TriOptima and SGX members Complete Portfolio Compression Cycle
TriOptima said that four Singapore Exchange (SGX) member banks successfully eliminated more than 82% of the Singapore dollar (SGD) interest rate swaps they wanted to terminate in the first SGX triReduce portfolio compression cycle.
The triReduce service enables participants to tear up their existing trades at their own mid mark-to-market valuations and avoid negotiation of a bilateral termination; and the number of trades that are eliminated significantly increases due to the multilateral nature of the process.
The four SGX 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,” said Lawrence Chan, managing director of business management and support of treasury and markets, Development Bank of Singapore (DBS). “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,” said Yutaka Imanishi, chief executive (CEO) of TriOptima Asia Pacific.
“Regular triReduce cycles in the central counterparty (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 over-the-counter (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.
TriOptima, which has offices in London, New York, Singapore, Stockholm, and Tokyo, is part of the ICAP Group.