TriOptima sets new record for FX forwards compression with USD9.1tn gross notional value compressed in 2019
Counterparties using the triReduce CLS FX compression service have eliminated USD9.1 trillion of gross notional value from their FX forward portfolios in 2019.
A new record for the service, this equates to an annual increase of 71 per cent.
In Q4 alone, the service compressed USD4.9 trillion of gross notional value, 153 per cent above the previous quarterly high achieved in Q3 2018. The new record was driven by increased participation from the prime broker and executing broker community, larger trade populations being submitted for compression and increased year-end activity as market participants manage their risk exposure and capital charges.
“As FX forwards volumes continue to grow, and in response to capital rule changes and increased regulatory interest in FX compression, clients have a greater need for flexible risk mitigation services to achieve capital and operational efficiencies,” says Guy Rowcliffe, Global Head of Optimisation Services and TriOptima, CME Group. “We are pleased with this new milestone for FX forwards compression and look forward to extending our service offering in 2020.”
“The increase in notional reductions seen in 2019 demonstrates the value triReduce CLS FX continues to deliver for our clients,” says Alan Marquard, Chief Business Development Officer, CLS. “It enables them to further improve their capital efficiencies and significantly reduce risk, while contributing to the smooth and efficient running of the FX market.”
“Citi remains committed to working closely with its clients to drive capital efficiencies by maximising notional compression opportunities across the industry,” says Chris Perkins, Global Head of Foreign Exchange Prime Brokerage and OTC Clearing, Citi. “Our business model greatly benefits from the notional we have eliminated through the triReduce CLS FX service.”
The triReduce CLS FX service provides capital optimisation and risk mitigation for the global FX community, combining TriOptima’s triReduce multilateral compression service with CLS’s infrastructure and market connectivity. During 2019, work continued with the FX derivatives community and infrastructure providers to further enhance and extend the service, with more than 20 banks now participating. Clients of the service have benefited from enhanced capital efficiency and leverage ratios, reduced operational risk and cost, and the ability to proactively manage credit risk without fundamentally changing their market positions.