ICE to Launch Eris Standard Interest Rate Futures on June 29; Introduction will Include Euro and Sterling Rates | Business Wire
LONDON–(BUSINESS WIRE)–Intercontinental Exchange (NYSE: ICE), the leading global network of
exchanges and clearing houses, today announced that ICE Futures Europe,
the UK’s leading multi-asset class derivatives exchange, intends to
launch Eris standard interest rate futures contracts denominated in Euro
(EUR) and Pound Sterling (GBP) on Monday June 29, 2015.
The new contracts, Eris
Standard EUR Interest Rate futures and Eris
Standard GBP Interest Rate futures, will trade and clear at ICE
Futures Europe and ICE Clear Europe. They're based on the product
design of Eris Exchange US dollar-denominated Eris Standard Swap future
and Eris Flex Swap future contracts.
Eris interest rate futures
contracts replicate all of the cash flows and economics of
comparable swaps traded in the over-the-counter market, including Price
Alignment Interest (PAI), which are incorporated into a single
futures-style variation margin cash flow. Additional contract features
include capital, margin and operational efficiencies of exchange-traded,
cash-settled futures contracts, without physical delivery risk at
Second of a two part article
Before I discuss the use of hedging to off-set risk, we need to understand the role and the purpose of hedging. The history of modern futures trading began in Chicago in the early 1800's. Chicago is located at the base of the Great Lakes, close to the farmlands and cattle country of the U.S. Midwest making it a natural center for transportation, distribution and trading of agricultural produce. Gluts and shortages of these products caused chaotic fluctuations in price. This led to the development of a market enabling grain merchants, processors, and agriculture companies to trade in contracts to insulate them from the risk of adverse price change and enable them to hedge.
The first commodity exchange was the creation of the Chicago Board of Trade, CBOT in 1848. Since then, modern derivative products have grown to include more than the agricultural industry. Products include Stock Indices, Interest Rates, Currency, Precious Metals, Oil and Gas, Steel and a host of others. The origins of the commodity and futures exchange was created to support hedging. The role of speculators is beneficial as they add trading volume and important volatility to what would otherwise be a small and illiquid market place.
A bona-fide hedger is someone with an actual product to buy or sell. The hedger establishes an off-setting position on the futures or commodity exchange, thereby instituting a set price for his product. Someone buying a hedge is known as being "Long" or "Taking Delivery". Someone selling a hedge is known as being "Short" or "Making Delivery". These positions known as "Contracts" are legally binding and enforced by the exchange.
Entering your trades either for speculation or hedging is done through your broker or Commodity Trading Advisor. Commodity and Futures exchanges are distinct from...
The futures will trade and clear alongside the ICE
Swapnote® complex, which launched in 2001 as the first
interest rate swap futures contract, as well as ICE Futures Europe’s
extensive European interest rate futures and options portfolio,
providing margin efficiencies for customers.
“As the clearing mandate approaches in Europe, market participants are
seeking more efficient means to hedge their interest rate exposure.
Eris’ unique methodology provides our customers with an innovative,
on-exchange solution for replicating the economics of interest rate
swaps,” said David Peniket, President &. COO, ICE Futures Europe.
In April, ICE launched the first tranche of Eris futures contracts, Eris
CDX HY and Eris
CDX IG, which replicate the economics of credit default swaps using
the Eris MethodologyTM. Both contracts trade and clear at ICE
Futures U.S. and ICE Clear U.S. with growing volume and established open
ICE plans to launch Eris
iTraxx Main and Eris
iTraxx Crossover, during the second half of 2015. In December 2014,
ICE entered into a multi-year license agreement with Eris to list
futures and options contracts based on the Eris Methodology
patent-pending product design on the ICE platform.
About Intercontinental Exchange
Intercontinental Exchange (NYSE:ICE) operates the leading network of
regulated exchanges and clearing houses. ICE’s futures exchanges and
clearing houses serve global commodity and financial markets, providing
risk management and capital efficiency. The New York Stock Exchange is
the world leader in capital raising and equities trading.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock
Exchange. Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its affiliates
is located at www.intercontinentalexchange.com/terms-of-use
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995 –. Statements in this press release regarding ICE’s business that
aren't historical facts are “forward-looking statements”. That involve
risks and uncertainties. For a discussion of additional risks and
uncertainties, which could cause actual results to differ from those
contained in the forward-looking statements, see ICE’s Securities and
Exchange Commission (SEC) filings, including. Not limited to, the
risk factors in ICE’s Annual Report on Form 10-K for the year ended
December 31, 2014, as filed with the SEC on February 5, 2015.
SOURCE: Intercontinental Exchange
About Eris Exchange
The Eris Exchange group includes a futures exchange registered in the
U.S. as a Designated Contract Market with the CFTC. The Exchange lists
cash-settled interest rate swap futures with current open interest
exceeding 173,000 contracts. For more information, visit Eris Exchange
online at www.erisfutures.com
or follow us on Twitter @erisfutures
Trademarks of Eris Exchange and/or its affiliates include Eris, Eris
Exchange, Eris SwapBook, Eris BlockBox, Eris PAI and Eris Methodology.