CME Adds to Interest Rate Arsenal with Eris Licensing Deal

The CME Group just moved even closer to its goal of becoming a one-stop shop for all things related to interest rates.

CME and Eris Exchange entered into an exclusive licensing agreement Thursday allowing CME to list Eris’s USD Interest Rate Swap Futures. Eris still retains the intellectual property underlying the contract.

“This news for us is a really big deal for the adoption of the Eris product globally,” said Eris Exchange CEO Neal Brady. “It just clears away a whole host of obstacles in people further adopting the product.”  

But more than just removing obstacles for Eris, the move adds to CME’s ever growing clout in the rate space. CME made a splash in March when news broke it would acquire Michael Spencer’s NEX Group for $5.5 billion. That move brings together cash, OTC and futures trading under one roof. The Eris deal adds to CME’s dominant standing.

This move also ups the competition between LCH and CME in clearing. LCH currently dominates the cleared USD swap space – in 2017 LCH’s market share was more than 90 percent.

With the CME licensing agreement, Eris removes all of its prospective clients’ connectivity issues, opening up a huge distribution channel for those looking to hedge swap risk.  Eris already had a deal with CME to use its clearinghouse for the product. Eris’s contract will trade alongside CME’s MAC Swap Futures and migration will begin in late 2018.

Open interest in Eris’s USD Interest Rate Swap Futures is just north of 184,000 contracts (with flexes the total is just north of 209,000).

Brady declined to say more about what was next for the 25 person Eris Exchange but said it was still focused on its goal of financial innovation in new product types.  

Eris was founded in 2010 with the backing of assorted market makers, including DRW.