CLS collaborates with TriOptima to deliver new FX compression service

Multinational FX market infrastructure provider CLS Group (CLS), ICAP’s post trade risk management and infrastructure division TriOptima today announced that they will be collaborating to deliver an FX forward compression service to the market.

CLS and TriOptima are delivering this service to address several needs of market participants, including the regulatory requirement for financial counterparties to consider the use of a compression service for non-centrally cleared OTC derivatives if available. FX forward transactions currently account for 13% of overall trading in the global FX market, according to the Bank for International Settlements1 – with trading volumes rising by 43% between 2010 and 2013. The new service will enable participants to reduce the number of trades effectively, limit their gross notional exposures and therefore reduce counterparty credit risk and leverage ratios, 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.

“This collaboration creates value for our settlement members through additional services that use our core operational and IT capabilities and those of TriOptima,” he added.

“We will continue to invest in new technology to ensure we provide the best possible risk mitigation service to the FX market.”

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.

“We are very pleased to be working with CLS and its members to deliver another important risk management tool to the industry. We believe this kind of collaboration serves the best interests of our mutual customers.”

CLS and TriOptima plan to begin offering the service later this year, subject to any necessary approvals.

For the official announcement from ICAP, click here.

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