CME Runs First NDF Optimisation Cycle

CME Group says it has completed its first initial margin optimisation cycle in collaboration with Quantile Technologies, which generated over $1.2 billion in NDF clearing across multiple currency pairs from banks including Citi and Standard Chartered.

CME announced its NDF service in late 2017 and started clearing at the start of this year with three futures commission merchants (FCMs), Citi, Credit Suisse and Morgan Stanley.

Quantile’s margin optimisation service enables dealers to benefit from the different product offerings and netting sets available at the leading global clearinghouses. Adding CME Group to Quantile’s optimisation run significantly reduces clients’ margin obligations, utilising multiple Central Counterparties (CCPs). Quantile is live with 15 dealers and LCH as well as CME.

With the ongoing implementation of the uncleared margin rules across both sell-side and buy-side firms, CME has been focused on delivering the greatest capital and margin efficiencies for our global clients, the exchange group says.

“As an active member of the initial optimisation runs, Standard Chartered has always sought to take advantage of every opportunity that will reduce the use of scarce resources, says Matt Turner, director, XVA trading at Standard Chartered. “Since the commencement of the optimisation cycles we have seen significant savings in our overall margin requirements and by widening the number of participants, we see potential for increasing this benefit further.”

Andrew Williams, CEO of Quantile, adds, “By adding CME Group to our optimisation service we are able to amplify the risk reduction opportunities across our network, generating increased capital and margin benefits for all of our clients. The significant reduction in risk and margin savings from this first cycle are a clear example of the efficiencies that can be generated by taking part in multi-dealer and multi-CCP processes.”

Meanwhile, Varqa Anyaneh, chief product offer of Quantile, says, “Including multiple CCPs in a single optimisation run gives market participants confidence that, regardless of where they choose to execute and clear trades, their risk will be optimised via our post trade service. This helps mitigate concerns surrounding market fragmentation and the formation of independent liquidity pools.”

Colin Lambert

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