CLS Group, the US financial firm that provides settlement services in the global FX market, and TriOptima, a provider of OTC derivatives post-trade risk management services, today announced they will be collaborating to deliver an FX forward compression service to the market.
CLS and TriOptima say they will be delivering this service to address several needs of market participants, including the regulatory requirement for counterparties who may want to consider the use of a compression service for non-centrally cleared OTC derivatives.
FX forward transactions currently account for 13% of overall trading in the global FX market, according to the Bank for International Settlements–with trading volumes rising by 43% between 2010 and 2013.
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The new service is meant to enable participants to reduce their number of trades, effectively limiting their gross notional exposures. This reduces counterparty credit risk and leverage ratios, all while ensuring compliance with EMIR, Basel III and Dodd-Frank.
David Puth, CEO of CLS, commented: “International regulators have recognized the importance of portfolio compression from a risk mitigation perspective, and CLS is ideally placed to deliver optimal access to an FX compression solution. The new service will significantly reduce exposure to risk and provide numerous operational and cost efficiencies that will help participants to comply with international regulatory requirements.”
Peter Weibel, CEO of triReduce, TriOptima’s compression service, said: “Adding FX forwards to our compression catalogue underscores TriOptima’s continually expanding role in the OTC derivatives post trade infrastructure, having already eliminated more than USD524 trillion notional principal across multiple asset classes in cleared and uncleared environments.”
CLS and TriOptima plan to begin offering the service later this year, subject to any necessary approvals.