BGC Brokers’ Capitalab Extends its Portfolio Compression Service to FX Derivatives and Interest Rate Caps and Floors; Reaches $3.5 trillion in Interest Rate Swaptions

Since June 2016, five FX Options compression runs have been executed, in USDJPY and EURUSD, with the participation of respectively five and seven major FX Option dealers. In the last three Interest Rate Options compression runs organised by Capitalab, a division of BGC Brokers L.P., participants have also included Caps and Floors, together with Swaptions. Combining products in the same compression cycle is proving to have a positive impact on efficiency. Caps and Floors – options on Libor and Euribor forward rates – are known to be capital intensive, because of their large notionals.

Capitalab brings to market cutting-edge portfolio compression services and is the first provider of multilateral portfolio compression for options. Capitalab’s compression services are designed to allow participants to reduce their derivatives exposures, while maintaining neutral portfolio risk, and to enable banks to make significant savings in capital and initial margin by reducing the outstanding gross notional of derivatives portfolios while optimizing the counterparty exposures. Compression services provided by Capitalab are highly customisable and accommodate many constraints and models used by options traders. Capitalab’s compression services utilise a state of the art proprietary internal risk and valuation engine.

“With these milestones, we continue to empower clients with innovative services across a number of critical derivatives products, now including OTC FX Options and Interest Rate Caps and Floors,” said Gavin Jackson, Co-Founder of Capitalab. “Our compression services enable clients to navigate the complexities of an evolving derivatives marketplace in a seamless and effective manner, by preserving both capital and liquidity and minimising operational risk in this heightened regulatory environment,” added David Bachelier, Co-Founder of Capitalab.

“These product-specific launches follow fast on the heels of Capitalab’s success in Interest Rate Swaptions, where it has to-date compressed close to USD3.5 trillion of gross notional. It has also seen very solid growth in the number of participants, approaching 25 institutions in total, which accounts for more than 80% of the interbank volume traded in the OTC market,” said Philip Norton, Global Head of e-Commerce, BGC Brokers L.P.

In recognition of its innovations and market leadership, industry publication GlobalCapital has named Capitalab, a division of BGC Brokers L.P., the “Compression/Compaction Service of the Year” in this year’s Global Derivatives Awards, following the service’s very first year of operation.