Portfolio Compression Breaking into Swaptions


BGC Partners and Capitalabs announced they removed €800 billion notional in the Fourth Quarter of 2015. Compressions achieve savings in capital costs, initial margin, gross notional value of derivatives and Basel III compliance, what makes this service different is that it is focussing on Swaptions which have a more complex risk profile than a vanilla IR Swap. 

The Financial Times published an article on Jan 5th 2016 titled “BGC Partners joins clean-up of bank derivatives books”. In it, explains how as of now, compression providers such as ICAP, LCH.Clearnet, CME Group have focused on derivatives in the mass market of interest rate swaps. Swaptions are a more a complex product given its asymmetry, and having had 10 banks including JPMorgan participating in BGC's cycles shows how portfolio compressions continue to prove useful in reducting risk in OTC Derivatives.

A big welcome to BGC-CapitalLab bringing this niche to live in compressions!

Diana Higgins

Author of Portfolio Compression