Credit Archives

Trade novation to support Asset Manager merger

Client type: Global Asset Manager

Challenge:

Following the completion of an asset manager merger, Custom Processing was approached to facilitate the transfer of selected funds and associated bilateral trades on OSTTRA MarkitWire and OSTTRA Trade Manager

OSTTRA Solution:

Following a review of the scope of work, the asset manager leveraged the Custom Processing team to handle all activities pertaining to the novation of trades across OSTTRA MarkitWire and OSTTRA Trade Manager

OSTTRA Delivered:

Novation of circa 1000 bilateral trades across OSTTRA MarkitWire and OSTTRA Trade Manager
Scope definition, planning and delivery with cross-functional team involving OSTTRA, incoming and outgoing party colleagues
Testing, issue resolution and authorisation for successful delivery in Production Environment
Counterparty coordination and tracking across 16 major banks
Handling of all client communications, from inception to go-live
Fully documented project plan and runbook – treated as a joint project
Project constituted repeat business from the asset manager due to previous successfully completed project

Customer Benefits

Streamlined, flexible bespoke project management
Defined project structure
Defined roles and responsibilities with single point of contact
Dedicated project manager and execution resources
Automated execution solution
Substantial cost savings

Focused, Tried and Tested

A repeatable and systematic service from OSTTRA, subject to continuous enhancement and evolution
Relationship management with internal and external project resources dedicated to meeting customer expectations
Full testing and issue resolution via pre-production and UAT Testing
Migration day execution and communications

For more information or to arrange a call with a member of the Team please email info@osttra.com.

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

Client type: G15 Bank

Challenge:

Following internal restructuring, a G15 bank approached Custom Processing to facilitate the novation and backloading of bilateral trades across OSTTRA MarkitWire.

OSTTRA Solution:

Following a review of the scope of work, the G15 bank leveraged the Custom Processing team to handle all activities pertaining to the novation and backloading of trades across OSTTRA MarkitWire

OSTTRA Delivered:

Novation of circa 30,000 bilateral trades across OSTTRA MarkitWire
Backloading of circa 40,000 bilateral trades across OSTTRA MarkitWire
Scope definition, planning and delivery with cross-functional team involving OSTTRA and the G15 bank colleagues
Testing, issue resolution and authorisation for successful delivery in production environment
Script development to accommodate project requirements
Handling of all client communications, from inception to go-live
Fully documented project plan and runbook
Project constituted repeat business from the customer due to previous successfully completed projects

Customer Benefits

Streamlined, flexible bespoke project management
Defined project structure
Defined roles and responsibilities with single point of contact
Dedicated project manager and execution resources
Automated execution solution
Substantial cost savings

Focused, Tried and Tested

A repeatable and systematic service from OSTTRA, subject to continuous enhancement and evolution
Relationship management with internal and external project resources dedicated to meeting customer expectations
Full testing and issue resolution via pre-production and UAT Testing
Migration Day execution and communications

For more information or to arrange a call with a member of the Team please email info@osttra.com.

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.

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.