As the interest rate swaps market continues to evolve, Eris Exchange is keeping pace.
Eris, the U.S. futures exchange that offers interest rate swap futures as an alternative to OTC swaps, has made a new hire to help bring in more big OTC participants.
George Harrington previously headed Bloomberg Markets and oversaw Bloomberg’s SEF, MTF, and Japanese ETP regulated trading platforms, so he has plenty of experience with the regulations that led to a boom in SEFs and the futurization of interest rate swaps.
At Eris, he will focus on working across the execution management and order management systems to assure that Eris products can be traded seamlessly by OTC market participants – specifically “real money” accounts (large traditional asset managers) and hedge funds, said Neal Brady, Eris’s CEO.
Both Eris and the markets have developed in ways that now make it possible for these large players to take advantage of Eris’s offering. Eris is building out its middle and back office structure to process the contracts. Harrington also worked with the Eris team on swap futures products while at Bloomberg, as the market was evolving rapidly.
Although swap futures were not new, their product design allowed for users of OTC swaps to look at Eris’s products side by side with them and see the fungibility of the products, he said.
At that time, “the market was in the process of digesting some massive changes resulting from Dodd-Frank, namely mandatory clearing, trade reporting and trade execution mandates,” Harrington said. “There was a lot of interest in swap futures due to obvious cost advantages available to all market participants. Also, the anonymous nature of CLOB (Central Limit Order Book) trading appeals to a wide variety of end users and had never been available to OTC participants in the past. The market is now turning toward optimization after having gone through a state of flux and a focus on operational compliance.”
At Bloomberg Markets, Harrington worked across the OTC swap community including dealers, alternative non-bank liquidity providers, real money end user clients and hedge funds. “All the major players in the OTC space traded a variety of asset classes comprising cash products, derivatives and futures,” he said.
He helped pioneer derivatives trading systems like BSEF, and took those platforms through the regulatory registration process, to become recognized and bring new customers on-line.
Harrington’s experience at Bloomberg helping banks and hedge funds implement U.S. regulatory requirements should also help Eris grow its global footprint. Europe is less than 12 months away from the implementation of MiFID II, and Harrington will be traveling frequently to Europe and working with customers there.
From the timing perspective for banks and hedge funds, a year might as well be tomorrow, Harrington said.
“[It’s not really a lot of time] to change the style in which they trade and get ready. Market participants will do more electronic trading in the coming years. This new technology-oriented approach fits directly into Eris’ sweet spot – a standardized product that processes more easily as a future.”
As the market has grown, there has been increased migration to CLOB execution as part of the rules requiring SEFs to have a CLOB, although RFQs are still more active than CLOB executions at this point, Harrington said.
For Eris, 2016 was the exchange’s most successful year yet, with 48 open interest records set in less than 12 months and an all time high in open interest at 180,000 contracts.
Eris also announced this week that its swap futures contracts are now supported on Citi’s Yield Book, a provider of fixed income market analytics and risk management, and that ED&F Man Capital Markets is now live with clearing and execution of Eris Swap Futures for customer and house accounts.