Press release
March 15, 2010
TriOptima reduces bank credit derivative portfolios covering Aiful debt
TriOptima announced that it has successfully compressed the portfolios of banks holding both credit default swaps (CDS) covering Aiful debt and Aiful-related iTraxx Japan CDS. This eliminated ¥3.99 trillion of the notional amount of CDS outstanding prior to the Aiful auction settlement which is scheduled for March 25th.
Once a restructuring credit event had been determined by the ISDA Japan Credit Derivatives Determinations Committee, TriOptima offered two Aiful-related compression cycles. In the Aiful single name CDS cycle 13 banks eliminated ¥111 billion of the notional amounts outstanding. In an iTraxx Japan CDS cycle 26 banks eliminated ¥3.88 trillion of the notional amounts outstanding. This assisted the industry in reducing operational risk and cost and credit risk, as well as facilitating a smooth auction settlement process because there were fewer trades to settle.
“We are pleased that we are able to continue to support the industry as part of this special credit event in Japan,” said Yutaka Imanishi, Executive Vice President of TriOptima Japan. “Compressing these trades reduces operational and administrative risk, and contributes to the smooth operation of the settlement process.”
Using TriOptima’s portfolio compression service, banks that act as dealers in the credit default swap market are able to eliminate trades from their portfolios which they no longer need to maintain their risk position compared with the market. When a credit event occurs, like the restructuring of Aiful debt, removing these unnecessary trades is particularly helpful since it avoids the costly administrative process of an auction settlement for these trades.
This is the first restructuring event in the rapidly-growing Japanese CDS market. Aiful is a Kyoto-based consumer lender and one of the 1000 most-referenced names globally according to DTCC.
ISDA’s ‘Small Bang Protocol’ was developed following the publishing of the 'Big Bang Protocol' in March 2009. The Small Bang Protocol includes a series of amendments suggested by market participants and allows for the incorporation of auction settlement terms following a Restructuring Credit Event into standard CDS documentation.
For further information please contact:
Susan Hinko, Global Head of Industry Relations
Tel: + 1 646 744 0410
susan.hinko@trioptima.com
About TriOptima
TriOptima, an ICAP Group company, is the award-winning provider of OTC derivatives infrastructure services including triReduce, triResolve, and the OTC Derivatives Interest Rate Trade Reporting Repository.
triReduce, the portfolio compression service for OTC derivative dealers, pioneers technology that eliminates risk and reduces operational and capital costs. Serving over 150 bank and non-bank subscribers worldwide including the major local and global dealers in derivatives, triReduce is a critical tool for maintaining post trade processing efficiency. triReduce offers compression cycles in single name and index CDS swaps worldwide, IRS swaps in 23 currencies and a range of energy derivatives.
triResolve is a network community service for proactive portfolio reconciliation of OTC derivative portfolios. Used by global dealers, regional banks and buy-side firms, triResolve currently handles 5.8 million trades representing over 75% of all non-cleared OTC derivative transactions globally. The service benefits trade control, settlement, documentation, collateral and counterparty credit risk functions. Web-based, interactive, with advanced matching and reporting capabilities, the triResolve service reconciles all OTC derivative products, from plain vanilla to complex structures.
TriOptima maintains offices in London, New York, Singapore, Stockholm, and Tokyo.
http:// www.trioptima.com