CME’s TriOptima completes first triReduce SONIA benchmark compression cycle

The benchmark compression cycle via the triReduce service took place on 22 October at LCH SwapClear.

CME Group’s collateral management and post-trade services provider, TriOptima, has completed its first compression cycle for SONIA risk replacement trades via triReduce.

TriOptima said the compression cycle took place 22 October at LCH SwapClear.

The triReduce benchmark compression service aims to help swap traders reduce gross and net exposure to legacy benchmarks and increase adoption of alternative benchmarks through risk replacement trades.

The firm said that after this first risk replacement compression cycle in sterling, it plans to offer enhanced benchmark conversion cycles in other currencies.

“This is the first step of an iterative process for our swap market clients as they convert their swaps exposure from legacy benchmark rates,” said Philip Junod, senior director, triReduce and triBalance business management.”

“The triReduce benchmark conversion service has the capacity to run conversion alongside compression at scale, helping participants proactively reduce their exposure at the same time as increasing their adoption of the alternative reference rates in currencies impacted by benchmark reform.”

Compression allows traders to remove bilateral trades across mismatched cash flow dates, and offset trade populations in order to reduce the size of the cleared portfolio of OTC derivatives.

For FX forwards, TriOptima saw record compression throughout last year as clients eliminated a record of $9.1 trillion of gross notional value from their FX forward portfolios via triReduce CLS FX.

The service provides optimisation and risk mitigation by combining TriOptima’s triReduce service with FX settlement specialist CLS’s market connectivity and infrastructure. More than 20 banks are now using the triReduce CLS FX compression service.