Monday, January 10, 2011

CDS compression amounts have fallen (TriOptima Press Release)

TriOptima announced that its triReduce portfolio compression service had eliminated $45.8 trillion in interest rate swap notionals in a record 53 cycles and $8.5 trillion in credit default swap notionals in a record 95 compression cycles during 2010.

Terminations in interest rate swaps increased significantly in 2010 with 53 triReduce Rates cycles in 23 currencies around the globe eliminating $45.8 trillion in notional outstanding, up from $26.7 trillion in 2009. This included nine cycles run in conjunction with LCH.Clearnet Swapclear. “2010 was another successful year in triReduce rates,” said Raf Pritchard, CEO of TriOptima North America. “We expanded the range of interest rate swap currencies we cover to Israeli Shekel (ILS) and Thai Baht (THB). Terminations in currencies like these with higher capital requirements can free up capital for redeployment and reduce counterparty credit risk. Furthermore, with strong cycles in JPY and eight other Asian currencies, our activities in Asia continue to gain traction.”

Compression results in credit default swaps have decreased since their peak in 2008 when triReduce Credit cycles eliminated $30.2 trillion in notional outstanding. “The success of our compression efforts in previous years as well as the increased industry efforts and prioritization accorded to clearing contributed to lower compression levels for CDS index trades in 2010,” said Raf Pritchard. “However, we have seen a doubling in the termination of single name trades since 2008 due to the introduction of coupon standardization in ISDA’s Small Bang.”

Since the introduction of its innovative triReduce service in 2003, TriOptima has terminated $108 trillion in IRS notional outstandings and $68.2 trillion in CDS notional outstandings. Full compression statistics are available on TriOptima’s website at: