Compression in a CCP
triReduce CCP Compression Service
triReduce extends the operational efficiency of clearing OTC derivatives and also reduces the potential for systemic risk by compressing trades cleared through a Central Counterparty (CCP). Regulations indicate that portfolio compression should be one of the services offered to clearing participants. TriOptima offers portfolio compression for swaps in LCH SwapClear, SGX, JSCC, CME, Eurex and Nasdaq and is actively engaged with other CCPs globally to make compression available to the industry wherever possible.
Compressing within the CCP provides significant benefits without disrupting normal operations. The graph below shows the results of the collaboration between TriOptima and LCH SwapClear. These regular compression cycles contribute to maintaining stable notional outstandings in LCH despite overall growth in market activity.
LCH and TriOptima collaborate
Notional Outstanding Showing Effect of Compression
Source: LCH.Clearnet Limited SwapClear Service. For more information on SwapClear volumes, click here.
SwapClear supports periodic multilateral compression activity, to reduce the volume of outstanding trades. The charts that show the effect of compression assume that all trades removed by this process would still be live today.
Minimizing trades in the CCP is a focus of both client and regulatory interest as more and more transactions are directed into clearing. New regulations address portfolio compression for bilateral as well as cleared swaps. A CCP that offers compression has a competitive advantage in attracting and keeping its members. It also reduces the potential for systemic risk that the concentration of trades in a clearinghouse can generate and minimizes the operational disruption of a Default Management process.
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