OSTTRA has completed a record-breaking interest rate counterparty risk optimization cycle in September resulting in a significant 56% quarter-on-quarter increase in savings across bilateral and cleared initial margin. OSTTRA did not release the savings value in monetary terms.
The news comes as financial institutions look to simultaneously optimize initial margin under the uncleared margin rules (UMR), cleared initial margin in multiple CCPs, and capital under the standardised approach for counterparty credit risk (SA-CCR).
Multi-targeted optimization across the two regulations aligns with the aim of ensuring efficient capital and risk management, cost reduction, all while maintaining a competitive edge in the market. Running together, OSTTRA clients can optimize on multiple risk factors, simultaneously while also benefiting from compression to minimize gross notional.
“UMR and SA-CCR have triggered a dramatic increase in client focus on optimizing using risk-based capital models, as well as on reducing SIMM and CCP IM via our triBalance service. Optimizing the two in tandem is clearly helping financial institutions to manage their capital more efficiently” according to Erik Petri, head of OSTTRA triReduce & triBalance, in a statement. “In addition, as central banks across the globe have tightened interest rate policies to tackle rising inflation, market participants have needed to adjust from a longstanding low-rate market dynamic and optimize their strategies accordingly.”