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
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.
Frequency
Frequency
Compression cycles are periodic. The frequency is reviewed regularly, and the number or frequency of cycles can be increased when necessary.
For 2026, compression runs are currently scheduled for (subject to change):
- Thursday, January 22
- Thursday, March 5
- Thursday, April 16
- Friday, May 29
- Thursday, June 25
- Thursday, July 30
- Thursday, August 20
- Wednesday, September 16
- Thursday, October 15
- Thursday, November 19
- Thursday, December 10
- Wednesday, December 16
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.
