The Singapore Exchange (SGX) has enhanced the efficiency for clearing members by introducing an OTC compression service for Singapore dollar interest rate swaps (IRS).
Portfolio compression is the elimination of trades, while keeping the market exposure of a clearing member unchanged. The aim is to reduce the amount of outstanding positions in terms of the number of notional size of cleared trades and increase collateral and trade management efficiency for clearing members.
On 23 November, S$25 billion in notional IRS trades were terminated during a portfolio compression exercise.
“The new SGX trade compression service enables market participants to better manage outstanding IRS notional transactions at the clearing house,” said David Griffith, COO for FX, rates and credit at Standard Chartered Bank. “Through it, risk-neutral cleared trades are eliminated and this helps improve operational efficiency for both the clearing members and the clearing house.”
On 12 November, SGX started clearing Singapore dollar IRS transactions with tenors up to 30 years. Previously it only cleared for tenors up to 10 years. In the first two weeks since the extension, SGX has cleared S$1.23 billion notional of the longer-dated tenors. The tenor of a swap is the length of time over which the payments are made.
“We are pleased to worth with TriOptima in offering a portfolio compression service to complement our OTC interest rate swaps clearing service. This follows our recent extension of tenors of Singapore dollar IRS cleared to 30 years,” said Muthukrishnan Ramaswami, president of SGX. “Our customers can expect more service enhancements in future as we continuously improve our OTC clearing offering.”