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, 153% above the previous quarterly high achieved in Q3 2018.
TriOptima says that the new record was driven by increased participation from the prime broker and executing broker communities, larger trade populations being submitted for compression and increased year-end activity as market participants were managing their risk exposure and capital charges.
“As FX forwards volumes continue to grow, and in response to capital rule changes and increased regulatory interest in FX compression, clients have a greater need for flexible risk mitigation services to achieve capital and operational efficiencies,” says Guy Rowcliffe, global head of optimisation services and TriOptima at CME Group. “We are pleased with this new milestone for FX forwards compression and look forward to extending our service offering in 2020.”
“The increase in notional reductions seen in 2019 demonstrates the value triReduce CLS FX continues to deliver for our clients,” comments Alan Marquard, chief business development officer at CLS. “It enables them to further improve their capital efficiencies and significantly reduce risk, while contributing to the smooth and efficient running of the FX market.”
Chris Perkins, global head of FX prime brokerage and OTC clearing at Citi, says: “Citi remains committed to working closely with its clients to drive capital efficiencies by maximising notional compression opportunities across the industry. Our business model greatly benefits from the notional we have eliminated through the triReduce CLS FX service.”