Glossary

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A

Ambiguous Match

An unidentifiable match between set of identical trades. These require the user to identify individual trade matches. This is a matching term used in both triReduce and triResolve.

Amortizing swap

Typically an interest rate swap where the notional (upon which the coupon payments are calculated) decreases during the life of the swap. A triReduce Rates eligible instrument type.

Asset Class

triResolve supports all OTC derivative asset classes, including Credit, Interest Rate, Commodity and FX, and all product types, from plain vanilla trades to complex structures.

Assignment Date (or Step-in Date)

The date on which a party assumes ownership of a trade side.

Auction Date

The date on which bonds are issued. Government issued Debt, in the form of Bonds, is usually issued through an auction process, where anybody is eligible to bid for a bond.

B

BaFin

Bundesanstalt für Finanzdienstleistungsaufsicht, The Federal Financial Supervisory Authority.

Basel Regulations

International banking regulations first issued in 2004 which specifies minimum required size of capital reserves for banks. TriOptima, via triReduce, can help banks reduce this required amount of capital reserves and thereby reduce the capital costs associated with trading.

Basis Risk

A risk arising from a difference in trade economics on two, otherwise offsetting trades.

Benchmark Curve

Ability to view and compare your own trade valuation to an industry average valuation curve for single name credit trades and standard indices.

Bilateral Margining

triResolve provides a comprehensive margin management service covering all aspects of the collateral management workflow.

BIS

Bank for International Settlements. An international organization which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability.

Break

Where the transaction details of a matched trade are different, triResolve will identify and facilitate tracking of such differences for swift resolution.

Business Day Convention

The convention for adjustment of event dates relating to a financial transaction towards a valid business day. The most relevant conventions are: - Following: where the date is adjusted to the first following day that is a Business Day - Modified Following: the same as ‘Following’, unless the first following Business Day is in the next calendar month, in which case that date will be the first preceding day that is a Business Day - Preceding: where the date is adjusted to the first preceding date that is a Business Day

Buyer

In triReduce Credit terms, this refers to the ‘Buyer’ of protection (or the ‘payer’ of interest payments). In triReduce Rates, this refers to the payer of the fixed leg.

C

Cash Flow

A transfer of money, receiving money means positive cash flow while paying means negative cash flow.

Cash Tolerance

A tolerance defining the maximum amount of cash to be paid or received in an Unwind Proposal. See Unwind Proposal.

CCP

Central Clearing Party.

CFTC (for triReduce)

U.S. Commodity Futures Trading Commission. Created under an amendment to the Commodity Exchange Act in 1974. Its mission is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.

CIG

Credit Implementation Group. Reports into Credit Steering Committee.

Close Match

A close match is a mismatch on one or two fields of lesser importance. It is a matching term used in triReduce.

CME

Chicago Mercantile Exchange.

COIG

Commodities Implementation Group, under ISDA.

Collateral

An asset posted to or by a counterparty to mitigate its counterparty credit risk.

Collateral Call

The issuing of a demand for margin / collateral is sent to a counterparty following the calculation of the collateral requirement.

Collateral Dispute

The process by which a counterpart disputes a collateral call.

Collateral in transit

Collateral that is due to be sent or returned but has not yet settled.

Compounding Swap

A swap which compounds interest over more than one fixing period.

Compression

TriOptima, through its triReduce service, offers market neutral compression of trades and gross notional. See also Multilateral Termination.

Correlation

A statistical measure of how two market instruments move in relation to one another. Positive correlation implies that both instruments move together. Negative correlation implies that both instruments move in the opposite direction to one another.

COSC

Commodities Steering Committee, under ISDA.

Counterparty Credit Risk

A risk arising from uncertainty in a counterpart's ability to meet the obligations set out in a contract.

Counterparty exposure (for triReduce)

Net MtM per counterparty. TriOptima offers services to efficiently manage and reduce counterparty exposure.

Counterparty exposure (for triResolve)

triResolve allows subscribing parties to calculate their current exposure against each subscribing party at a group, entity portfolio or trade by trade level.

Counterparty Risk

Risk arising from potential default and hence credit-worthiness of a counterparty. TriOptima offers services to efficiently manage and reduce counterparty risk.

Counterparty Risk Tolerance

A tolerance used to constrain risk impact in counterparty relations.

CP Unmatched

During linking in a triReduce cycle, this term is used for trades that are submitted by the counterparty, but not by the participant.

Credit Default Swap

A contract entered into by a buyer and seller. The buyer purchases credit protection on a debt obligation from the seller. The buyer pays a regular premium for the privilege.

Credit Event

An event relating to the deterioration in credit worthiness of an underlying entity to a credit derivative.

Credit Spread Delta Tolerance

A tolerance defining the maximum acceptable impact on the Credit Spread Delta risk.

Cross Currency Basis Swap

See Cross Currency Swap.

Cross Currency Swap

A financial contract where the buyer and seller agrees to swap floating cash flows between two different currencies, during a defined period of time. See Cash Flow.

CSA

ISDA's Credit Support Annex, a legal agreement between the two parties to an OTC derivative transaction which contains the agreed collateral terms under an ISDA Master Agreement.

CSA-Collateral Balance Reconciliation

triResolve facilitates reconciliation of collateral balances between counterparties to identify any non receipts or errors in the amount of collateral posted or received.

CSA-Exposure Reconciliation

Reconciling trade population characteristics and valuations daily minimizes misbookings and decreases the number of collateral disputes significantly, reducing credit and operational exposures.

CSC

Credit Steering Committee, under ISDA.

CVA

Credit (Counterparty) Valuation Adjustment. A common measure of counterparty credit risk.

D

Data Summary

triResolve has the functionality to display data on different levels of detail where it can be grouped and compared based on user criteria.

Delivery Point

Commodity market terminology for the physical delivery location relating to a transaction. An example for US Natural Gas is Henry Hub.

Discount Delta

The sensitivity to a change in the rate used to discount future cash flows.

Dispute Resolution

triResolve incorporates a stream lined work flow for Dispute Resolution, the recommended ISDA procedure for resolving complex disputes.

Distant Match

A distant match is a mismatch on trade details that could have a major economic impact. It is a matching term used in triReduce.

Document Type

A legal confirmation document clause type. Typically refers to the settlement conditions for Credit Derivatives.

Dress Rehearsal

Dress Rehearsal. This phase of a triReduce cycle provides participants with a test proposal giving them an indication of the risk movements they can expect to see in Live Execution.

DTCC (for triReduce)

Depository Trust & Clearing Corporation. TriOptima is interoperable with the DTCC for automated terminations and also provides triReduce Credit participants with TIW extracts relating to cycles.

DV01

A commonly used term for a measure of risk and stands for the Dollar Value of a one unit change in the underlying. It is used across a number of different asset classes.

E

EDD

see Event Determination Date.

EEPE

Effective Expected Positive Exposure.

EFET

The European Federation of Energy Traders. A group of more than 90 energy trading companies dedicated to stimulate and promote energy trading throughout Europe.

Energy Swap

An exchange of payments relating to an energy commodity.

Event Determination Date

For Credit Derivatives, it relates to the date on which the Credit Event Notice is 'served'.

Exchange Traded Contract

A transaction that takes place on an exchange trading platform where buyers may meet sellers anonymously.

Extraterritoriality

The right or privilege of a state to exercise authority in certain circumstances beyond the limits of its territory.

F

FASB

Financial Accounting Standards Board.

FCA

The Financial Conduct Authority (FCA). The regulator of the financial services industry in the UK.

FCM

Futures Commission Merchant.

Financial Derivative

A financial contract where the value/pay off is strictly dependent on an underlying asset.

Fixing

For an Interest Rate Swap, a fixing is the float rate for the current/next coupon period.

Forex Swap

See FX Swap.

Forward

A non-standardized, and typically over-the-counter contract, obligating obligation the owner to either buy or sell an underlying financial instrument at a pre-determined time in the future and at a pre-determined price.

Forward Rate Agreement

An agreement to fix a rate of return for a period of time commencing in the future.

FSB

Financial Stability Board. Established to coordinate the work of national financial authorities and international standard setting bodies, at the international level.

Full Termination

A trade that is struck off from a portfolio as part of a triReduce unwind proposal.

Funding Risk

Relates closely to Interest Rate Risk, but deals specifically with the method of handling capital in- and out-flows.

Futures Contract

A standardized and exchange traded contract obligating the owner to either buy or sell an underlying financial instrument at a pre-determined time in the future and at a pre-determined price.

FX Forward

An agreement to buy or sell currency in the future and at a pre-determined price.

FX Spot

Buying or selling currency at the current market rate under regular market settlement conditions.

FX Swap

An FX Forward with an additional reverse FX spot trade upfront.

G

G14 dealers

Group of 14 international banks that have signed up to meet the NY Fed's regulatory commitments.

H

Haircut

The amount by which the market value of the collateral is reduced to account for price volatility and liquidity. Also known as the valuation percentage.

Hedging

A risk management or trading technique where fluctuations in profit or loss are limited or minimised. Hedging can be achieved by taking opposing positions in two positively correlated instruments.

Hub

A feature of the triReduce Credit service allowing participants to group multiple books together, thereby achieving greater termination efficiency.

I

IAS

International Accounting Standards.

IIGC

ISDA Industry Governance Committee.

IMM dates

In terms of credit derivatives, IMM dates are the four quarterly maturity dates: 20th March, 20th June, 20th September and 20th December. In terms of futures and options and swaps, IMM dates are four quarterly maturity dates: the third Wednesday in March, June, September and December.

Independent amounts

The amount of collateral required over and above the mark to market of a portfolio. It is designed to cater for changes in the market value of a portfolio between margin calls.

Interest Rate Delta

Sensitivity of the value of a trade to a related interest rate. It may be expressed as a profit or loss measured by a single unit uptick in the interest rate from a valuation curve. A popular measure of interest rate risk, commonly known as price value of a basis point (PV01) or dollar value of a basis point (DV01).

Interest Rate Delta Tolerance

A tolerance defining the maximum acceptable impact on Interest Rate Delta risk.

Interest Rate Swap

In its basic form, a commitment to exchange of fixed interest payments and floating (variable) interest payments in the future.

IOSCO

International Organization of Securities Commissions.

ISDA

International Swaps and Derivatives Association, Inc. The global trade organization that represents participants in the OTC derivatives markets, and designs and maintains the industry-standard contracts (ISDA Master Agreements) for trading OTC derivative transactions.

ISDA CIWG

ISDA's Collateral Infrastructure Working Group.

ISDA Minimum Market Standards

ISDA has published a set of minimum field requirements for collateralized portfolio reconciliation.

ISDA's Best Practices for the OTC Derivatives Collateral Process

ISDA best practices document for the collateral management process following the "Roadmap for Collateral Management", an action plan to re-examine the collateral management function based on the market events of 2008.

ISDA's Port Reconciliation Best Practices

triResolve supports ISDA's recommendations for portfolio reconciliation.

L

LCH.Clearnet

Central Counterparty. triReduce Rates performs regular termination events on cleared Interest Rate Swap trades.

Linking (for triReduce)

The first phase of a triReduce cycle, where participants submit trades that are eligible for termination. TriOptima forms a legal connection between trade sides that form a deal previously incepted between two institutions.

Liquidity Risk

A risk arising from a lack of tradable volume in a market.

M

Margin Call

Margin calls can be issued to a counterparty via the triResolve web site using the Margin Management application.

Margin Management

Margin management represents the comparison and collateralization of the daily valuation changes in a portfolio of financial transactions outstanding between two counterparts. triResolve’s Margin management functionality facilitates this process by providing transparency and a secure communication platform where clients can manage both incoming and outgoing margin calls in an efficient manner with full audit trails. triResolve provides early visibility of potential problems, providing maximum time to investigate and solve them while allowing users to quickly process straightforward margin actions.

MarkitWire

An electronic trade capture and confirmation platform. triReduce Rates is interoperable with MarkitWire for trade terminations.

Mark-to-Market

The net present value of a derivative trade. Typically calculated using the concept of cash flow discounting.

Mark-to-Market Tolerance

A tolerance used to constrain the amount of Mark-to-Market realized in an Unwind Proposal.

Matched Trades

A match where all key data fields match or where insignificant discrepancies have been identified.

Matched with Difference

triResolve will identify trades that closely correspond to an equivalent trade in your counterparty's portfolio but one or several key data fields do not match.

Match Quality

triResolve provides a match quality rating via the use of stars. A 5-star rating is a perfect match while a 1-star rating represents a match with three major differences or more.

Match Status

When a match result is published in triResolve users can review established matches and each match is assigned a status.

Minimum transfer amount

A minimum size threshold below which calls for collateral will not be made.

MIS Reporting

The triResolve service includes highly flexible reporting that can be customized to fit a wide range of purposes and departments within a firm.

Monthly Regulatory Metrics

TriOptima is the producer of the G14 dealer portfolio reconciliation metrics that is provided to the regulators and Federal Reserve each month.

MtM

See Mark-to-Market.

Multilateral Termination

A trade tear-up exercise (or compression process) involving more than two parties. TriOptima offer a multilateral-termination service, triReduce.

N

Nominal Tolerance

A tolerance used to constrain the amount of Notional maturing on specific end dates; used in triReduce Credit.

Non-collateralised trades

Trades between two institutions that are not governed by the terms of a CSA.

Non-Subscriber Upload

Extension to the triResolve service, which allows non-subscribing firms to submit their portfolios to triResolve for secure and automated reconciliation with their counterparties.

Notional

The principal amount on a derivative contract. The amount is used a reference upon which interest is calculated.

Notional Revision

A notional amendment of an existing trade as part of a triReduce unwind proposal. A Notional Revision can increase or decrease the notional on a given trade.

O

ODSG

OTC Derivatives Supervisors Group. The group is chaired by the New York Fed and meets annually with other supervisors as well as major OTC Derivative market participants.

Operational Risk

A risk which arises from a company's people, system or processes. TriOptima can, through its termination service, reduce the ticket count and thereby the amount of manual steps required resulting in less operational risk.

Optimisation

A mathematical technique for determining the extreme value of a function of several variables subject to a set of constraints.

OSC

Operations Steering Committee. Replaced the Operations Management Group (OMG) in 2009.

OTC Derivative

A derivative transaction taking place between two parties without the involvement of an exchange to facilitate the trade ("Over the Counter").

Overnight Index Swap

An Interest Rate Swap that resets its floating leg one-day interest rate on a daily basis. The floating leg compounds and pays its cash flow in line with the fixed rate payment frequency.

P

Partial Termination

A notional reduction of an existing trade as part of a triReduce unwind proposal.

Payer

The party to a trade that is required be the fixed interest rate payer in a derivative transaction. Typically, the Buyer.

PCM

Primary Clearing Member.

PFE

Potential Future Exposure. A measure of the maximum credit exposure expected over a specific period of time.

Plain Vanilla

The most basic form of a financial derivative contract.

Portfolio Compression

TriOptima's triReduce service offers portfolio compression on OTC Derivatives.

Portfolio Reconciliation

Portfolio reconciliation is a process of mutual trade and records comparison. It is a key process to manage and reduce operational risks. Proactive reconciliations of portfolios ensure high integrity in trade bookings as well as valuations.With a secure and automated trade upload, triResolve effectively matches even complex structures using sophisticated business logic. The result is presented in a common, online view for timely resolution of discrepancies and disputes.

Product Class

triResolve supports all OTC derivatives across all asset and product classes, from plain vanilla to bespoke products. See Asset Class.

Q

Quantity

Used in triReduce Commodities to denote the contract size.

R

Receiver

The party to a trade that receives the fixed rate of interest in a derivative transaction. Typically, the Seller.

Reconciliation History

Ability to view past reconciliation results and the reconciliation progress over time.

Relative Difference

triResolve offers extensive MtM value analysis such as comparison in absolute as well as relative terms to highlight problematic areas.

Replacement Trade

A trade, delivered as part of a triReduce Credit unwind proposal. The sole purpose of this trade type is to rebalance risk that would be shifted by solely booking terminations.

Reset Risk

The risk arising from floating interest rates being fixed (known as 'resetting') for their next coupon period. See Fixing.

Restructuring

An agreement between an entity and its creditors to rearrange its liabilities. Often used as a preferred alternative to bankruptcy or liquidation. Can be considered as a Credit Event in some types of Credit Derivative.

RIG

Rates Implementation Group. Reports into Rates Steering Committee.

Roll Date

Pertaining to a derivative trade, the date on which one coupon is paid and the next coupon period begins. For CDS Indices, it can also refer to the launch date of a new series.

Root Cause Analysis

In order to identify and categorize causes for common errors or misbookings triResolve provides extensive functionality for identifying and analyzing root causes.

RSC

Rates Steering Committee, under ISDA.

RWA

Risk Weighted Assets. The basis for calculating the minimum required capital reserve required for a bank. TriOptima, through its triReduce termination service , can help banks reduce the required capital reserve and capital costs. See Basel Regulations.

S

SEC

U.S. Securities and Exchange Commission. Their mission is to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation.

Securities-Financing Reconciliation

triResolve has the functionality to reconcile a very wide range of different financial products, including Repos and Stock Borrow / Lend, Collateral Balances or trades not under CSA agreement.

Seller

In Credit terms, this refers to the ‘Seller’ of protection (or the ‘receiver’ of interest payments).

Settlement Date

The date upon which flows of cash and/or securities are exchanged following a financial transaction.

Spot Rate

The rate that can be achieved in the cash market (otherwise known as the spot market) under regular settlement conditions.

Star Colouring

triResolve distinguishes between a manually created and an automatic match. The star rating will be in green for a manually created match and gold if the match is automatically created.

Swapswire ID/Markitwire ID

triResolve is interoperable with other matching platforms in order to facilitate investigation of cross related data and highlights any such discrepancies.

T

TARGET

The Trans-European Automated Real-Time Gross Settlement Express Transfer System.

Termination Date

The day on which a trade termination becomes effective.

Three-Way Reconciliation

Reconciliation of trades from three different sources; for example the principal, its counterparty and a custodian.

Tolerance

Tool to constrain the magnitude of impact due from an Unwind Proposal. See Unwind Proposal for more info.

Trade Browser

triResolve includes highly flexible customizable filtering across entire portfolios on a trade detail level to break out sub-sets of trades for detailed analysis.

Trade Cart

A temporary storage area for trades and or matches.

Trade Comments

As a community platform, triResolve supports different types of client communication on the platform to facilitate the resolution process.

triBalance

The systemic risk reduction service operated by TriOptima AB.

triReduce

A multilateral portfolio compression and early termination service operated by TriOptima AB.

triResolve

The proactive portfolio reconciliation service and exposure management service from TriOptima.

triResolve MatchID

triResolve retains global unique match identifiers for each match established on the service.

U

Underlying

An asset , index or rate from which the value, cash flows or deliverables under a derivative transaction are calculated.

Unilateral Reconciliation

The vast majority of reconciliations are performed between subscribers to the service. triResolve also supports so called unilateral reconciliations, where the subscriber uploads data on behalf of the counterparty after receiving the counterparty's consent.

Unmatched Trades (for triReduce)

Trades submitted by a party that are not submitted by their counterpart.

Unmatched trades (for triResolve)

triResolve will quickly identify any trades where a satisfactory match has not been identified, these are a single sided match where no matching counterpart trade has been identified.

Unwind

Where both parties to a trade mutually agree to settle or terminate prior to the normal maturity of the trade, normally involving a cash settlement.

Unwind Proposal

A proposal containing a package of transactions to carry out, that will have the effect of trade reduction and/or notional reduction.

Upfront Fee

A fee paid typically on a credit derivative transaction, where the amount relates to a differential between the fair coupon and the fixed coupon on the trade. This results from product standardization in the credit derivative markets.

V

Value Date

The date upon which a cash payment relating to a financial transaction is completed.

VIT

Vendor Initiated Terminations.

W

Write-down

The process of diminishing the recorded value of a security to better reflect its lower market value.

WTI

West Texas Intermediary.

Y

Yearly Coupon

Aggregate amount of coupon to be paid or received during a year, for a contract.

Yearly Coupon Tolerance

A tolerance specifying the maximum amount of Yearly Coupon to be shifted in an Unwind Proposal; used in triReduce Credit.