Compression Service

In cooperation with TriOptima and Capitalab, the EurexOTC Clear Compression Service enables Clearing Members to reduce the number of trade lines and overall gross notional by offsetting trades with opposing directions.

Key benefits

  • Trade compression can significantly reduce leverage ratio and overall cost of capital through the termination of offsetting trades within member-predefined risk tolerance levels.
  • Reducing the number of trades in a portfolio optimizes efficiency and reduces overall operational risk. 

Key features

Multilateral

D2D (Dealer to Dealer) portfolios of all Clearing Members who sign up for a cycle will be included in a compression run. However, in phase one, only Direct Clearing Members can access the service to compress trades in their house accounts.

Unlinked

Both sides of the respective original OTC transaction can be considered separately in a compression run. A successful compression is not dependent on retaining the original counterparty link.

Risk-based

Members pre-define tolerance levels, within which the risk of their portfolio is allowed to change.

Scope and frequency

The service is available for Euro-denominated cleared FRA, IRS, Basis swaps, OIS, and zero-coupon inflation swaps. On request, the service can also be provided for other currencies. 

Compression cycles are periodic. The frequency is reviewed regularly, and the number or frequency of cycles can be increased when necessary. For 2022, compression runs are currently scheduled for (subject to change): 

  • 13 July
  • 14 September
  • 16 November
  • 14 December

Worked example

Compression Service: worked example

1. Bilateral trade
   
Bilateral OTC Swaps A and B between X and Y are not completely offsetting trades.
 

2. Central clearing
     Bilateral OTC Swaps A and B between X and Y are not completely offsetting trades.
 

3. Compression run
     Swap B is terminated. Swap A is partially terminated during a compression run resulting in Swap AB compressed. 

  • CCP remains cashflow flat.
  • Risk on Member portfolio level changes within tolerances defined by X and Y.

Contact

For more information on our Compression Service, please contact us at


Eurex Clearing AG
Clearing Business Relations

T +44-20-7862-7276

FixedIncome.Sales@eurex.com