- • Seventeen banks involved in Standard Initial Margin Model (SIMM) optimization tests
- • Pilots conducted over the last few months show SIMM reductions between 32-43%
- • Tradition and its compression and analytics partner LMRKTS completed a live run, limited to Non-Deliverable Forward (NDF) trades, within 8 minutes and 9 seconds
- • Partnership builds on existing cooperation, maintaining separation and independence of trade execution and trading positions
Tradition, one of the world’s largest interdealer brokers in over-the-counter commodity and financial products, has delivered an initial margin optimization in FX, after extending its partnership with LMRKTS, a market-leading compression and analytics provider.
Tradition and LMRKTS announced a strategic partnership in 2016 to handle execution and compression processing for G10 FX Forwards. Earlier this month, the two firms completed a SIMM optimization for NDFs with a group of Tradition’s clients.
Borrowing from the operational processes of their G10 Cash RWA and Leverage Reductionservices, the live run incorporated exposure data from four banks, with theentire operational process, resulting in the processing of 132 sides of trades, being completed within 8 minutes and 9 seconds.
Tradition used its existing infrastructure and connectivity, in combination with LMRKTS’s analytics, to provide a comprehensive end-to-end service for participants.
The LMRTKS offering is an analytic tool that sits on top of Tradition’s existing market infrastructure. Participants set bespoke constraints and objective functions and LMRKTS determines an output that is not only mutually beneficial but also lowers systemic risk and subsequent costs. The power of the new partnership is that instead of a Chinese wall, LMRKTS and Tradition offer a separation of church and state. Tradition’s broking business will have no information regarding the positions or exposures of the banks, but can still be employed to lower them.
Dan Marcus, Global Head of Strategy and Business Development at Tradition, comments: “We assess our partners very carefully before entering into any partnership but recognised the potential of LMRKTS’s technology and analytics at an early stage. By combining Tradition’s scale, connectivity and regulatory oversight in multiple jurisdictions with LMRKTS’s innovative technology, we are providing a crucial tool for banks, many of whom are under pressure to meet regulatory capital requirements and manage risk exposures.
“In a world where efficient use of capital is becoming increasingly more important, LMRKTS has demonstrated its ability to deliver unprecedented reductions in notional volumes and risk exposure for our clients. We fully intend to build on this partnership over the coming months.”
“Lucio Biase, CEO of LMRKTS, comments: “We have worked with Tradition for over a year to develop a scalable and efficient service that allows us to deliver extraordinary notional and risk reductions to clients. By offering access to LMRKTS’s analytics through Tradition’s existing infrastructure and technology, we have a market-ready solution; banks trust their tested pipes and, after four years of betas andpilots, believe in our results.
“Tradition’s track record, support and international client base was a key factor behind our decision to extend our partnership. Our collaboration in both G10 FX and NDF products has yielded impressive results in a very short period of time, and we look forward to rolling out our interest rates solutions soon. Tradition has greatly accelerated our time to market, offering our services as a white-labelled solution as we finish the procurement process with these large institutions.”
