TriOptima and LCH.Clearnet Compression of Cleared Interest Rate Swaps Exceeds $100 Trillion in Notional; $20.4 Trillion Compressed in 2012 Alone
TriOptima and LCH.Clearnet Limited (LCH.Clearnet) today
announced that $110 trillion in total notional volume in
EUR, JPY, GBP and USD interest rate swaps has been
terminated by 21 SwapClear members using TriOptima's
triReduce service since the first cycle in 2008. In 2012
alone, $20.4 trillion has been eliminated, accelerating a
trend to larger and more frequent termination cycles.
Compression of cleared trades fulfills existing commitments
to international banking regulators and also anticipates a
final CFTC Core Principle Risk Management rule requiring a
clearing organization to offer compression to swap dealers
and major swap participants.
Terminating risk-neutral trades in SwapClear contributes to
reducing systemic risk and facilitates systems processing
by increasing operational efficiency and reducing potential
administrative exposure in the event of a default. Through
this process, more than 950,000 transactions have been
completely terminated within SwapClear.
"We are pleased that we have seen renewed focus on
eliminating cleared swaps among SwapClear member
banks," said Peter Weibel, triReduce CEO. "As
highlighted by ISDA's paper on the progress being made in
interest rate swap compression, multilateral portfolio
compression in both cleared and uncleared swaps generates
significant benefits for market participants, especially
with the adoption of the 'one-book'
approach."
"We have been a strong advocate of compression since
our first collaboration with TriOptima in 2008, so
we're pleased to have surpassed the $100 trillion
mark," said Michael Davie, CEO, SwapClear. "The
marketplace is clearly eager to reduce systemic risk; in
fact, one third of SwapClear's total volume compressed
has occurred in the last six months."
TriOptima and SwapClear began compression cycles for
cleared swaps in 2008. The frequency increased in 2010 to
nine cycles, and in 2011 to 10 cycles, and is expected to
significantly exceed that in 2012, with an anticipated
increase in the number of SwapClear's 62 members
participating by end of year. Participation and volumes
have also increased dramatically due to SwapClear and its
members investing in streamlined processes and procedures
such as the "one-book" approach discussed in ISDA's recent
paper on interest rate swap compression.
For further information, please contact:
TriOptima:
Susan Hinko, Global Head of Industry Relations
Tel: + 1 646 744 0410
susan.hinko@trioptima.com
LCH.Clearnet:
Nina Truman, Corporate Communications
Tel: +1 212 513 5608
nina.truman@lchclearnet.com
About TriOptima Compression
Compression services are offered through TriOptima's
triReduce service. Utilizing triReduce, participants are
able to tear up their existing trades at their own mid
mark-to-market valuations avoiding the difficult
negotiation process of bilateral termination. Multilateral
terminations leverage off the expanded number of
participants and result in increased numbers of terminated
trades. Eliminating trades eliminates costs, credit and
operational risk and reduces capital requirements. With the
one-book approach, swaps executed across multiple desks are
combined into a central book for clearing and compression
purposes. Including all trading desks from an organization
increases the number of offsetting trades and has a
dramatically positive effect on compression results.
About TriOptima
TriOptima, an ICAP Group company, is the award-winning
provider of OTC derivatives infrastructure services
including triReduce and triResolve.
triReduce, the portfolio compression service for OTC
derivative dealers, pioneers technology that eliminates
risk and reduces operational and capital costs. Serving
over 150 bank and non-bank subscribers worldwide including
the major local and global dealers in derivatives,
triReduce is a critical tool for maintaining post trade
processing efficiency. triReduce offers compression cycles
in cleared and uncleared interest rate swaps (IRS) in 25
currencies, single and index credit default swaps (CDS)
worldwide, and a range of energy derivatives.
triResolve is a network community service that provides
counterparty exposure management services, including
proactive portfolio reconciliation of OTC derivative
portfolios, margin call management and dispute resolution.
Used by global dealers, regional banks and buy-side firms,
triResolve currently handles 7 million trades representing
over 75 percent of all non-cleared OTC derivative
transactions globally. The service benefits trade control,
settlement, documentation, collateral and counterparty
credit risk functions.
TriOptima maintains offices in London, New York, Singapore,
Stockholm and Tokyo.
http://www.trioptima.com
About SwapClear
Established more than 12 years ago, SwapClear is the only
truly global clearing service for interest rate swaps.
Since being launched in 1999, it has cleared more than 1.5
million OTC interest rate swap trades and currently has 62
clearing members. It was the first OTC clearing service to
successfully handle a significant OTC interest rate swap
default, doing so when it resolved Lehman Brothers' $9
trillion IRS default in 2008. In that instance,
SwapClear's default management process ensured that
more than 66,000 trades in five currencies were hedged and
auctioned to other clearing members. SwapClear's
process resulted in no loss to any market participants.
About LCH.Clearnet
The LCH.Clearnet Group is the leading independent
clearinghouse group, serving major international exchanges
and platforms as well as a range of OTC markets. It clears
a broad range of asset classes, including securities,
exchange-traded derivatives, commodities, energy, freight,
interest rate swaps, CDS and euro- and sterling-denominated
bonds and repos, and works closely with market participants
and exchanges to identify and develop clearing services for
new asset classes.
A clearinghouse sits in the middle of a trade, assuming the
counterparty risk involved when two parties (or members)
trade. When a trade is registered with a clearinghouse,
that clearinghouse becomes the legal counterparty to the
trade, ensuring financial performance of the trading
parties; if one of the parties fails, the clearinghouse
steps in. By assuming the counterparty risk, the
clearinghouse underpins many important financial markets,
facilitating trading and increasing confidence within these
markets.
Initial and variation margin (or collateral) is collected
from clearing members; should they fail, this margin is
used to fulfill their obligations. The amount of margin is
decided by the clearinghouse's highly experienced risk
management teams, which assess a member's positions and
market risk on a daily basis. Both the soundness of the
risk management approach and the resilience of its systems
have been proven in recent times. LCH.Clearnet is regulated
or overseen by the national securities regulator and/or
central bank in each jurisdiction from which it operates.