Four Singapore Exchange member banks successfully eliminated more than 82 per cent of the SGD interest rate swaps they wanted to terminate in the first SGX triReduce portfolio compression cycle.
The four participants, including two local institutions, reduced notional principal outstanding by SGD25bn in the inaugural compression cycle for cleared trades.
“We are pleased with how smoothly this initial compression cycle in SGX went,” says Lawrence Chan, Managing director of business management and support of treasury and markets, Development Bank of Singapore. “We view this as a natural extension of the bilateral compression cycles that TriOptima has offered in Singapore since 2004.”
“Our successful collaboration with SGX and its members demonstrates the benefits of using compression as a complement to the clearing process,” says Yutaka Imanishi, chief executive of TriOptima Asia Pacific. “Regular triReduce cycles in the CCP ensures that exposures will be minimized even with the growth in clearing since a good measure of success in a CCP is turnover rather than accumulations of notional and trade volumes. We look forward to continuing our work with SGX and its members.”
Eliminating unnecessary swaps in an OTC derivatives clearinghouse promotes the efficient use of capital and collateral and contributes to overall financial stability by moderating the pace of growth in outstanding notional principal in the market.