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Quantile launches equity derivatives risk reduction service

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Quantile Technologies (Quantile) has completed the world’s first live multilateral counterparty risk reduction run in the OTC equity derivative markets.

The new service reduces exposure using risk-reducing trades generated from proprietary optimisation technology. Six major global banks participated in the initial run, which targeted initial margin reduction between participants.
 
This development marks a major expansion of Quantile’s cross-asset class services which now comprise multilateral risk reduction services in foreign exchange, rates and equity derivatives; these complement its compression offerings, designed to eliminate redundant notional and trade count. The Quantile equity derivatives service, together with its rates and FX equivalents, has been developed in collaboration with major global banks and AcadiaSoft Inc., the leading industry provider of margin automation and standards.
 
Quantile’s weekly runs covering optimisation and compression date back to January 2017, with 25 clients, including the largest global banks, now using the service.
 
The total initial margin posted by banks to each other, as measured by ISDA SIMM and required under the regulatory framework for uncleared derivatives, is mostly driven by equity, FX and interest rate risk, with the equity component currently being the largest.
 
“The addition of the equity optimisation service represents an important step into a new asset class for our firm and for the market,” says Andrew Williams (pictured), CEO at Quantile. “Capital and risk optimisation directly addresses core resource requirements for financial institutions, which will free up scarce capital and reduce costs.”
 
“Quantile’s risk reduction and compression services reduce risk and associated resource consumption for clients across margin, funding and capital,” says Stephen O’Connor, Quantile’s Chairman. “As we continue to develop our leadership position in these services, we remain committed to continue to work closely with our clients and partners to deliver products that are both fit-for-purpose and timely in the months ahead.”   

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