Nasdaq completes portfolio compression for Nordic banks

Portfolio compression is widely being adopted across the industry to reduce their capital requirements. 

Nasdaq OMX Clearing has completed its first round of a new portfolio compression service for OTC derivatives.

In collaboration with TriOptima and a number of Nordic-based banks, Nasdaq was able to eliminate 288 billion SEK ($35.8 billion) of notional value for interest rate swaps cleared by five banks.

“In the world of new capital requirements it is of great importance for the Scandinavian market place to have an effective compression service in order to minimize capital cost,” said Joakim Anjou, head of markets, Danske Bank.

Portfolio compression tools provided by clearing houses have become vital for banks, which enable them to offset compatible trades and wipe of billions of dollars in notional volume, and as a result reduce their capital requirements.

“The compression functionality makes Nasdaq a competitive CCP in a cost and capital constraint swap market”, said Jan-Peter Larsson, head of markets at Swedbank.

LCH.Clearnet’s portfolio compression service has become the most widely used tools for banks. According to its end of year results, SwapClear, the coveted interest rate swaps clearing service provided by LCH.Clearnet, had compressed $328 trillion of notional volume in the OTC derivatives market.

Nasdaq said it will carry out the compression session twice a year going forward.