Morgan Stanley (NYSE: MS) and Eris Exchange announced today that Morgan Stanley plans to make a strategic equity investment in Eris, a U.S. futures exchange that offers Interest Rate Swap Futures. Morgan Stanley also plans to participate on the exchange as a provider of liquidity and clearing services. Financial details were not disclosed.
As part of the arrangement, which is expected to close in early 2013, Morgan Stanley will join the board of directors of the exchange holding company.
“As the traditional OTC rates swap market undergoes significant structural, economic and regulatory changes, Morgan Stanley believes that Eris Exchange and its futurized swaps are ideally suited to provide our clients with flexible alternatives,” said Patrick Haskell, Head of Liquid Flow Rates in the U.S. for Morgan Stanley.
“Eris Exchange is excited to welcome Morgan Stanley as an anchor bank liquidity provider, equity investor and member of our board,” said Neal Brady, CEO of Eris Exchange. “Morgan Stanley’s commitment to stream two-sided markets across the yield curve in quarterly Eris Standards and daily Eris Flexes ensures that end user clients will benefit from the institutional liquidity of Morgan Stanley’s leading rates trading team, and complements our set of existing liquidity providers.”
Morgan Stanley has initiated its integration with the Eris SwapBook
electronic trading platform and will commence providing electronic and block trade liquidity for both Eris Standards and Eris Flexes in early 2013.
Eris Exchange recently launched Eris Standards, interest rate swap futures contracts with quarterly effective dates and pre-determined fixed rates that currently provide margin savings of 40-80% compared to cleared OTC interest rate swaps.
In addition, Eris Flexes offer the date and rate flexibility necessary to replicate many OTC trading structures, ranging from daily, spot-starting swaps to highly customized structures. This flexibility, which is unique to Eris Flexes, appeals to hedgers looking to obtain FAS133 hedge accounting treatment, and to relative value funds and asset managers isolating exposure to specific points on the swap curve.