TriOptima saw a 71% increase in the gross notional value of FX forward contracts going into the triReduce CLS FX compression service last year. This means that $9.1 trillion was eliminated from counterparties’ FX forward portfolios in 2019, a new record for the service. In Q4 alone it compressed $4.9 trillion of gross notional value, […]
LCH has announced that 2019 was a record year for volumes across multiple asset classes, including FX. Over $18 trillion in notional value was cleared by ForexClear, LCH’s FX derivatives clearing service, in 2019. This represents a 5% increase from the previous year. Of this total, $60.5 billion was client cleared notional, a sixfold increase […]
FX settlement risk has increased since 2013 according to the Bank for International Settlements (BIS), both in relative and absolute terms, however the gross market value of outstanding FX and OTC derivatives has fallen, thanks largely to the growth in clearing. An article in the bank’s latest Quarterly Review says that in spite of “significant […]
TriOptima has announced that it has completed the first cleared inflation swap compression run at LCH SwapClear. The run was completed on 19 July with euro cleared inflation swaps being compressed through the TriReduce service and the firm says it will go live with sterling and dollar cleared inflation swaps compression in LCH SwapClear “imminently”. In order to […]
CME Group’s TriOptima says it has reduced notional outstanding at Eurex Clearing by 26% following a record compression run on June 26, 2019. The latest run, which equates to $3.9 trillion worth of cleared euro interest rate swaps (IRS) and forward rate agreements (FRAs), represents a 143% increase on the previous record of $1.6 trillion. […]
TriOptima, a provider of multilateral compression services for OTC markets, set a new record for its triReduce portfolio compression service in 2018, having compressed $250 trillion gross notional value of trades at LCH SwapClear.The firm says this record, which represents an annual increase of 31% in terms of notional value, was driven by a combination of increased participation of both dealers and their clients, increased trade submission to triReduce cycles and a wider adoption of the Trade Revision methodology, which improves compression efficiency by up to 50% by allowing a wider range of trade economics to be changed.“We are proud that another record compression year continues to help the industry achieve important capital and operational cost reductions,” says Peter Weibel, co-CEO at TriOptima.
For the first time, trades registered in LCH’s SwapAgent service were successfully compressed in TriOptima’s multilateral USD/EUR cross-currency swap compression cycle. Using its triReduce compression service, €4.5 billion in notional of trades registered in SwapAgent were compressed. During the run, SwapAgent and non-SwapAgent trades were blended together to achieve better benefits from the compression.Compression is the process by which members can eliminate offsetting trades to reduce notional outstanding and the number of line items in a portfolio. Capital requirements such as those introduced under the Basel III leverage ratio have incentivised banks to reduce notional outstanding.
LCH says that its ForexClear members have reduced their notional outstanding by $4.5 billion through the use of the service’s compression solution. Citi and Standard Chartered Bank are among the first participants to actively compress their trades at ForexClear.
Compression is the process by which clearing members and their clients can eliminate offsetting trades to reduce notional outstanding and the number of line items in a portfolio. Capital requirements such as those introduced under the Basel III leverage ratio have incentivised banks to reduce notional outstanding.
CLS and NEX Group have announced that they are extending the triReduce CLS FX service to third parties. These institutions will participate in the same compression cycles as CLS settlement members.
Financial institutions and multinational corporations that settle in CLS Settlement through a settlement member are now able to join the compression service, benefiting from reduced counterparty exposures.
NEX’s triReduce and CLS pioneered the triReduce CLS FX service to provide risk mitigation services for the global FX market for non-cleared OTC derivative trades. The service combines CLS’s infrastructure and market connectivity with triReduce’s compression expertise.
What are the biggest challenges still facing FXPBs today and how can they be overcome? Galen Stops takes a look.
There’s no getting around the fact that regulation has changed the economics of the FX prime brokerage (FXPB)
business, and not for the better.
“You can classify PB costs into three basic categories – technology, human resources and direct transactional costs,” says Sanjay Madgavkar, global head of FXPB at Citi.
The first two of these are fixed costs that an FXPB has to pay, but the new regulations under Basel III have made it more expensive for banks to provide FXPB services to certain clients, meaning the overall profitability of some portfolios has fundamentally declined.