ICAP’s TriOptima Eliminates AUD 2.15T in Interest Rate Swap Compression

ICAP continues to experience interest among swap dealers for its TriOptima position compression solution. The product helps banks and swap dealers reduce the notional value of Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term on their books by analyzing portfolios to find overlaps in counterparties between firms. For example, a firm that has sold multiple swaps to another firm, but also acquired similar exposure, is eligible for compression of their positions into one aggregated report of their risk with their counterparties.

Part of ICAP’s post-trade services, TriOptima has announced results of a compression cycle for AUD interest rate swaps in LCH.Clearnet’s SwapClear. According to the firm, twenty financial institutions participated in the compression cycle, with the notional principal outstanding of their swap positons being reduced by AUD 2.15 Trillion ($1.65 trillion USD). Overall, the compression reduced dealer to dealer AUD interest rate swap notional outstanding at SwapClear by almost 21%.

According to TriOptima, the firm grew participation of 20 financial institutions compared to 14 in a cycle last year. Commenting on the compression performance, John Chiah, Head of triReduce Asia Pacific stated, “This AUD cycle at SwapClear was a dramatic increase over the last cycle in May 2014 where trades were still linked. We went from 14 to 20 participants including local representation, and the notional eliminated almost tripled. This continues the trend we’ve seen of increased focus on compression in the region, and underscores the impact of unlinking trades on compression results in a Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e Read this Term.”

Marcus Robinson, Head of SwapClear Australia, added, “This is the largest AUD TriOptima compression cycle we’ve run at SwapClear. We continue to see good uptake for compression in the Australian market, and worldwide, reducing the notional outstanding despite growing average daily cleared volumes. We expect this demand for compression services to continue as market participants recognize the benefits of streamlining their portfolios to increase their capital efficiencies.”