triReduce Rates
Reduces costs and capital in a competitive market
triReduce, the multilateral early termination service for OTC derivative
dealers, pioneers technology that eliminates risk and reduces
operational and capital costs. TriOptima offers termination cycles for
interest rate swaps in 19 global currencies.
Serving over 100
bank and non-bank subscribers worldwide including the major local and
global dealers in derivatives, triReduce is a critical tool for
maintaining post trade processing efficiency in an environment of
dramatic growth in transaction volumes. According to the BIS statistical
update in November 2007, outstanding notionals in interest rate
transactions doubled between 2004 and 2007 making the use of triReduce
an essential risk elimination tool.
TriOptima has scheduled 24
termination cycles for triReduce rates in 2008 in order to meet the
market demand for tear ups both in its traditional currencies and in
expanding markets like India, Hungary, Korea and the Czech Republic. The
first ever Indian rupee cycle is currently planned for second quarter
2008 following intensive meetings with local dealers and trade groups in
Mumbai to ensure a smooth introduction in that market.
While most
triReduce termination cycles involve multiple counterparties for maximum
benefit, some TriOptima subscribers have also recognized the benefits of
internal tear ups among their own trading books. This rationalizes
institutional positions that have grown through merger and other market
events reducing exposure and operations costs.
Overview of triReduce Rates 2008
In 2008 24 rates cycles are scheduled in 19 currencies globally
including four new currencies: CZK, HUF, INR, and KRW. In 2007
termination cycles were offered in 15 currencies: AUD, CAD, CHF, EUR,
GBP, HKD, HUF, JPY, MXN, NOK, NZD, PLN, SEK, SGD, USD, ZAR.
100
banks/legal entities are participating in triReduce, including all of
the world’s major derivatives dealers.
Managing Credit Risk
Participating in triReduce reduces capital costs associated with
reserves for regulatory and economic capital. This frees up capital for
other uses, a big advantage for capital-constrained institutions. With
fewer outstanding trades, a firm is also better able to manage current
exposure by reducing collateral management costs and minimizing balance
sheet growth. And for transactions which can not be collateralized,
managing potential future exposure is facilitated with the elimination
of these transactions.
Managing Operational Risk and Costs
With the elimination of trades, there is a reduction in operational costs since there are fewer trades to process and fewer periodic payments to make. With fewer trades, there are fewer potential processing errors; less time and money is spent on resolving errors. In addition, there is a real reduction in any associated operational risk capital charges under Basel II.