Credit Archives

OSTTRA transfers $190 billion of open interest to support the ICE Clear Europe credit clearing closure

London, 04 May 2023 – OSTTRA, the global post-trade solutions company today announced that its counterparty risk optimisation service, OSTTRA triBalance, has successfully completed five of a series of rebalancing cycles, reducing open interest and moving residual positions to alternative clearing houses ahead of the closure of the CDS clearing service at ICE Clear Europe later this year.

OSTTRA delivered a reduction of more than $190 billion equivalent in open interest in Indices and selected Single Name CDS at ICE Clear Europe, approximately 50% of the Indices and between 85% and 98% of Telecom, Technology, Utilities, Basic Materials, Energy, Healthcare and Consumer Goods and Services Single Name CDS positions were closed out.

These results are particularly impressive given that approximately 35% of the index open interest in scope of the closure was in instruments that are subject to regulatory restrictions. As of 30 March, regulators¹ have provided a time-limited exemption, to allow for the inclusion of the instruments that were previously restricted, until the closure of the CDS clearing service at ICE Clear Europe, to aid firms with the risk moves.

Following ICE Clear Europe’s decision to exit the CDS clearing business, market participants need to migrate their positions from ICE Clear Europe to either ICE Clear Credit or LCH SA.

With a central role in post trade workflows for credit derivatives, OSTTRA is uniquely placed to support the industry in a robust, cost-efficient and timely transition. The solution combines the extensive risk transfer and optimisation capabilities of OSTTRA triBalance, with trade processing via OSTTRA MarkitWire and TradeServ to ensure new positions are accurately reflected at CCPs and in the Trade Information Warehouse.

“In collaboration with market participants and OSTTRA, ICE Clear Europe has reached an important milestone in the work towards the cessation of its CDS clearing service,” said Hester Serafini, President of ICE Clear Europe. “The compression service allows market participants to smoothly migrate their CDS positions and the first cycles have been very successful. We look forward to future iterations over the coming months.”

“We are delighted with the results of the transition cycles, providing market participants with an innovative solution to manage an orderly exit. The open interest reductions achieved, and the smooth running of the whole process demonstrate the value that OSTTRA can deliver, contributing to the smooth and efficient running of the credit derivatives market” concluded Erik Petri, Head of OSTTRA triReduce & triBalance.

To find out more, talk to a member of our team at at info@osttra.com.

¹The time limited exemptions can be found here CFTC, FCA, ESMA.

From Faxes to Fintech: OSTTRA MarkitWire – Reflecting on 20+ years of industry evolution

The financial markets have undergone a dramatic transformation in the past two decades, and OSTTRA MarkitWire has been at the forefront of this evolution. From its origins replacing fax-based confirmations to its current role as a leading fintech platform, OSTTRA MarkitWire has helped shape the post-trade landscape and actively participated in the evolution.

Momentous change in financial markets

Looking back, the sheer magnitude of change is striking. Gone are the days of cumbersome manual processes, when boxes of derivative confirmations were couriered to counterparties to agree trades, or trade records were faxed over archaic technologies. Today’s seamless electronic post-trade processes have come a long way, driven in part by new technology but also by market events. And while not all those events have been anticipated or welcome, the challenges they presented have spurred innovation and ultimately benefited the entire industry. The ramifications of the global financial crisis have shaped much of today’s over-the-counter (or OTC) derivative trade workflows. Legislation has been passed and successfully rolled out across market jurisdictions.

Reflecting on the past twenty years, we feel it’s essential to pause and appreciate the industry’s remarkable evolution and accomplishments, and the role OSTTRA MarkitWire has played. But the journey doesn’t end here. OSTTRA remains committed to partnering with clients to navigate the challenges and opportunities that lie ahead. Synergies across the OSTTRA business mean clients will have single streamlined workflows across large data sets; a marked difference to a past world of siloed interactions.

20 years of evolution

The story of post-trade processing is a journey of evolution, driven by technology vendors but guided by financial institutions. In the early days of SwapsWire, the original name for OSTTRA MarkitWire, the focus was on building a platform that could connect counterparties for electronic trade confirmation in the interest rate derivatives market and then quickly progressed to support clearing. This marked a significant step forward from the manual processes that dominated the industry.

Since then, the service has evolved into a comprehensive platform driven by straight-through processing (STP), significantly reducing operational risk by minimising human intervention. Today it comfortably processes tens of millions of trade records yearly, supporting rates, credit, equity, and repo transactions across 34 currencies and various product sub-types, with connectivity to 12 CCPs and multiple venues supporting 8 venue types. Building on this success, OSTTRA MarkitWire is transforming the bilateral repo market with our standardised, automated affirmation and confirmation workflows, while working with our customers to prepare for the incoming clearing mandates in the United States.
Furthermore, OSTTRA Trade Manager interacts seamlessly with OSTTRA MarkitWire providing investment managers and fund administrators with a consolidated matching and confirmation workflow across asset classes.

OSTTRA MarkitWire has a proven track record of supporting the industry through periods of significant change and uncertainty. When the Lehman Brothers crisis emerged in 2008, we worked with our clients and clearing houses to assist in an orderly transition of portfolios. The partnership has continued through the rollout of clearing best practices and mandates worldwide with OSTTRA MarkitWire connectivity extended to relevant CCPs, not only for clearing but also for post-clearing events, including the cleared trade IBOR transitions. The service now includes CLS settlement and connectivity to trade repositories for regulatory reporting.

In this era of complex and intense regulatory debate, OSTTRA has remained a steadfast partner, providing clients and partners with automated, digitised solutions, helping to manage the cost and complexity of change.

Consensus building – the keystone for centralised adoption

One of the most important roles a scaled technology provider can play is to act as a forum for rational industry-wide decision making. The industry expresses its mutual needs, and we provide intelligence, expertise and insight on how workflows can evolve to satisfy new regulations efficiently.

Market participants can struggle to collaborate and find cost-effective solutions to benefit the industry without setting off legal alarm bells. We have provided a safe forum for discussion since the initial launch with a member group of 23 businesses interested in standardising inter-dealer messaging in the rates market. Today we engage with a network of over 1,600 active participants across multiple working groups and the network continues to grow, particularly in emerging markets where the demand for market infrastructure increases.

With our partners we have taken the industry on a journey, drawing on new technologies and techniques as they have become available. That journey is not stopping now; on the contrary, OSTTRA marks a shift into a new gear, with the promise of compelling and synchronised benefits to our customers.

Marrying ‘T0’ and ‘T+’ post-trade processes

As OSTTRA, we have aligned our services to enable frictionless workflow for confirmation and reconciliation processes. Our full legal confirmation remains the key cog in our credit, rates and equity businesses – providing a golden source of agreed electronic derivative contract information to market counterparties, and creating a point of agreement and standardisation that enables trust.

Using this record in downstream T+1 activities lowers the resource burden for operational teams managing increasing volumes and system complexities. In today’s environment of ever-increasing regulatory scrutiny, banks must conduct assorted reconciliations across their technology infrastructures to ensure data accuracy and compliance. This includes reconciling data between their own global business units, between counterparties, with clearing houses and also the data they report to trade repositories.

Given OSTTRA’s interconnected post-trade services and 20 year track record, we are uniquely positioned to assist the industry in navigating these processes. This is our bread and butter. Increasing STP, harnessing the power of data, enabling synchronised analytical processes and allowing customers to optimise their resources most appropriately aligns with our vision and track record of marrying post-trade processes for the benefit of the industry.

In delivering for our clients i.e., by connecting OSTTRA MarkitWire and our portfolio reconciliation service, OSTTRA triResolve, we endeavour to add further use cases that bridge the synergies within OSTTRA. Future cases will span different asset classes and platforms, amplifying the resource optimisation benefits our customers are continually searching for and removing redundant processes for good.

Partnering with the industry through Interest Rates reform and transition

Financial market professionals will be well-versed with the global introduction of overnight risk-free rates (RFRs), replacing legacy interbank offered rates (IBORs), across multiple markets and currencies. For over 20 years the legacy OSTTRA businesses have helped navigate industry change like central clearing, regulatory reporting, compliance timeliness, and disclosure of material economic terms (METs). Benchmark reform is no different.

OSTTRA MarkitWire’s CCP Sync services for Rates initially focused on netting, compression, and portfolio transfers. By listening to multiple CCP updates and absorbing trade messages back into customer systems via existing APIs, we enabled advantageous STP workflow and mitigated the need for customers to build additional post-trade connectivity. As clearing continues to evolve across various jurisdictions, this connectivity remains as important as ever.

Enter benchmark reform through clearing events – the process of running high-risk, multi-year projects of transitioning millions of trades from IBOR rates to new RFRs. Using our CCP Sync service, hundreds of customers have avoided expensive ‘blue ocean’ builds and instead utilised the OSTTRA MarkitWire connectivity to multiple CCPs and coverage of key market currencies, to achieve transitions in an automated manner. We partnered with the industry through the initial IBOR transitions in 2021 and the notable USD Libor transition events in 2023 – the work continues today.

As various markets and regulators continue to review and update legacy rates – most recently Canada, and looking ahead to Mexico, Japan and Israel – rest assured the OSTTRA team is on-hand to deliver exceptional CCP Sync services that reduce cost and risk through low latency and resilient frameworks. We have no doubt legacy rates will remain in certain markets, and that’s OK; our aim is to partner with the industry across their broader portfolios of trades, be they cleared or non-cleared, and when the time is right, we’ll be there to support rates transition activity.

It’s not about the destination, it’s about our journey together

So the question is, where does the industry go from here? With a backdrop of exciting new technologies such as distributed ledger and artificial intelligence (AI), our experts are naturally following these developments and applying innovative and incremental changes to our products, for example, OSTTRA Trade Manager’s Paper Digitisation module. We view these changes as natural improvements to the existing products that have served the industry so well.

Most importantly, we look to our clients to shape our functionality roadmap. Their input may be driven by technology, the pursuit of greater operational efficiency, or challenges arising from new ideas or regulatory and compliance needs. Whatever the use case, we are committed to working collaboratively with the industry. We are not in the business of advocating shiny new technologies for their own sake, our philosophy is to advance the needs of the industry, building on 20 years of connectivity, evolution, resilience, partnership and transparency.

Two decades of experience have prepared us for the next chapter of post-trade. We’re embracing the challenge and the technology, collaborating with our clients to build a future defined by efficiency, innovation, and connectivity. The future is post-trade, and it starts now.

For more information, contact info@osttra.com

Compression & Optimisation Update – October 2024

“So far 2024 has been a year of significant global events – from general elections and easing interest rates to geopolitical shifts that have impacted the global economy. We have remained committed to supporting the integrity of the markets and empowering our extensive network to mitigate risks effectively, resulting in record performance, innovation in new asset classes and products as well as notable award wins.

Thank you to our network of participants for your continued support and we look forward to delivering even greater efficiencies in the future.”

Erik Petri, Head of Optimisation

Post-Trade Dictionary: Decode Industry Terms from A to Z with this Post-Trade Glossary

TriOptima combines credit optimisation with compression to deliver major capital and initial margin funding benefits for banks

LONDON, 12 January 2022 – OSTTRA TriOptima, a leading infrastructure service that lowers costs and mitigates risk in OTC derivatives markets, today announced that its combined credit optimisation and compression service for mitigation of bilateral counterparty credit risk and reduction of outstanding gross notional has launched with participation from multiple investment banks.

The triBalance service has delivered 40% initial margin optimisation saving for credit, while triReduce has eliminated $21.5bn of gross notional value from CMBX Index Mortgage-Backed Securities (MBS). The combined strength of both services has enabled banks such as Goldman Sachs and Citi to optimise their notional, initial margin (IM) and capital exposures on a multilateral basis.

The efficiencies achieved from optimisation came just prior to the annual SIMM recalibration on 4 December, a process that saw these particular risk weights increased. The timing of the run was therefore critical in order to prevent the IM increase that would have occurred automatically otherwise. The credit compression cycle followed and helped to reduce MBS exposures in the market – unlocking risk mitigation opportunities as a result. This initiative perfectly demonstrates how optimisation and compression can be synchronised to maximise the benefit for banks, forming the blueprint for extended coordination between these two processes across other asset classes.

“We are pleased with the triBalance service and welcome scalable solutions that optimise margin and capital for industry participants. We actively manage participation in multilateral services that facilitate risk reduction with OTC participants & CCPs,” said Dave Bolatin, Global Head of FICC Capital & Portfolio Optimisation at Goldman Sachs.

“A change in industry focus from gross to net exposure means more clients wish for optimisation and compression to work in tandem. When it comes to credit derivative markets, optimisation needs to be closely followed by compression. In aggregate, our service ensures banks reduce funding costs associated with margin and capital requirements, while at the same time manage the risk of gross notional,” concluded Erik Petri, Head of triBalance at TriOptima.

TriOptima’s unparalleled multilateral network means the firm provides the most comprehensive asset class coverage for optimisation. The addition of credit uniquely positions the service to optimise across all derivative asset classes, FX, commodities, equities and credit derivatives.

Explore our Portfolio Compression and Counterparty Risk Optimisation service.

OSTTRA TriOptima launches credit optimisation service allowing banks to reduce cleared risk

LONDON, 17th November 2021 – OSTTRA TriOptima, a leading infrastructure service that lowers costs and mitigates risk in OTC derivatives markets, today announced a new triBalance credit optimisation rebalancing initiative that reduces risk in multiple central counterparties (CCPs), including LCH CDSClear and ICE Clear concurrently.

This new service, which has already allowed 12 participants to eliminate more than $475bn of gross notional value from cleared Index Credit Default Swaps (CDS), enables investment banks such as Goldman Sachs and J.P. Morgan to simultaneously optimise multiple risk measures including notional, initial margin (IM) and capital exposures on a multilateral basis. Previously, banks would have had to reach out to, and negotiate with, counterparties individually to mitigate the same type of risk. The addition of credit to TriOptima’s multilateral network uniquely positions the service to optimise across all derivative asset classes, FX, rates, commodities, equities and credit derivatives.

“We appreciate triBalance for establishing a framework to optimise notional and capital for cleared credit products and look forward to future offerings targeting capital & IM reduction in the credit and mortgages space in the future”, said Kaushik Murali, Global Head of Index Trading at Goldman Sachs.

“Rebalancing credit risks across ICE Clear and LCH CDSClear is an important risk-management task and solutions to support dealers to achieve this will reduce market fragmentation and help deliver results for clients. Through a successful first session TriOptima: triBalance Credit has helped us to reduce initial margin and simplify positions, enabling us to continue delivering a best-in-class service”, said Aymeric Paillat, Head of J.P. Morgan Global Credit Index Trading.

“We welcome initiatives like triBalance Credit that help our members manage their gross notional and derived capital exposure across CCPs.” added Frank Soussan, Global Head of CDSClear, LCH.

“The risk reductions achieved, demonstrate the value that this triBalance Credit initiative is already delivering for our clients. It enables financial institutions to achieve further capital efficiencies and reduce funding costs associated with margin requirements, while contributing to the smooth and efficient running of the credit derivatives market,” concluded Erik Petri, Head of triBalance at TriOptima.

For more information, please visit our Portfolio Compression page

ICE Clear Europe Credit Clearing Closure Reaches 85% Completion Mark for Open Interest Transferred, with OSTTRA Moving $330 Billion So Far

London, 11 July 2023 – OSTTRA, the global post-trade solutions network, has completed its latest migration cycle run to move open interest (OI) out of ICE Clear Europe through its counterparty risk optimization service triBalance. With 9 cycles now completed, OSTTRA has successfully moved $330bn of OI for single name and index cleared credit default swaps (CDS). The migration has progressed successfully, enabling firms to reduce OI substantially as the closure of ICE’s European CDS clearing service (ICEEU) later this year inches closer.

OSTTRA has been operating a series of migration cycles since January 2023 to reduce open interest and move firms’ residual positions to alternative clearing houses, namely LCH CDSClear and ICE Clear Credit (ICC), the US equivalent of ICE’s European credit clearing entity.

The $330 billion successfully moved equates to approximately 85% of the total open interest that must be transferred by 27 October 2023. More specifically, over 99% of Single Names CDS positions and 77% of the Indices have now been moved to alternative central counterparties (CCPs).

Following recent exemptions granted by regulators, the latest cycle addressed 65% of the total Index DTO/MAT series (on-the-run and first-off-the-run, which together constitute approximately 37% of total Index OI). This has enabled OSTTRA to facilitate firms in making significant progress.

“The results of the most recent of the transition cycles mark a significant milestone ahead of the ICEEU closure. The efficiency seen within this process demonstrates the unique capabilities and central position of OSTTRA within post-trade workflows for credit derivatives, which has allowed for the smooth, timely running of such an impactful transition within the industry. We are very pleased with the ability of our service in supporting this industry migration, and we look forward to continuing with the remaining cycles.”

– Nikki Einarsson, Business Development Manager at OSTTRA triBalance

To find out more, talk to a member of our team at info@osttra.com.

Trade novation to support Asset Manager merger

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Novation and backloading of 70,000 trades for G15 bank restructure