LCH.Clearnet’s SwapClear has added multilateral compression capabilities to reduce the number of trades and notional outstanding through netting, expanding on its existing solo and duo compression capabilities.
Compression reduces counterparty credit exposure and capital costs, as well as increases operational efficiency through lower administrative and legal expenses. In 2013, SwapClear compressed over $83 trillion through its own compression offering as well as TriOptima’s offering, and the firm now hopes to compress more.
“The limited effectiveness of current netting measures has caused notional outstanding to be a large driver of regulatory capital holdings for some firms. SwapClear’s compression offering enables firms to reduce notional outstanding and better manage their regulatory capital requirements, with the benefit of simplified operations and lower overheads,” says Daniel Maguire, global head of SwapClear.
“Trade compression is an important tool which provides operational efficiencies and allows us to reduce our counterparty credit exposure, which in turn frees up capital that can be deployed elsewhere,” says Zar Amrolia, co-head of fixed income and currencies at Deutsche Bank.
This year, SwapClear also plans to add future cash flow netting, blended rate compression and portfolio de-linking, subject to regulatory approval. Future cash flow netting will allow trades with different maturities but the same future cash flow to be compressed; blended rate compression will enable trades with different coupons, but otherwise identical terms, to be compressed; and portfolio de-linking will give members the ability to manage trade compression independent of other counterparties.
SwapClear Adds Multilateral Compression Capabilities
LCH.Clearnet's SwapClear has added multilateral compression capabilities to reduce the number of trades and notional outstanding through netting, expanding on its existing solo and duo compression capabilities.
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