Hedge Accounting Applications for Eris Exchange Interest Rate Swap Futures


Changes in market structure resulting from the Dodd-Frank Act, Basel III, and general market conditions are resulting in the creation of innovative financial products across the derivatives market. These products need to be carefully considered in the context of U.S. hedge accounting rules which are primarily dictated by ASC 815. This paper will conclude that the only driver of additional ineffectiveness relative to OTC interest rate swaps is price alignment interest. 



Changes in market structure resulting from the Dodd-Frank Act, Basel III, and general market conditions are resulting in the creation of innovative financial products across the derivatives market.

These products need to be carefully considered in the context of U.S. hedge accounting rules which are primarily dictated by ASC 815. Eris Exchange interest rate swap futures (“Eris contracts”) have been designed to replicate the net cash flows associated with plain-vanilla, fully collateralized OTC interest rate swaps while retaining all of the operational and economic efficiencies of traditional futures contracts.

This paper will conclude that the only driver of additional ineffectiveness relative to OTC interest rate swaps is price alignment interest. However, the impact will be minimal in most cases, and the resulting Net Income will be equivalent.

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Eris Exchange is a futures exchange (Designated Contract Market) subject to CFTC jurisdiction, listing cash-settled interest rate swap futures with open interest exceeding 100,000 contracts. Eris Exchange contracts are cleared by clearing firms through CME Clearing, the global leader in derivatives clearing. Eris SwapBook and Eris BlockBox are registered trademarks of Eris Exchange.