triReduce Rates
Reduces costs and capital in a competitive market
triReduce, the multilateral early termination service for OTC derivative
dealers, pioneers technology that eliminates risk and reduces
operational and capital costs. TriOptima offers termination cycles for
interest rate swaps in 23 global currencies including many capital
intensive emerging market transactions.
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 in an environment of dramatic growth in
transaction volumes.
While most triReduce termination cycles involve
multiple counterparties for maximum benefit, some TriOptima subscribers
have also recognized the benefits of internal tear ups among their own
trading books. This rationalizes institutional positions that have grown
through merger and other market events reducing exposure and operations
costs.
Overview of triReduce Rates
TriOptima offers triReduce termination cycles in 23 currencies globally
including AUD, CAD, CHF, CNY, CZX, DKK, EUR, GBP, HKD, HUF, INR, JPY,
KRW, MXN, NOK, NZD, PLN, SEK, SGD, THB, TWD, USD, and ZAR. Capital
charges for many of these currencies can be significant so eliminating
these trades from an institution’s portfolio can increase trading
opportunities. With new focus on reducing the notionals in interest rate
swaps, TriOptima has seen the results double in 2009.
In
addition, TriOptima and members of LCH.Clearnet SwapClear are working
together to reduce the outstanding notionals of cleared trades in
SwapClear. Regularly scheduled termination cycles eliminate transactions
yielding significant results. In some cycles over $1 trillion USD in
notional has been cancelled.
Managing Credit Risk
Participating in triReduce reduces capital costs associated with reserves for regulatory and economic capital. This frees up capital for other uses, a big advantage for capital-constrained institutions. With fewer outstanding trades, a firm is also better able to manage current exposure by reducing collateral management costs and minimizing balance sheet growth. And for transactions which can not be collateralized, managing potential future exposure is facilitated with the elimination of these transactions.
Managing Operational Risk and Costs
With the elimination of trades, there is a reduction in operational costs since there are fewer trades to process and fewer periodic payments to make. With fewer trades, there are fewer potential processing errors; less time and money is spent on resolving errors. In addition, there is a real reduction in any associated operational risk capital charges under Basel II.