OSTTRA has reported a staggering 42% increase in compressed notional in euro contracts at LCH compared to the same period last year. With year-to-date compression totals nearing €80 trillion, OSTTRA is cementing its position as a key facilitator of risk management across the €200 trillion euro interest rate derivatives market.

In their most recent run, OSTTRA successfully compressed €8.2 trillion in notional, and a cumulative €80 trillion in notional value at the end of the third quarter. A substantial rise compared to the €56 trillion achieved in the same period in 2023.

This surge comes as OSTTRA continues to expand its compression services, which allow market participants to reduce the number of active contracts by cancelling out redundant or opposing trades. Financial institutions trade a vast number of contracts every day, especially in highly liquid markets like euro interest rate swaps. Over time, these trades can result in duplications or offsetting positions which is why compression is used to reduce the complexity and size of portfolios, as it helps to free up capital and reduce systemic risk.

“For financial institutions, compression is not merely a tool for simplifying balance sheets — it’s a critical measure that drives cost reductions,” said Peter Lundgren, Head of Rates and Credit Compression at OSTTRA. “This uptick in compression is partly in response to diverging global interest rate policies, but also due to impending Basel III endgame reforms. Aimed at strengthening the resilience of banks by tightening capital requirements, these reforms are driving financial institutions to optimise their portfolios ahead of implementation, with the increased focus on capital efficiency directly influencing the demand for compression as a way to free up balance sheet capacity,” Lundgren added.

Source: OSTTRA