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Johannesburg - The Johannesburg Stock Exchange (JSE), the continent’s largest exchange, on Monday officially launched JSE Eris Interest Rate Swap (IRS) Futures.
The new JSE Eris Interest Rate Swap (IRS) Futures will be based on the Johannesburg Interbank Agreed Rate (JIBAR) and denominated in the rand.
The product will follow the standard South African swap market conventions, while using the Eris MethodologyTM, allowing the contracts to replicate the cash flows of over the counter (OTC) swaps.
The new product offering will be available for trading by all registered interest rate market members and their clients and will be cleared through JSE Clear.
“Bringing this product to market has been a collaborative effort between us, our clients and our partnership with Eris," said Warren Geers, head of interest rates and currencies at the JSE. "After significant engagement with market participants we took a global product and modified it to make it a truly South African product relevant to the South African market needs."
The new IRS Swap Futures will be competitively priced; clients will be charged R1 per contract (R100 000) for 1 and 2 year tenors and R2 for any tenors greater than 2 years.
The JSE will make appropriate pricing alignment as the product gathers more trading momentum.
The swap futures, which are based on the Eris Methodology, remain futures throughout the full life cycle of the contract with no risk of physical delivery and can be held to their maturity date.
The JSE will use a portfolio VaR framework to determine the amount of initial margin participants should post for position in the swap futures product suite, instead of the traditional portfolio scanning framework (j-SPAN) that is used for all other futures at the JSE.
Portfolio level initial margin will thus recognise the offsets associated with trading long and short positions across the curve.
