October 15, 2013

Wells Fargo has joined Eris Exchange, a U.S.-based futures exchange offering interest-rate swap futures, to provide liquidity and clearing services to the bank’s global client base.

Wells Fargo’s swap desk has already executed its first swap futures trade and is providing liquidity, and making markets for their client base, according to Eris' release. Secondly, Wells Fargo’s global futures clearing operation is clearing the Eris swap future trades for clients, even if the clients aren’t trading through the Wells’ desk and are trading anonymously on a screen.

“For us it’s a real sign of where the market is today,” said Neal Brady, CEO of Eris Exchange, who noted that client onboarding is accelerating in the face of the upcoming trading mandate.

“With the Dodd-Frank trading mandates coming in early 2014 and some of the mandates for clients to trade either on a swap execution facility or a designated clearing market like ours, we are seeing increased migration to our platform in swap futures,” said Brady. “The same trends that will lead to volume on SEFs are the same drivers that will move buy side clients and sell side dealers to look for alternatives and to movie into swap futures, noted Brady.

Wells Fargo looks forward to providing liquidity in Eris Swap Futures as part of our continuing effort to consistently service our clients’ interest rate needs in an evolving market and regulatory environment,” commented Cronin McTigue, managing director and head of Liquid Product Sales and Trading at Wells Fargo Securities in today’s release.

As for connecting clients to Eris Exchange, Wells Fargo will provide clients with sponsored access via their futures commission merchant (FCM) into the Eris SwapBook, as well as provide voice markets to those who want to call up and do a block trade.

Wells Fargo’s client trades in Eris swap futures will be cleared through CME Clearing. “We are partnered with CME and they provide significant margin offset and portfolio margining offset against al their other listed futures,” explained Brady.

One of the advantages of swap futures is that they offer margin savings over traditional swaps and don’t require new legal documents because they rely on existing futures documentation, processes and infrastructure, according to Brady.

“Our clients will enjoy industry leading portfolio margining, trading access to the deepest pools of swap futures liquidity, and margin offsets for Eris Swap Futures positions against other futures held at CME Clearing,” commented George Simonetti, Managing Director and global head of clearing for Wells Fargo Securities.

“It’s a sign that swap futures are going to play a big role in the market,” said Brady. It’s also a sign of strong client interest in the product, which in turn is leading major dealers to commit, added Brady. In addition to Wells Fargo, other dealers are in advanced stages of connecting to the Eris platform, he said.

“It’s kind of night and day to what the market was like three to six months ago with the amount of onboarding we’re now seeing in our pipeline and the commitment that dealers are making to swap futures,” he said.

The exchange did not name other dealers that have joined recently, but pointed to its public announcements. In May, Eris announced that Morgan Stanley had become a strategic equity partner and a member of Eris Exchange’s board of directors. Morgan Stanley is making prices and providing liquidity both in block trades and streaming quotes to the market. In addition, the firm is clearing for clients and their desk is connected to the Eris SwapBook and is providing electronic and block trade liquidity. Morgan Stanley’s Passport, an electronic trading portal for their end users, is connected to Eris SwapsBook.

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in ...