Quantile Technologies (Quantile), a leading provider of multilateral optimization services, has successfully completed its first cleared interest rate initial margin (IM) optimization run with LCH. The run saw 14 market participants rebalance their interest rate portfolios, with four entities leveraging the new cleared functionality and generating margin savings of US$4 billion.
Quantile’s extensive suite of optimization services now includes regular runs for cleared FX and interest rates, together with uncleared SIMM optimization for FX, interest rates, and equities. Quantile connects liquidity pools and generates increased capital and margin benefits for clients as both cleared and uncleared asset classes are optimized.
Lear Janiv, Managing Director at Goldman Sachs, said: “In our experience, Quantile’s IM optimization service delivers significant risk reduction and margin savings. The expansion into cleared interest rates could lead to materially higher efficiencies across sell-side and buy-side communities”, he said.
Andrew Williams, CEO at Quantile, said: “Adding cleared interest rates to our optimization service is a significant milestone for us, and the first LCH run demonstrates huge potential to deliver increased efficiencies across CCPs. As we continue to extend our product and venue coverage, clients are able to optimize more of their risk, irrespective of where they choose to execute or clear.”
Varqa Abyaneh, Chief Product Officer at Quantile, added: “We continually look to free up scarce capital and reduce the costs of trading for our clients. By incorporating cleared interest rate optimization into our proven process, we’re delivering greater IM reduction and increasing market liquidity – at a time where funding and liquidity are critical.”
Quantile’s optimization service was launched in 2017 to reduce counterparty risk and the cost of funding initial margin, and since then it has eliminated USD trillions of gross notional of OTC derivatives through compression and billions of dollars in margin through its counterparty risk reduction service.
The firm analyzes the risk of transactions between participants and calculating a new set of trades that generate margin savings without changing market risk positions. The service regularly reduces initial margin postings across multiple asset classes by over US$10 billion on average. Cleared optimization, together with increased participation, is expected to drive new levels of growth and efficiency. Clients include the G15 top tier global banks, regional banks, and other large institutional market participants.