NEW YORK & LONDON -- (BUSINESS WIRE) -- TriOptima announces that it has worked with industry participants to implement an advanced triReduce compression methodology for Index Tranche trades with non-standard coupons, known as “legacy” trades as well as the more recent Index Tranche trades with standard coupons.
triReduce compression cycles eliminated 25% or €35.9 billion of the European-based ITraxx and 56% or $189.6 billion of US CDX Index Tranche legacy notionals. Total notionals eliminated in the triReduce index tranche cycles were €80.4 billion and $281.3 billion including trades with standardized and non-standardized coupons.
Since 2009, coupons on index tranche trades have been standardized; however many outstanding trades with non-standard coupons remain in portfolios and are difficult to hedge. Currently index tranche trades are not mandated for clearing and remain in bilateral OTC derivative portfolios. Eliminating these trades reduces gross notional exposures and results in higher leverage ratios and lower capital charges.
“We are pleased that we have been able to work with the industry to find a solution that helps to eliminate gross notional exposures and contributes to a reduction in systemic risk,” said Vikash Rughani, triReduce business manager. “We look forward to continuing the Index Tranche compression cycles on a regular basis given that these trades are not currently cleared and the legacy trades are more expensive to manage because of their bespoke nature.”
TriOptima is the award-winning provider of post trade risk management services and infrastructure for OTC derivatives. Focused on reducing costs, eliminating operational and credit risk, improving counterparty exposure management, and reducing systemic risk, TriOptima offers a range of services:
triReduce to reduce swap inventory and counterparty risk; triResolve to reconcile OTC derivative portfolios and manage disputes; triBalance to manage cleared and bilateral counterparty risk; and triQuantify to measure and analyze counterparty risk.
TriOptima, an ICAP Group company, maintains offices in London, New York, Singapore, Stockholm, and Tokyo.