How it works
Minimal effort, maximum rewards
Participants identify trades that are no longer necessary to hold in
inventory for accounting, regulatory or risk reasons. Once these trades
have been matched to those from other participants, triReduce produces a
proposal of deals that can be terminated while maintaining an
institution's predefined tolerances for changes in counterparty credit
exposure, market risk, and cash payments.
triReduce's
multilateral optimization process is much more powerful and effective
than any bilateral attempts at termination because it has access to a
greater pool of trades that can be eliminated while still respecting the
preferred tolerances of participants. As many as 40,000 trades have been
terminated in a single cycle.
No residual risk Unlike risk mitigation tools like collateralization or clearing which reduce risk but leave transactions on the books and subject to operational costs and risk and capital charges, transactions terminated in a triReduce cycle are completely eliminated leaving no residual risk at all.
Overview of Cycle Timeline
• Sign up
• Trade linking to resolve close matches and check
regularly on updated
link results
• Establish tolerances for
counterparty credit, market risk, and cash payments
• Dress
rehearsal: submit trade portfolio including mark to market values
•
Review results of dress rehearsal and make any adjustments in trade
population
and tolerances
• Live execution: resubmit final trade
file with new marks and final tolerances, accept
proposal, and
confirm terminated trades