CME Group unveils Eris Options contract specificationsNote: Diagram depicts listing schedule for Eris Options, demonstrating how four monthly expiries deliver into underlying Eris SOFR Swap futures contracts over time. For example, top green box shows a July 2-year 93.000 Call (YITN6 C93000) being listed in March and physically delivering into the Sep 2-year Eris SOFR Swap future (YITU26) upon expiration in July.Following the recent press release announcing the June launch of Eris Options, CME Group released the Eris Options 2-page tearsheet, which includes detailed contract specificationsEris Options offer swaption-style risk in listed CME Group options, with four consecutive European-style monthly expiries (e.g., Jul, Aug, Sep, Oct) that physically deliver into 2-year, 5-year, or 10-year Eris SOFR Swap futuresEris Options feature futures-style margining, similar to forward-premium OTC swaptionsThey remove operational burdens associated with swap data repository (SDR) reporting, uncleared margin rules (UMR), and manual trade confirmationsFor more information, visit erisfutures.com/optionsNew Eris SOFR Market Maker: Bank of MontrealThe BMO swap desk is the most recent dealer to start responding to inquiries for Eris SOFR block trades“We are pleased to respond to the growing end user demand for Eris SOFR Swap futures by providing block trade liquidity across the swap curve,” said Akash Agrawal, Head of US Rates, Bank of MontrealFutures brokers can contact Akash Agrawal, Wesley Hyde, or Mike Novack on Bloomberg IB chat, and BMO clients can contact their BMO sales coverageClick here for a full list of Eris SOFR Block Market MakersOpen interest cracks 710,000 contractsEris SOFR Open interest (OI) reached 713K contracts ($71B notional) on Apr 28, finishing the month at 697K contractsOI in Eris SOFR Swap futures tripled over a 16-month period from January 2025 to April 2026, increasing from 242,000 to the recent high of 713,000 contractsOI leapt 158% year-over-year (YoY), up 427K contracts ($42.7B notional) from April 2025Mega blocks boosted OI including three Apr 17 trades, each greater than 7,500 contracts ($750mm notional)April activity follows record Q1 daily volume of 22,000 contracts, and record March daily volume of 44,000 contractsNew CME Group article: Unlocking Capital with Eris SOFREric Leininger of CME Research and New Product Development released a new article on reducing capital with Eris SOFR Swap futuresIt begins, “In the current landscape of shifting interest rate cycles and tightening liquidity, institutional hedgers are facing a silent drain on their balance sheets: initial margin (IM).”It notes, “the era of set-and-forget OTC hedging is over. As capital costs remain elevated, the ability to reduce margin …by 60% is a competitive necessity.”For similar risk transfer, insurers, banks, and asset managers achieve more capital flexibility with less balance sheet dragExplore initial margin comparisons between Eris SOFR and cleared OTC swaps at erisfutures.com/marginsavings
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CME Group, the world's leading derivatives marketplace, today announced it will launch options on Eris SOFR Swap futures on June 15, 2026, pending regulatory review.
In the current landscape of shifting interest rate cycles and tightening liquidity, institutional hedgers are facing a silent drain on their balance sheets: initial margin (IM). While the transition from LIBOR to SOFR is behind us, participants continue to seek efficiencies in their hedging strategies within SOFR instruments.
Quarterly ADV for Q1 2026 climbed to 22,360 contracts ($2.2B notional), up 33% from Q4 2025. Eris SOFR also set a monthly volume record in March with 44,863 ADV, up 30% from the previous record from December 2025
The following are four approaches one can take to efficiently hedge the price risk of holding residential mortgage loans prior to bulk sale, improving execution and profitability. Not surprisingly, they intersect and are progressively more robust.Method 1. Forward SalesThe first method is to sell the loans forward, similar to what occurs in the Agency To-Be-Announced (TBA) market, where TBAs are sold today and eligible loans are delivered during the settlement window in the future. Although there is some forward selling occurring in the Non-QM market, capital markets professionals are not observing meaningful price improvement and find it having limited use. The process is also bi-lateral, lacking uniformity and liquidity. However, it is an option, and it does transfer all risk - but at the expense of potential price improvements from hedging the interest rate risk and seeking better execution through bulk sales.Method 2. Correlated HedgesThe second approach is a data-based regression method, involving the selling (short selling) of US Treasuries, or paying fixed on SOFR swaps, as these are both correlated with the price of loans. However, regression analysis requires good quality loan price data to analyze against US Treasury or SOFR swap prices. While the US Treasury and SOFR swap markets are both liquid and transparent, offering accurate and available data, this is not the case for Non-QM loan data. Challenges include:Data Quality: Due to the shortage of accurate and uniform baseline Non-QM loan price data, regression results can have limited use.Theory Flaws: Co-linearity, for example the correlation of 10-year rates with other tenor rates (e.g. 2, 4, 5 and 7-year rates), may erroneously suggest a hedge instrument that does not match the expected maturity of the loans being hedged.Practicality: Co-linearity may also recommend impractical hedges, such as a butterfly strategy of short 3-year, long 5-year, and short 10-year SOFR swaps to hedge a loan pool that would be more accurately hedged by shorting all 3 of these maturities.Method 3. Hedging to Expected Prepayments (CPRs)The third method involves hedges that match the expected prepayment schedule of the loan pool. This effectively hedges the funding interest rate risk that would be required to hold the loans to final maturity. Conditional Prepayment Rates (CPRs), widely used to explain borrower prepayment behavior, can inform us of the outstanding unpaid principal balance (UPB) of a loan pool, and hedges are then established to best align with this profile.Hedge Example: A Non-QM loan pool with an average market-neutral coupon may have an 18% CPR, implying a weighted average life of 4.5–5.5 years. One approach might be to hedge to the expected 5-year average life, shorting the 5Y Eris SOFR Swap futures contract. However, the loan pool is not a bullet repayment loan; it prepays steadily over time. Therefore, a more accurate approach would be to utilize a combination of 2, 5, 7 and 10-year Eris SOFR Swap futures to hedge the funding interest rate risk more precisely with the expected prepayment schedule.Method 4. Hedging to a Stochastic Model PriceThe fourth and most robust, but more complex approach to pricing and hedging Non-QM loans is to use a stochastic, discounted cash flow (DCF) model. Stochastic is a fancy word used in probability modeling, meaning that interest rates will move in a random manner over time according to a probability distribution implied by market traded volatility, rather than following the risk-free (i.e.hedgeable) future path of rates. The model determines expected future cash flows based on probabilities of prepayment, and then discounts the expected cash flows to today.In evaluating the financial instruments on which to build this model, one quickly will find that it is not possible to trade future primary mortgage rates to inform us of future borrower prepayment behavior. Therefore, models are based on SOFR swaps, the most efficient way to model, trade and hedge the future path of interest rates. Once the future path of SOFR rates is determined, a mortgage-SOFR spread is added to model the future path of mortgage rates and therefore borrower behavior.The Case for SOFR Swaps vs. US TreasuriesFinancial modelers prefer using SOFR swaps to build their models because they are liquid, easily accessible, and efficient to trade. Critics may ask: "Why not use US Treasuries?" The reason is twofold. First, it is inefficient to trade forward expectations of US Treasury rates as there is no efficient market in term financing of US Treasuries beyond a few months. This is necessary to price and hedge forward US Treasury rates. This is the balance sheet effect, with US Treasury securities requiring the financing of the full purchase price, while SOFR swaps are derivatives, requiring only the financing of initial margin. Second, credit idiosyncrasies of US Treasuries muddy the water when one is hedging forward mortgage rates. Therefore SOFR swaps, liquid and easily accessible as Eris SOFR Swap futures, are favored in running models and trading SOFR swap hedges.ConclusionsAll methods outlined above intersect. However, the limited availability of Non-QM loan price data means that determining hedges by regression of poor quality Non-QM loan price data with high quality US Treasury or SOFR swap data, can yield inaccurate hedges. Consequently, replicating the prepayment profile of loan pools with more precise Eris SOFR Swap futures hedges - Method 3 - or the use of a robust stochastic model based on SOFR swaps - Method 4 - are today’s favored approaches to hedging Non-QM and improving execution and profitability.To learn more about hedging Non-QM with Eris SOFR, contact John.Douglas@erisfutures.com.
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Open interest (OI) increased to 592,848 contracts, up 19% YTD (+94,469 contracts / $9.5B notional) since year-end. Eris/Treasury Swap Spreads (ETSS) aided OI growth with at least 25K contracts ($2.5B notional) traded in each of the 5-year and 10-year ETSS in February.
New indices mark the first time an index provider brings futures-based indices to market using CME Group's Eris interest-rate swap futures
Headline Interview! John Lothian News and our CEO, Michael Riddle, explore Eris SOFR’s success at FIA, Inc. Expo 2025. CME portfolio margining has made Eris SOFR part of the US Dollar liquidity pool, driving volume and shrinking bid/ask. Michael also highlights newer market entrants including REIT’s, regional banks, and asset managers.
Eris SOFR 2025 Recap: Reaching new heights.Record volume, record participation, and record trade sizes defined the year for Eris SOFR Swap futures, a CME Group interest rates product:-Average daily volume was 14,520 contracts ($1.45 billion notional), up 46% year-on-year. December saw a new monthly high at 34,439 contracts ($3.44 billion notional). More than 80 block trades of +$300k DV01 printed throughout the year.
