Quantile Technologies has completed its first compression run at LCH, the world's largest clearing house for OTC derivatives. This follows its recent appointment as an Approved Compression Service Provider at LCH's SwapClear service, the first service provider to be given this status in nine years.
Compression of swap portfolios, where large numbers of transactions can be eliminated while preserving the overall risk profile and valuation, improves efficiency by reducing line items and notional-linked capital. The process has strong support from global regulators.
Quantile's compression service operates alongside its existing counterparty risk reduction platform for non-cleared derivatives, which in contrast drives initial margin and capital savings for banks, and is available under the AcadiaSoft Quantile Optimisation Service, said a statement.
"This is an important step forward in risk management for the industry," said Stephen O'Connor, Chairman of Quantile, a leading provider of counterparty risk reduction tools for the derivatives industry.
"By enabling a faster, more streamlined process for compression, we are delivering new efficiencies to our clients. We're grateful that this has already generated extremely positive feedback from the major market participants."
"We are delighted to onboard Quantile as an additional compression partner, offering more choice to our members and their clients," said Daniel Maguire, Group COO of LCH. "Compression is an integral part of our ongoing efforts to improve capital efficiencies for market participants, and we are very pleased with the outcome of this first run. We look forward to doing more compression runs together with our mutual customers."
"We welcome Quantile Technologies' innovative solution which increases compression efficiency," said Stuart Bancroft, Managing Director, G10 XVA, at Citi. "The service provides a notionally efficient risk replication of the consolidated cleared portfolio with low operational complexity. We look forward to leveraging the solution to bring incremental notional reduction."
"Not only does this service achieve great notional reduction, but a real differentiator for Quantile is their focus on operational efficiency and the ease of use for their clients," said Lear Janiv, Managing Director at Goldman Sachs, a user of Quantile's compression and optimisation services.
"This was a strong first run with seamless execution," said Boyd Winston, Executive Director - Head of Macro Compression Operations at J.P. Morgan, one of several banks that use Quantile's optimisation services. "It is encouraging to see greater choice in multilateral compression services, which help the participants to efficiently manage the size and risk of their swap portfolios."
Quantile's initial customer focus has been the G15 leading global banks but the firm is now gearing up to expand its dealer footprint, as well as expand into buy-side institutions. Its mission is to deliver market-leading solutions using advanced technology with fully integrated streamlined processing.