ICAP’s TriOptima Eliminates AUD 2.15T in Interest Rate Swap Compression

ICAP continues to experience interest among swap dealers for its TriOptima position compression solution. The product helps banks and swap dealers reduce the notional value of swaps on their books by analyzing portfolios to find overlaps in counterparties between firms. For example, a firm that has sold multiple swaps to another firm, but also acquired similar exposure, is eligible for compression of their positions into one aggregated report of their risk with their counterparties.

Part of ICAP’s post-trade services, TriOptima has announced results of a compression cycle for AUD interest rate swaps in LCH.Clearnet’s SwapClear. According to the firm, twenty financial institutions participated in the compression cycle, with the notional principal outstanding of their swap positons being reduced by AUD 2.15 Trillion ($1.65 trillion USD). Overall, the compression reduced dealer to dealer AUD interest rate swap notional outstanding at SwapClear by almost 21%.

According to TriOptima, the firm grew participation of 20 financial institutions compared to 14 in a cycle last year. Commenting on the compression performance, John Chiah, Head of triReduce Asia Pacific stated, “This AUD cycle at SwapClear was a dramatic increase over the last cycle in May 2014 where trades were still linked. We went from 14 to 20 participants including local representation, and the notional eliminated almost tripled. This continues the trend we’ve seen of increased focus on compression in the region, and underscores the impact of unlinking trades on compression results in a clearinghouse.”

Marcus Robinson, Head of SwapClear Australia, added, “This is the largest AUD TriOptima compression cycle we’ve run at SwapClear. We continue to see good uptake for compression in the Australian market, and worldwide, reducing the notional outstanding despite growing average daily cleared volumes. We expect this demand for compression services to continue as market participants recognize the benefits of streamlining their portfolios to increase their capital efficiencies.”