TriOptima Launches Combined Credit Optimisation and Compression Service

Osttra’s TriOptima has 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, the firm says, while TriReduce has eliminated $21.5 billion 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, Osttra states.

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 company says, therefore, the timing of the run was 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.

The firm claims, the 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,” says Dave Bolatin, global head of FICC capital and portfolio optimisation at Goldman Sachs. “We actively manage participation in multilateral services that facilitate risk reduction with OTC participants & CCPs.”

Erik Petri, head of TriBalance at TriOptima, adds, “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.”