Quantile, a leading provider of portfolio optimisation services for the global financial markets, announced it has enhanced its counterparty risk optimisation service for FX by supporting SwapAgent FX Forwards. The enhancement is an industry first and will significantly simplify optimisation hedge proposals, make the booking process more efficient and help clients better manage risk across SwapAgent and non-SwapAgent portfolios.

Quantile’s multilateral service works by analysing the risk of transactions between participants and rebalancing portfolios with new market risk neutral hedges that reduce risk and release capital. By using SwapAgent FX Forwards as a hedging instrument, Quantile enables participants to move risk to SwapAgent’s standardised infrastructure, reducing risk and capital usage by ~30-60%. SwapAgent reduces counterparty risk through aligning collateral and settlement payments, eliminating margin disputes and facilitating daily settlement of margin.

The enhancement was delivered in Quantile’s recent FX optimisation run, which saw the market’s first SwapAgent FX Forward executed between two participants, including Nomura, to sweep risk to SwapAgent. Quantile expects additional participants to leverage SwapAgent FX Forwards to reduce risk and capital requirements within their optimisation runs going forward.

Mike Curtis, Managing Director at Nomura International plc, welcomed the enhancement and execution of the first run, “We are pleased to see LCH SwapAgent extend their product scope to include FX Forwards. There are potential benefits from using FX Forwards with LCH SwapAgent such as reductions in Collateral In Transit, Credit Exposure and Leverage Balance Sheet.”

Andrew Williams, CEO of Quantile, added, “At Quantile we are continually looking for ways to enhance our multilateral services to make post trade risk reduction more efficient. Adding SwapAgent FX Forwards to our counterparty risk optimisation runs significantly enhances the service operationally, as well as reducing risk and capital requirements across the network.”

Nathan Ondyak, Global Head of SwapAgent, said, “SwapAgent is a very efficient place for participants to hold risk and we thank Quantile for adding FX Forwards at SwapAgent as part of their optimisation runs. By supporting FX Forwards, we can materially improve standardisation, efficiency, and simplicity in the bilateral derivatives market.”

Quantile pioneered multilateral initial margin optimisation for FX in 2017 and has since extended the service to optimise cleared and uncleared initial margin (IM) and risk-based capital under SA-CCR and IMM.

Source: Quantile