TriOptima sees significant growth in cross currency swap compression


TriOptima, a provider of OTC derivative post trade risk management services, has announced that client participation in cross currency swap compression cycles has grown from 12 to 20 institutions since its introduction earlier this year, eliminating $500 billion in notional principal outstanding.

Cross currency swaps, which are subject to both interest rate and foreign exchange rate fluctuations, are not currently cleared; and increase an institution’s credit and capital costs as well as settlement risk.

Since its introduction in April 2014, TriOptima has run 5 cross currency swap compression cycles in USD/JPY, USD/EUR, USD/CAD, and USD/GBP.

“The ability to compress cross currency swaps is a valuable way to positively impact leverage ratios, improve capital efficiency and reduce counterparty settlement risk,” said Dean Tonkin, Managing Director, Global Head FX STIRT Global Banking & Markets, Bank of America Merrill Lynch.

“Citi welcomes any initiative that affords the opportunity to compress trade volumes in a regulatory environment where capital requirements are connected to aggregate outstanding notional,” said Stuart Bancroft, Head of Rates Trading Secured Counterparty Risk at Citi. “In this context, the move into cross currency swaps, which cannot currently be cleared, is an important development.”

“Commerzbank has been participating in triReduce compression cycles for interest rate and credit default swaps for several years, and also was involved in TriOptima’s first compression for cross currency swaps earlier in 2014,” said Martin Jung, Head of FIC Middle Office, Commerzbank. “Since we joined, the triReduce cycles have become an important tool to actively manage our balance sheet and regulatory factors such as the leverage ratio or German Bank Levy.”

Additional cross currency compression cycles are planned for 2014-2015 both in the currencies already offered and in new currencies including Turkish Lira (TRY), Chinese Yuan (CNH), Mexican Peso (MXN), Russian Ruble (RUB), Korean Won (KRW), and Australian Dollar (AUD). The triReduce compression cycles can accommodate all transaction types whether they are float/float or fixed/float, resetting and non-resetting.

“Given the strong customer interest in cross currency compression cycles our emphasis is on more cycles and more currency pairs,” said Peter Weibel, CEO of triReduce. “Reducing exposure in these transactions offers significant capital and cost benefits and eliminates settlement risk.”

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TriOptima sees significant growth in cross currency swap compression

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