OSTTRA’s TriOptima, an infrastructure service that aims to reduce costs and mitigates risk in OTC derivatives markets, has announced a triBalance credit optimization rebalancing initiative that “reduces risk in multiple central counterparties (CCPs), including LCH CDSClear and ICE Clear concurrently.”
As mentioned in the announcement, this service, which has allowed 12 participants to eliminate over $475 billion of gross notional value from cleared Index Credit Default Swaps (CDS), “enables investment banks such as Goldman Sachs and J.P. Morgan to simultaneously optimize multiple risk measures including notional, initial margin (IM) and capital exposures on a multilateral basis.”
Previously, banking institutions had to reach out to, and negotiate with, counterparties “individually to mitigate the same type of risk,” the announcement explained. The addition of credit to TriOptima’s multilateral network “uniquely positions the service to optimize across all derivative asset classes, FX, rates, commodities, equities and credit derivatives,” the update noted.
Kaushik Murali, Global Head of Index Trading at Goldman Sachs, stated:
“We appreciate triBalance for establishing a framework to optimise notional and capital for cleared credit products and look forward to future offerings targeting capital & IM reduction in the credit and mortgages space in the future.”
Aymeric Paillat, Head of J.P. Morgan Global Credit Index Trading, remarked:
“Rebalancing credit risks across ICE Clear and LCH CDSClear is an important risk-management task and solutions to support dealers to achieve this will reduce market fragmentation and help deliver results for clients. Through a successful first session TriOptima: triBalance Credit has helped us to reduce initial margin and simplify positions, enabling us to continue delivering a best-in-class service.”
Frank Soussan, Global Head of CDSClear, LCH, said they welcome initiatives such as triBalance Credit that assist their members with better managing their gross notional and derived capital exposure across CCPs.
Erik Petri, Head of triBalance at TriOptima, pointed out that the risk reductions achieved, indicate the value that this triBalance Credit initiative is delivering for their customers. Petri also noted that it allows financial service providers to attain capital efficiencies and lower overall funding costs related to margin requirements, while also contributing to the smooth and efficient running of the credit derivatives sector.