CLS Group (CLS), a leading provider of risk mitigation and operational services for the global foreign exchange (FX) financial market infrastructure, and TriOptima, a leading provider of OTC derivatives post-trade and risk reduction services, announce today that they have launched the triReduce CLS Forward FX Compression Service completing the first successful compression cycle for FX forwards and swaps transactions.
The new service combines CLS’s infrastructure and market connectivity with TriOptima’s triReduce compression product to enable counterparties to reduce the gross notionals of their outstanding portfolios without fundamentally changing their market positions.
Launched at a time when international regulators have encouraged compression services for non-centrally cleared OTC derivatives, the triReduce CLS Forward FX Compression Service is designed to reduce operational, credit and counterparty risk for institutions and enhance capital efficiency. It is consistent with the goals of EMIR, Basel III and Dodd-Frank, all of which seek a more robust and transparent post-trade environment.
Tobias Becker, Capital Management Trading at Credit Suisse, comments: "Being able to compress FX forwards and swaps has the potential to not just simplify derivative portfolios and notionals but ultimately also to reduce counterparty exposure and costs. We welcome any initiative that helps increase the efficient management of FX derivatives in the marketplace."
David Puth, CEO of CLS, comments: “Trade compression is a vital tool in managing risk, leading to strong market demand for a compression service for FX forwards and swaps.
“By combining CLS’s infrastructure, network and expertise in the FX market with TriOptima’s knowledge of the OTC derivatives environment and experience with compression in other asset classes, this new service enables institutions to efficiently reduce counterparty and credit exposure and to meet global regulatory requirements.”
Peter Weibel, CEO of triReduce, TriOptima’s compression service, comments: “Working with CLS and its members underscores our commitment to providing robust and efficient compression services to a broad range of financial market participants. Adding FX forward compression is an important expansion of the asset classes in our catalogue of compression services.”