $100k) $0.72 Cost of Financing IM 0.75% IRS FCM Ticketing Fee (per trade) $300 Eris Exchange Fee (per $100k) $0.50 IRS FCM Maintenance Fee % of IM 0.75% 12
Clearing Firms Clearing Firms: Contact Information: New York 211 East 43 rd St., Suite 1600 New York, NY 10017 London* 68 King William Street London EC4N 7DZ Chicago 227 West Monroe St., Suite 2070 Chicago, IL 60606 888-587-2699, select 2 sales@erisfutures.com 13
Instant Access to Significant Screen Liquidity ~2.5mm of DV01 being streamed; Bid/offer ~0.4 bps EMSX and TSOX Passport Global Electronic access is available through open FIX-based APIs and many market leading front-end platforms: http://www.erisfutures.com/isvs www.erisfutures.com Live quotes and historical tick data Free GUI for Eris SwapBook CLOB trading Open FIX APIs Market Data API Order Routing API NPVs expressed in Par Rate equivalents FIX FIX FIX ERIS APIs 14
Get Started Today: Contact Information Eris Control Center 888-587-2699, select 1 ecc@erisfutures.com Sales 888-587-2699, select 2 sales@erisfutures.com Client Services 646-961-4480 clientservices@erisfutures.com Market Regulation 888-587-2699, select 3 marketreg@erisfutures.com New York 211 East 43 rd St., Suite 1600 New York, NY 10017 London* 68 King William Street London EC4N 7DZ Chicago 227 West Monroe St., Suite 2070 Chicago, IL 60606 www.erisfutures.com FAQs: www.erisfutures.com/faqs Follow us on Linkedin Follow us on Twitter 2014 Fixed Income Exchange of the Year 2011 Best New Exchange 2012 Innovation Award 2014 Best New Technology *Eris Marketing Europe, Ltd. +44 203 514 6583 15
Eris Exchange Legal Notices Version Created 01/11/2018 Eris Exchange is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission, whose relationship with persons utilizing the Exchange is governed solely by its Rulebook and certain other ancillary documentation. All information contained herein is made subject to and superseded by the Eris Exchange rules. Current rules should be consulted in all cases concerning contract specifications. Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All references to options refer to options on futures. The contents of this document have been provided to you for informational purposes only and are intended as a broad overview of certain aspects of Eris Exchange. Eris Exchange assumes no responsibility for any errors or omissions. Additionally, all examples in this document are hypothetical situations, used for explanation purposes only, and should not be considered as investment advice, legal advice, or tax advice. Nothing in this document should be taken as a public offer to sell or to buy any applicable financial instruments or securities. Notice to individuals in the UK and Europe. This communication does not constitute a Prospectus, nor is it a recommendation to buy, sell or retain any specific investment. This communication is for the exclusive use of Eligible Counterparties, Professional Clients, or investment professionals and must not be relied upon by any other class of person and is therefore not intended for private individuals or those who would be classified as Retail Clients. Circulation should be restricted accordingly. Issued by Eris Marketing Europe Limited. The Eris Logo, Eris, Eris Exchange, Eris BlockBox, Eris Methodology, Eris PAI, and Eris SwapBook are trademarks of Eris Exchange, LLC or its affiliates. Copyright 2018. All rights reserved. If found please contact legal@erisfutures.com. 16