OSTTRA, the global post-trade solutions company, today announced that its market-leading portfolio compression service, OSTTRA triReduce, has compressed $26.4 trillion of interest rate derivatives in September as Global Systemically Important Banks (G-SIBS) look to reduce notionals before year-end.
More than $1 trillion in additional notional was compressed in September as a result of OSTTRA triReduce’s innovative trade refactoring solution. The patented solution, currently implemented by four financial institutions, transforms swaps portfolios to efficiently minimise gross notional exposures. Previously, market participants would experience a build-up of historic trades lacking the necessary offsets to unlock compression. Trade refactoring opens the historic population of trades, which can lead to a lower steady state of gross notional. This method has delivered an increase of nearly a third (30%) in gross notional compressed for market participants vs September last year.
“Being classified as a G-SIB is a fundamental component of financial institutions’ overall regulatory capital. It is key for banks to have a detailed understanding of their G-SIB scores, particularly as classification is assessed relative to their peers,” said Magnus Jonsson, head of business management triReduce and triBalance, at OSTTRA. “The challenge is that G-SIB assessments are highly sensitive to gross notional of derivatives contracts. This is why we are seeing such a big uptick in market participants looking to significantly reduce their notionals before the year closes. We’re happy to see our latest innovation being adopted by more participants and the significant increase they are seeing in results, and we continue to innovate to support current and future market participants in maximising their notional compression.”