PRODUCT REFERENCE GUIDE TRADING EFFICIENCY MARGIN SAVINGS REGULATORY CERTAINTY

Transcription

1 PRODUCT REFERENCE GUIDE TRADING EFFICIENCY MARGIN SAVINGS REGULATORY CERTAINTY

2 Table of Contents Overview & Contract Design Eris Exchange Overview..... P. 4 Contract Methodology.. P. 6 Contract Specs. P. 7-9 Trading Conventions Product Codes. P. 11 Trader Execution Reference Information... P. 13 Trading Platforms & Tools Eris Central Limit Order Book.... P. 16 Trading Hours P. 18 Trading Scenarios Compression Tools... P. 20 Trading Eris Calendar Spreads.. P. 21 Trading Off-The-Run Eris Standard... P. 22 Getting Started Start Trading Eris.. P. 26 FCMs.. P. 27 Electronic Execution P. 28 Daily Settlement Prices.... P. 30 Initial Margin.. P. 32 Post Trade Tools, Information, and Features Standards Look-Up.. P. 34 Eris Tax Treatment Summary. P. 37 Eris FASB Hedge Accounting Summary... P. 38 Execution and Clearing Fees.. P. 39 Additional Resources Eris Website Resources.... P. 41 Contact Information.... P. 42 2

3 Overview & Contract Design 3

4 Eris Exchange Overview Status Comments Structure Designated Contract Market (Futures Exchange) CFTC registered since 11/2011 Products 3 Month LIBOR Interest Rate Swap Futures Eris Standards and Eris Flexes Currency USD Eris EUR & GBP futures available at ICE, ZAR at JSE CCP CME Clearing Futures guarantee fund Initial Margins Margin Offsets Trading Platform: Central Limit Order Book Trading Platform: Off-Exchange Trades Standards: 2 Day SPAN Flexes: 5 Day HVaR CME Eurodollars, Treasury Futures, Deliverable Swap Future Eris SwapBook TM Eris BlockBox TM Set by CME Clearing Available today for house and client accounts Based on State Street s Currenex code base Web browser accessible Exchange Access Via CME Futures Clearing Firms 16 FCMs offering access today CLOB Access Market Data Exchange SwapBook GUI, Bloomberg EMSX, MS Passport, RTS, Trading Technologies (TT), ION, Open APIs, Fidessa, CQG, RiskVal Live Eris Swap Curve Free internet connected Eris GUI available for live trading today Free access via: API, Excel Add-In, FTP Snapshot Files, and more 4

5 Features of Eris Swap Futures Ability to hold as futures through maturity date (no physical delivery or early expiry) Replicates all OTC swap economics using the Eris Methodology TM Settles to Eris Swap Futures curve Margin offsets with CME Futures for clients Efficient asset segregation for 40 act funds Standard futures documentation (no ISDA required) Standard swap conventions: Fixed Leg: Semi 30/360, mod following, adjusted, NY and London Floating Leg: Quarterly, actual/360, 3M LIBOR, mod following, adjusted, NY and London Reduced margin for life of trade IRS section 1256 contracts; either 40/60 annual MTM tax treatment or 1256(e) tax exemption Eligible for FASB ASC 815 hedge accounting designation (as Fair Value or Cash Flow Hedges) Eris Invoice Swap Futures available: UST Futures CTD matched maturity swap terms Efficient trading of multi-legged packaged transactions Flexible dates and rates using Eris Flexes Effective dates out as far as 10 years 5

6 Eris Swap Futures Contract Methodology A + B - C = Eris Futures Price Swap NPV The present value of future cash flows and how Eris trades in the CLOB; can be negative or positive B C 100 Eris Futures Price Historical Fixed and Floating Amounts Eris PAI TM Index Price Settlement Value Past cash flows, which remain in the contract settlement price Accumulated overnight interest on A, replicating interest on collateral in OTC To index price to 100 rather than zero The Eris settlement price 6

7 Primary Standards, Contract Specifications Effective Dates The next two IMM dates in the quarterly IMM cycle (March, June, Sept, Dec) with IMM Effective Dates as far out as 6 months The next contract will be listed on the first business day of the month immediately following a quarterly month such that there will always be Contract Months up to 2 contracts listed with forward starting Effective Dates. Underlying Tenors 2, 3, 4, 5, 7, 10, 12, 15, 20, 30 Years Fixed Rate Pre-determined rate set by Eris Exchange, which will remain static throughout the life of the Contract. Determined at listing date. Quoting Convention Net Present Value (NPV) per Contract for trade execution Buy = Pay Fixed and Sell = Receive Fixed Contract Size $100,000 per contract RTH Min. OTH Min. Minimum Tick Size Tenor Tick Size ($) Implied bps Per Annum Block Size (lots) Block Size (lots) 2Y Y Y Y Y Y Y Y Y Y Last Trading Day The last day on which the Contract can be traded is the NY business day preceding the Maturity Date. Regular Trading Hours (RTH): Monday Friday; 7:00 AM to 5:00 PM Eastern Time Trading Hours Other Trading Hours (OTH): All times that are not RTH; including all hours on weekends and holidays Tickers/Vendor Codes Tenor Eris Short Name Eris Product Code 1 TT Bloomberg 2Y 2Y P Stnd ZA9102 2Y STND LIT 3Y 3Y P Stnd ZB9103 3Y STND LIC 1 4Y 4Y P Stnd ZB9104 4Y STND LID Used by Interactive Brokers, Fidessa, and CQG 5Y 5Y P Stnd ZB9105 5Y STND LIW 7Y 7Y P Stnd ZC9107 7Y STND LIB 10Y 10Y P Stnd ZC Y STND LIY 12Y 12Y P Stnd ZD9112 n/a LII 15Y 15Y P Stnd ZD9115 n/a LIL 20Y 20Y P Stnd ZD9120 n/a LIO 30Y 30Y P Stnd ZD Y STND LIE Margining 2 Day SPAN, with portfolio offsets including CME Interest Rate Futures: Eurodollars, Treasury Futures, DSF, and all other Eris Stnd/Flexes Matching Algorithm FIFO Block Reporting Required to report block trades as per Rule 601 of the Eris Exchange Rulebook. There is no public reporting for EFRs and EFPs 7

8 Ultra Forward Standards, Contract Spec. Effective Dates Contract Listing Underlying Tenors Fixed Rate Quoting Convention Contract Size Minimum Tick Size Third IMM date on the quarterly IMM cycle (March, June, Sept, Dec) and subsequent IMM Effective Dates as far out as 10 years The next contract will be listed on the first business day of the month immediately following a quarterly month such that there will always be contracts listed with the next 21 forward starting quarterly Effective Dates (beginning with Sep 2016) and with the 41st forward starting quarterly Effective Date 2, 3, 4, 5, 7, 10, 12, 15, 20, 30 Years Pre-determined rate set by Eris Exchange, which will remain static throughout the life of the Contract. Determined at listing date. Net Present Value (NPV) per Contract for trade execution Buy = Pay Fixed and Sell = Receive Fixed $100,000 per contract Tenor Tick Size ($) RTH Min. OTH Min. Block Size (Lots) Block Size (lots) 1 2Y Y Y Y Y Y Y Y Y Y Last Trading Day The last day on which the Contract can be traded is the NY business day preceding the Maturity Date. Regular Trading Hours (RTH): Monday Friday; 7:00 AM to 5:00 PM Eastern Time Trading Hours Other Trading Hours (OTH): All times that are not RTH; including all hours on weekends and holidays Tickers/Vendor Codes Tenor Eris Short Name Eris Product Code Tenor Eris Short Name Eris Product Code 2Y 2Y UF Stnd ZA Y 10Y UF Stnd ZC9210 Margin Matching Algorithm Block Reporting 3Y 3Y UF Stnd ZB Y 12Y UF Stnd ZD9212 4Y 4Y UF Stnd ZB Y 15Y UF Stnd ZD9215 5Y 5Y UF Stnd ZB Y 20Y UF Stnd ZD9220 7Y 7Y UF Stnd ZC Y 30Y UF Stnd ZD Day SPAN, with portfolio offsets including CME Interest Rate Futures: Eurodollars, Treasury Futures, DSF, and all other Eris Stnd/Flexes FIFO Required to report block trades as per Rule 601 of the Eris Exchange Rulebook. There is no public reporting for EFRs and EFPs 1 Min Block Size calculated based on Remaining Tenor 8

9 Standard Invoice Swap Futures, Contract Spec. Effective Dates Either the first or last delivery date 1 for the related CBOT Treasury Futures contract Reference Treasury Futures 2-year, 5-year, 10-year, ultra 10-year, 30-year bond, ultra 30-year bond Pre-determined rate set by Eris Exchange, which will remain static throughout the life of the Contract. Fixed Rate Determined at listing date. Quoting Convention Net Present Value (NPV) per Contract for trade execution Buy = Pay Fixed and Sell = Receive Fixed Contract Size $100,000 per contract Minimum Tick Size Eris Contract Tick Size ($) Implied bps Per Annum RTH Min. Block Size (lots) OTH Min. Block Size (lots) 2T T T U10T LBT ULBT Last Trading Day The last day on which the Contract can be traded is the NY business day preceding the Maturity Date. Regular Trading Hours (RTH): Monday Friday; 7:00 AM to 5:00 PM Eastern Time Trading Hours Other Trading Hours (OTH): All times that are not RTH; including all hours on weekends and holidays Tickers/Vendor Codes CBOT Treasury Future Eris Short Name Eris Product Code 1 (Initial) Eris Product Code 2 (Secondary) ZT 2T ISF ZA99<MM> n/a ZF 5T ISF ZB99<MM> n/a ZN 10T ISF ZC99<MM> n/a TN U10T ISF ZC99<MM> n/a ZB LBT ISF ZD99<MM> ZD98<MM> UB ULBT ISF ZD99<MM> ZD98<MM> Margin 2 Day SPAN, with portfolio offsets including CME Interest Rate Futures: Eurodollars, Treasury Futures, DSF, and all other Eris Stnd/Flexes Matching Algorithm FIFO Block Reporting Required to report block trades as per Rule 601 of the Eris Exchange Rulebook. There is no public reporting for EFRs and EFPs 1 Determined by the Exchange, in consultation with the market 2 The last 2 digits (<MM>) in the Eris product code will represent the quarterly month of the reference treasury future (i.e. 03, 06, 09, 12) 9

10 Trading Conventions 10

11 Product Codes for Eris Standards Eris Standards product symbology varies across Independent Software Vendor (ISV) platforms. The table below lists some of the ISVs supporting Order Routing and/or Market Data functionality for the Eris Standards contracts. June 2018: June Tenors Eris Short Name Bloomberg CQG Fidessa Interactive Brokers Thomson Reuters TT 2Y 2Y Stnd Jun LITM8 LITM8 2Y Standard Jun % ZA9102 Jun22 20 PS2YM20=ER 2Y STND Jun18 3Y 3Y Stnd Jun LICM8 LICM8 3Y Standard Jun % ZB9103 Jun21 21 PS3YM21=ER 3Y STND Jun18 4Y 4Y Stnd Jun LIDM8 LIDM8 4Y Standard Jun % ZB9104 Jun20 22 PS4YM22=ER 4Y STND Jun18 5Y 5Y Stnd Jun LIWM8 LIWM8 5Y Standard Jun % ZB9105 Jun20 23 PS5YM23=ER 5Y STND Jun18 7Y 7Y Stnd Jun LIBM8 LIBM8 7Y Standard Jun % ZC9107 Jun20 25 PS7YM25=ER 7Y STND Jun18 10Y 10Y Stnd Jun LIYM8 LIYM8 10Y Standard Jun % ZC9110 Jun20 28 PS10YM28=ER 10Y STND Jun18 30Y 30Y Stnd Jun LIEM8 LIEM8 30Y Standard Jun % ZD9130 Jun22 48 PS30YM48=ER 30Y STND Jun18 Sep 2018: Sep Tenors Eris Short Name Bloomberg CQG Fidessa Interactive Brokers Thomson Reuters TT 2Y 2Y Stnd Sep LITU8 LITU8 2Y Standard Sep % ZA9102 Sep21 20 PS2YU20=ER 2Y STND Sep18 3Y 3Y Stnd Sep LICU8 LICU8 3Y Standard Sep % ZB9103 Sep20 21 PS3YU21=ER 3Y STND Sep18 4Y 4Y Stnd Sep LIDU8 LIDU8 4Y Standard Sep % ZB9104 Sep19 22 PS4YU22=ER 4Y STND Sep18 5Y 5Y Stnd Sep LIWU8 LIWU8 5Y Standard Sep % ZB9105 Sep19 23 PS5YU23=ER 5Y STND Sep18 7Y 7Y Stnd Sep LIBU8 LIBU8 7Y Standard Sep % ZC9107 Sep19 25 PS7YU25=ER 7Y STND Sep18 10Y 10Y Stnd Sep LIYU8 LIYU8 10Y Standard Sep % ZC9110 Sep19 28 PS10YU28=ER 10Y STND Sep18 30Y 30Y Stnd Sep LIEU8 LIEU8 30Y Standard Sep % ZD9130 Sep21 48 PS30YU48=ER 30Y STND Sep18 11

12 Trading Conventions To pay fixed, end-users will execute on the ask side of the live quotes and vice versa Eris Standards: Forward starting contracts with predetermined rates and dates; trade in NPV Eris SwapBook GUI 12

13 Trader Execution Reference Information Key Points to Remember Contract Size = $100,000 notional BUY = Pay Fixed, SELL = Receive Fixed for both Rate and NPV quoted contracts Long Position: Implies Paying Short Position: Receiving Fixed All NPV quoted instruments are from the Buyer s perspective: Positive NPV: Par Rate > Fixed Rate Negative NPV: Par Rate < Fixed Rate BID SIDE: NPV/Rate where Market Maker Pays Fixed and End User Receives Fixed ASK SIDE: NPV/Rate where Market Maker Receives Fixed and End User Pays Fixed 13

14 Par Rate Equivalents NPV Traded Contracts Can Be Expressed in Par Rate Equivalents The OTC market is familiar with trading in par rate terms The par rate equivalent represents the implied fixed rate to make the NPV (A) = 0 Par Rate Equivalent = NPV / PV01 / 10,000 + Contract Fixed Rate Bids Offers Depth of Market Tile Price (Eris A) Par Rates Displayed on 14

15 Trading Platforms & Tools 15

16 Eris Central Limit Order Book is Live Today Trading Hours Eris Standards Eris Flexes Regular Trading Hours (RTH) Monday Friday 7:00 AM to 5:00 PM Eastern Time Monday Friday 7:00 AM to 4:30 PM Eastern Time 1) Third Party Platforms Electronic Streaming Prices: 2Y, 3Y, 4Y, 5Y, 7Y, 10Y, 30Y Immediate Trade Acceptance 2) Eris Exchange / SwapBook GUI Anonymous All-to-All RFQs 3) FIX Connectivity to Open APIs FIX FIX FIX ERIS APIs 16

17 Voice Execution and Off Exchange Trades Voice Block Trade Thresholds Pre-trade net exposure credit checks Single price spread trading/baskets Maturity 2 to <5 Eris Block Size (RTH) $10mm (100 Contracts) Eris Block Size (OTH) $1mm (10 Contracts) OTC Block Size $460mm EFPs w/cash and EFRs w/otc Submit EFPs and EFRs for clearing by EOD Blocks measured as sum of notional Eligible for OTH trading 5 to <10 10 to <30 30 $10mm (100 Contracts) $10mm (100 Contracts) $10mm (100 Contracts) $0.5mm (5 Contracts) $0.5mm (5 Contracts) $0.5mm (5 Contracts) $240mm $170mm $120mm Report Trades: Call the Eris Control Center, , select 1 or enter trades in Eris BlockBox TM through your web browser Trading Hours Eris Standards Eris Flexes Regular Trading Hours (RTH) Other Trading Hours (OTH) Monday Friday; 7:00 AM to 5:00 PM Eastern Time All times that are not RTH, including all hours on weekends and holidays Monday Friday; 7:00 AM to 4:30 PM Eastern Time All times that are not RTH except for 4:30 PM to 5:00 PM Eastern Time on business days 1 All hours on weekends and holidays 1 4:30 PM to 5:00 PM Eastern Time on business days is considered an invalid execution time for Eris Flexes 17

18 OTH RTH Regular and Other Trading Hours Block Trades, Exchange for Risk (EFR) and Exchange for Physical (EFP) Trade Negotiation Times (ET) Product Type Negotiation Permitted Trade Date Block Reporting Deadline Submission for Clearing Deadline Begin End 7:00 AM 4:30 PM Standards Flexes Same Calendar Date Within 15 minutes of negotiation Within 15 minutes of negotiation, up to 4:35 PM 5:15 PM on Same Calendar Date 4:35 PM on Same Calendar Date 4:30 PM 5:00 PM Standards (ONLY) Same Calendar Date Within 15 minutes of negotiation, up to 5:15 PM 5:15 PM on Same Calendar Date 5:00 PM 11:59 PM Standards Flexes Next Business Date 6:55 AM on Next Business Date 5:15 PM on Next Business Date 4:35 PM on Next Business Date 12:00 AM 6:45 AM Standards Flexes Same Calendar Date 6:55 AM on Same Calendar Date 5:15 PM on Same Business Date 4:35 PM on Same Business Date 6:45 AM 7:00 AM Standards Flexes Same Calendar Date Within 15 minutes of negotiation on Same Calendar Date 5:15 PM on Same Business Date 4:35 PM on Same Business Date 1. EFPs and EFRs do not have a reporting deadline, though must be submitted for clearing by the deadline noted in the table above 2. Eris Flexes may be negotiated between 4:30 PM and 5:00 PM on weekends and holidays 3. Eris BlockBox TM will open at 6:45 AM ET for reporting and submission on valid business days 4. Eris Exchange daily Eris PAI for all trades executed between 9:15am and 5:00pm ET during RTH using the overnight fed funds effective rate that was published on the morning of the trade date For all other trades, daily Eris PAI is calculated using the overnight fed funds rate that was published on the morning of the previous trade date 18

19 Trading Scenarios 19

20 Basket & Compression Trading Tools Eris SLICE Anonymous All-to-All CLOB RFQ trading tool Eris Swap-futures Line Item Compression and Elimination (SLICE) Terminate or replace multiple positions at a single price Spreadsheet integration (reduce human error) Basket sharing between parties Net credit checks for entire basket Individual leg prices assigned post execution 20

21 Trading Eris Calendar Spreads What is an Eris Calendar Spread? Execution of a buy and sell for two Eris Standards with the same Underlying Tenor but with Effective Dates one quarter apart from each other. Calendar spreads can be legged into separately, or traded as a package Why Trade Eris Calendar Spreads? End users often roll positions quarterly as calendar spreads to stay in the most actively quoted current contract, or to maintain a constant underlying tenor Ways to Trade Eris Calendar Spreads: Example Trade: Order Book of Jun vs Sep Discrete Spread 1. Discrete Spreads: Trade combined package electronically via Eris SwapBook TM 2. Auto Spreading Tools: Trade buy and sell legs independently by utilizing 3 rd party ISV auto spreading tools: Eris SwapBook TM GUI, TT, and RTS 3. Single Block Trade: Trade combined package by voice, 2 legs reported through Eris BlockBox TM 5Y P Stnd Jun/Sep Spread Buyer lifts the offer at $275 which represents selling the Jun contract at -$3,180 and buying the Sep contract at -$2,905 Spread Seller hits the bid at $270, which represents buying the Jun contract at -$3,180 and selling the Sep contract at -$2,910 The NPVs illustrated above represents the difference between the prompt and next month in the spread trade 21

22 Trading Off-The-Run Eris Standards Achieve Yield Curve Granularity With Off-The-Run Eris Standards Eris Standards which have passed the Effective Date are referred to as Off-The-Run and are available for trading until the Maturity Date There are hundreds of points on the yield curve available to trade using Off-The-Run Eris Standards Off-The-Run Eris Standards are margined at 2 day VaR until maturity, and margins will decline as the remaining tenor falls over time Eris Standards Curve Request for Market (RFM) Protocol 1. A user may either place a limit order, or create an anonymous request for market (RFM), which is then broadcast to the entire Eris market. The RFM includes no information of direction or size, just a request for market quotes 2. Market Makers then create a live order book market on the request 3. The user may then aggress the order book market, or place a limit order 22

23 Use Eris Swap Futures for Packaged Trades Single Bid/Offer Without Legging Risk, Credit on Net Risk of Swap Futures Package Transaction Compress OTC Swaps into Futures Swap (future) vs. Swap (future) Swap Spreads MBS Basis Corporate Bond Hedging Delta Neutral Swaptions Municipal Bond Hedging Eris Leg(s) Trade Type Exchange for Risk Block Trade Exchange for Physical Exchange for Physical Exchange for Physical Exchange for Risk Exchange for Physical Additional Information Compress line items Lower margins and clearing fees Efficient voice trade execution of the package as an Exchange for Risk (EFR) at any size Net credit check Sum of notional used to determine block eligibility Single price for basket trade execution Eris SLICE automates basket trading Negotiate in spread terms Use Eris Standards to reduce IM End of day submission to Eris Exchange Negotiate in spread terms Use Eris Standards to reduce IM End of day submission to Eris Exchange Synchronize with new issue process End of day submission to Eris Exchange Forward starting Eris Flex to replicate the Delta End of day submission to Eris Exchange No leg risk End of day submission to Eris Exchange 23

24 Use Eris to Hedge New Issues Complications of New Issue Hedging With OTC Swaps Traditional approach of locking in swap spreads and later passing Treasuries on the pricing call may not be allowed A large portion of cleared OTC swaps are now forced to trade electronically on SEFs Potential loss of anonymity Pre Dodd Frank: Hedging New Issue With OTC Issuer Issuer Swap Spread Lock + Treasury Pass = Rec Fixed Swap Bank Bank Benefits of Hedging New Issues With Eris Economics of a swap spread lock & Treasury pass can be achieved with Eris and an intraday T-Lock designated as an Exchange For Risk EFR & EFP can be transacted by voice at any size - with no public reporting Use Treasuries at new issue pricing to unwind T-Lock Lower stand alone block thresholds than OTC allow for voice trading Lower margins for standardized tenors Forward-starting Eris Swap Futures can be used in place of swap locks Post Dodd Frank: Hedging New Issue With Eris Eris + Intraday T-Lock replaces the use of a swap spread lock. Treasury pass settles the T-Lock Issuer Issuer Rec Fixed (Eris) & Intraday T-Lock + Treasury Pass & T-Lock Unwind = Rec Fixed (Eris) Bank Bank 24

25 Getting Started 25

26 Start Trading Eris Swap Futures Today No ISDA execution agreements Traditional futures documentation Minimal documentation required if already trading CME futures Electronic Give-up System (EGUS) protocols On-board to Trade Electronically: A. Clearing firm sets account credit limits B. User executes Connection Agreement C. Clearing firm updates give-up agreements On-board to Trade Blocks, EFPs, and EFRs: A. Clearing firm sets account credit limits and permissions for BlockBox B. Clearing firm updates give-up agreements 26

27 Call Your FCM to Get Started Today Eris Contact Information: New York 211 East 43 rd St., Suite 1600 New York, NY London 68 King William Street London EC4N 7DZ Chicago 227 West Monroe St., Suite 2070 Chicago, IL , select 2 sales@erisfutures.com 27

28 Electronic Execution EMSX / TSOX Connectivity Providers: 28

29 Live on Bloomberg: ERIS<GO> ERIS <GO> Shortcuts ERIS: Landing Page GP: Graph Price ERIS1: Streaming Benchmarks GIP: Intra-day Price Graph MDM: Market Depth Monitor DES: Contract Description QRM: Recap of Quotes SWPM: Swap Manager QR: Recap of Trades HP: Historical Price Table Eris Primary Standards Example: LITZ8 (Dec year) L I T Z 8 LI Indicates Instrument as Eris Standards contract T Dictates the tenor Tenor 2Y = T 5Y = W 7Y = B 10Y = Y 30Y = E Z Month of Eff. Date Month Codes Active* = A Mar = H Jun = M Sep = U Dec = Z 8 The last number of the effective year Ex ERIS1 <GO> View live streaming markets MDM <GO> MDM allows users to see full market depth and top day trade activity in any streaming Eris benchmark contract SWPM <GO> SWPM can be launched from the DES page with pre-populated contract terms QRM <GO> QRM shows time, price and size for trades executed in Eris SwapBook HP <GO> HP shows historical settlement prices and volume and open interest Available Resources: Request the ERIS <GO> User Guide and Spreadsheet, sales@erisfutures.com 29

30 Daily Settlement Prices Eris Standard Historical Prices on Erisfutures.com The data file provides users immediate access to historical prices in conjunction with Eris short codes, Eris z-codes and Bloomberg contract codes. Users can also view the Swap NPV, Accrued Coupons, and Eris PAITM for Eris Swap Futures Live Eris Swap Curve: Anchored to live order books, fitted to price the entire curve, accessible to all by API and Excel Add-In, Public FTP: On the Eris public ftp site, ftp://ftp.erisfutures.com/, settlement prices for each z-code can be found in the daily End of Day file (e.g. Eris_Instruments_YYYYMMDD_Volume.csv) Bloomberg Terminal: Historical settlement prices for Eris Flexes can be viewed from the contract s Bloomberg ID Bloomberg ID Comdty HP <Go> (see conversion methodology below) Eris Product Code Example: Eris Z-Code 1 Bloomberg ID Tenor Bucket 2 ZA EIA Eris Standard ID / Eris Flex Counter 9102, , Maturity Date 3 YYYYMMDD YYYYMMDD 1 - For more detailed information on Eris z-code construction, consult the Eris Exchange Trade Ticker Conventions 2 - Bloomberg replaces the Z in the Eris z-code with an EI 3 - Bloomberg adds a 0 before the Eris Standard ID / Eris Flex Counter 4 - Bloomberg adds a space in the Comdty Code before the Maturity Date Security Identifier 4 ZA ZA EIA EIA

31 Eris Volume and Open Interest Data File/Name Web Location Data Eris Website: Volume and Open Interest Current day s volume and open interest for each of the streaming Standards, Other Standards as a single group and Flexes as a single group Historical Volume and Open Interest (CSV) file Historical Eris Swap Futures Data (Excel) file Prelim and Final Open Interest Files (e.g. Eris_ _PRELIM_OpenInterest.csv and Eris_ _FINAL_OpenInterest.csv) End of Day Price File (e.g. Eris_Instruments_YYYYMMDD_Volume.csv) Historical_VOI.csv Historical_Swap_Futures_Data.xlsx ftp://ftp.erisfutures.com/ ftp://ftp.erisfutures.com/ Historical volume and open interest for every individual Standard and for Flexes as a group Historical trade count, volume, pricing and open interest for all contracts. Settlement and underlying price components and end of day NPV calculations for Eris Standards. Published daily with current open interest for every individual Standard and for Flexes as a group Published daily with top day volume for every single z-code (no open interest) Historical volumes for both Eris Flexes and Eris Standards and historical Open Interest for Eris Standards can also be viewed via the HP (Historical Price) screen on Bloomberg 31

32 Initial Margins and Available Margin Offsets Margin Tables as of April 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 63% Savings over OTC Cleared Daily updated margining, maintenance margin levels are available in the Live Eris Swap Curve data feed 32

33 Post Trade Tools, Information, & Features 33

34 Eris Standards Look-Up Page The Standards Look-Up page allows users to easily retrieve details for all Eris Standards erisfutures.com/lookup Use the search bar to find specific contract details by typing in Bloomberg Code, Coupon rate, etc. Clicking the dropdown arrow will display detailed contract information Search for contract details by selecting the Type, Underlying Tenor, Effective Year, and/or Effective Month 34

35 Collateral Flexibility Collateral Eligible for Initial Margin 1 Eris Exchange and CME Futures CME OTC IRS LCH SwapClear Cash US Dollar Australian Dollar, British Pound, Canadian Dollar, Euro, Japanese Yen, Mexican Peso, New Zealand Dollar, Swiss Franc, Norwegian Krone, South African Rand and Swedish Krona Turkish Lira, Chinese Renminbi US Treasuries, Agencies & MBS 2 Gold Corporate Bonds Letters of Credit US Equities Japanese Government Bonds Other Foreign Sovereign Debt List shows collateral available to be posted to clearing house. Individual FCM s designate eligible collateral for individual clients. Source URL s (each accessed March 28, 2014) Eris Exchange: CME OTC IRS: LCH SwapClear: SwapClear US and SwapClear Global (Non-Members): 2 FNMA and FHLMC MBS are not acceptable at SwapClear Global 3 - Foreign Sovereign Debt of Canada, France, Germany, Sweden, and the United Kingdom are eligible collateral for Eris Exchange products, CME OTC IRS and LCH SwapClear. LCH SwapClear also accepts debt from Australia, Austria, Belgium, Denmark, Finland, Luxembourg, Netherlands and Norway. LCH SwapClear Global also accepts debt from Italy and Spain 35

36 Average Pricing and Allocation Tools Average Pricing Average pricing functionality is available for Eris Interest Rate Swap Futures using CME Average Pricing System (APS) End user asks its FCM to average price specific Eris contracts with the same terms, FCM then processes via CME Front-End Clearing System Plus (FEC+) Example: 10y Standard, 3 fills, 400 contracts ($40mm notional) Trade #1 Buy 10y Standard # Contracts: 100 NPV: +$1,850 Trade #2 Buy 10y Standard # Contracts: 100 NPV: +$1,950 Trade #3 Buy 10y Standard # Contracts: 200 NPV: +$2,100 Post Trade End user asks FCM for average pricing on trades # 1, 2, & 3. FCM processes request Total # Contracts: 400 Avg NPV: +$2,000 Pre-Trade Post-Trade Allocations Pre-Trade and Post-Trade Allocations Participants can utilize existing futures give-up framework Allocate trades using CME Give Up System EGUS Electronic Give-ups Agreements Manage give-ups with FIA Electronic Give-Up System (EGUS) Quickly connect executing brokers to clearing firms Manage and monitor brokerage fee changes in a single portal 36

37 Eris Tax Treatment Summary Opinion on Tax Treatment IRS Code 1256(a) Annual MTM 60/40 Tax Treatment The tax treatment of regulated futures contracts is outlined in IRS Code The tax code requires that regulated futures contracts defined in section 1256(a) be marked-to-market annually, with gains/losses recognized and taxable each year; 60% taxed as long-term capital gains, and 40% taxed as short-term capital gains. This has resulted in futures contracts being commonly called section 1256 contracts and Eris Swap Futures fall into this classification. IRS Code 1256(e) MTM Exemption The annual mark-to-market treatment of Eris Swap Futures under IRS Code 1256(a), while optimal for some users, presents a challenge to hedgers that traditionally employ OTC interest rate swaps as long-term exposure hedges, where they match the timing of gains/losses of OTC swap hedges with the timing of expenses/income of their real exposures. Under IRS Code 1256(e), section 1256 contracts may be designated as hedging transactions to manage the risks of interest rate or price changes with respect to borrowings or ordinary obligations of the taxpayer, and in so doing, may be exempted from the annual mark-to-market tax treatment of IRS Code 1256(a). This flexibility allows long term position holders of Eris Swap Futures to treat the gains and losses of their Eris Swap Futures positions similar to OTC swaps; with gains/losses taxed as realized, permitting a matching of the realization of exposure income/expense with that of the losses/gains of Eris hedges. The information contained herein has been compiled for general purposes only, and Eris Exchange and its affiliates do not provide tax, legal or accounting advice, and may not be relied upon by any party for any purpose. Eris Exchange assumes no responsibility for any errors or omissions and you should consult your own tax, legal and accounting advisors before engaging in any transaction. 37

38 Eris FASB Hedge Accounting Summary Eris and the Fixed Income Group of R.J. O Brien & Associates (RJO) have released accounting case studies for Cash Flow and Fair Value hedging treatment Studies outline how one would designate Eris Swap Futures as eligible hedges Utilize the same accounting benefits as OTC swaps to reduce earnings volatility & Independent Consultants Eris Swap Futures as a Cash Flow Hedge Eris Swap futures as Fair Value Hedge Regression analyses demonstrate high degree of effectiveness Accounting journal entries illustrated Sample Hedge Designation document illustrated Eris and REVAL have released a white paper illustrating how Eris is suitable for FASB hedge accounting treatment 38

39 Eris Exchange Execution & Clearing Fees All fees are quoted per $100k notional, include CME Clearing fees and are charged per contract side Product Type Tenor/Code Exchange + Clearing Fees Eris Primary Standards Eris Ultra Forward Standards 2, 3, 4, 5, 7, 10, 12, 15, 20, 30 Year $0.50 Eris Standard Invoice Swap Futures * 2T, 5T, 10T, U10T, LBT, ULBT $0.50 Eris Flexes 0 to 2 Year $ to 5 Year $ to 10 Year $ to 30 Year $3.50 Maintenance Fees may apply; Eris Standards $1.00 quarterly and Eris Flexes $0.30 annually The maintenance fees for Eris Standards are equivalent to rolling the position to the active contract, but without having to pay the bid / offer quarterly For information on fee incentive programs and to request a TCA Analysis for Eris vs. Cleared OTC, sales@erisfutures.com *Tenor for Invoice Swap Futures represents the related Treasury Futures cheapest to deliver 39

40 Additional Resources 40

41 Eris Website Resources Content and Pages Description Web location Traders Corner Landing page with many trading and product resources Live Eris Swap Curve Benchmark USD interest rate swap curve Volume and Open Interest Summary table of recent trading activity Trade Recap Cash Flow Comparison Contract Specifications Standards Look-Up Real time and historical trade details for all Central Limit Order Book and Block Trades White paper showing the cash flow equivalence of Eris Swap futures and swaps Landing page with all Eris Swap Futures product specifications Provides functionality to identify products and generate contract details Live Quotes Live market data for Eris Swap Futures Bloomberg User Guide for Eris Eris Hedge Ratios Trading Hours and Holidays Reval Hedge Accounting Paper Bloomberg guide with common shortcuts, screenshots and spreadsheet features Displays hedge ratios required to create DV01 neutral portfolios between Eris Standards and Treasury Futures List of all trading hours, settlement curve times, holidays and early market closures White paper focused on the application of hedge accounting to Eris Swap Futures Block Trades Summary of daily block trading activity Electronic Execution Contacts List of companies and contacts for execution platforms offering Eris markets Rulebook Eris Exchange Rulebook 41

42 Eris Exchange Contact Information Eris Control Center , select 1 ecc@erisfutures.com Sales , select 2 sales@erisfutures.com Market Regulation , select 1 marketreg@erisfutures.com Client Services clientservices@erisfutures.com New York 211 East 43 rd St., Suite 1600 New York, NY London* 68 King William Street London EC4N 7DZ Chicago 227 West Monroe St., Suite 2070 Chicago, IL FAQs: Follow us on Linkedin Follow us on Twitter *Eris Marketing Europe, Ltd

43 Eris Exchange Legal Notices Version Created 04/11/2018 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 All rights reserved. If found please contact legal@erisfutures.com. 43