TriOptima announced that market participants, using its triReduce compression service for both interest rate and credit default swaps, terminated a record-breaking $62 trillion in OTC derivative notional principal outstanding in 2011. The $62 trillion included $56.4 trillion in interest rate swap notional principal of which $48.3 trillion were cleared swaps in LCH SwapClear, and $5.6 trillion in credit default swap notional principal. This represented a 14% increase over 2010 levels overall, and a 23% increase in interest rate swap terminations.
Portfolio compression is one of the tools that global regulators have identified as effective in achieving the important goal of reducing counterparty credit risk. OTC derivative dealers supported the triReduce compression cycles in both cleared and uncleared interest rate swap transactions, and also continued to compress uncleared CDS transactions where possible.
“We developed a strong partnership with LCH SwapClear and its members that resulted in significant terminations of cleared IRS transactions,” said Peter Weibel, ceo of triReduce. “In some months, like October, we actually eliminated more existing IRS notional principal from the clearinghouse than the aggregate notional of new trades submitted to clearing during the same period. We are working to sustain these results in 2012 within the clearinghouse while continuing our expansion in non-cleared currencies around the globe.”
Currently, TriOptima runs triReduce compression cycles in 25 IRS currencies globally and a range of CDS product types including credit index swaps, single names and credit index tranches.
