Quantile Technologies (Quantile), a leading provider of multilateral optimisation services, has become the first vendor to offer optimisation of cleared USD/CAD, USD/DKK, USD/MXN, USD/NOK, USD/NZD, USD/SEK, USD/SGD and USD/ZAR non-deliverable forwards (NDFs) within their initial margin (IM) optimisation runs for foreign exchange. Preliminary runs saw Quantile successfully incorporate five of the new currency pairs offered by LCH’s ForexClear, delivering increased capital and margin benefits for clients.
Quantile pioneered the optimisation of cleared FX trades at ForexClear, with FX optimisation now accounting for a material share of cleared G10 NDF volumes. ForexClear’s new currency pairs will further increase the optimisation opportunities available to market participants trading OTC FX derivatives.
The extension of Quantile’s offering to include these new cleared currency pairs bolsters its suite of optimisation services which are designed to reduce risk and the cost of funding initial margin. The service reduces initial margin postings across multiple asset classes by over $10billion on average and can optimise cleared and uncleared portfolios simultaneously for FX and interest rates.
Initial runs have seen three market participants, including Goldman Sachs, optimise five of the eight new currency pairs cleared at LCH. Quantile expects additional participants to include the full breadth of cleared currencies as part of their optimisation runs going forward.
Jessica Bateson, Executive Director at Goldman Sachs, welcomed the new currencies and execution of the first runs, “We were pleased to see the speed with which the additional cleared currency pairs were incorporated into Quantile’s optimisation runs, following their launch at LCH ForexClear. We actively seek to participate in solutions that aid greater risk reduction across both sell-side and buy-side communities, and believe that cleared FX optimisation, together with increased industry participation in these runs, will drive new levels of efficiency.”
Varqa Abyaneh, Chief Product Officer at Quantile, said, “We believe optimisation and clearing are complementary to one another. Clearing houses are one of the most efficient places to hold risk, and our optimisation engine continues to seek out efficiencies which free up scarce capital and reduce the costs of trading for our clients.”
He added, “By adding these new cleared currencies, clients benefit from increased netting opportunities which enables us to deliver enhanced risk and IM reduction.”
Ankeet Dedhia, Americas Head of Product, ForexClear, LCH, said, “We are seeing a continued growing global demand for OTC FX clearing and have worked with the market to expand LCH’s cleared offering to a broad range of FX derivatives. Optimisation services are an important part of the post trade process and complement the benefits of clearing in delivering increased capital, margin and operational efficiencies to market participants globally.”
Quantile launched its initial margin optimisation service in 2017. Designed to reduce risk and release capital, the multilateral process works by analysing counterparty risk and proposing a new set of trades that generate margin savings without changing market risk positions. This has a positive impact on resource management and makes the financial system safer. Cleared FX optimisation, together with increased participation, is expected to drive new levels of efficiency.
Quantile reduces risk in financial markets, delivering advanced strategies that rebalance and reduce counterparty risk between market participants, increasing the efficiency and liquidity of markets, improving returns for clients and making the financial system safer.
Since launching its first products in 2017, Quantile has eliminated trillions of dollars of gross notional of OTC derivatives through compression and billions of dollars in margin through its counterparty risk reduction service.
Clients include all of the G15 top tier global banks, regional banks and other large institutional market participants. Quantile is headquartered in London, with offices in New York and Amsterdam.