ClearCompress mediates between all participants to agree risk and match parameters as well as timelines for execution. All parties upload their data securely using standard Clearing House reports. No data is shared directly with other participants and no internal development work is required.
ClearCompress matches offsetting positions between the trade populations and identifies possible offsets. The results of this matching process are then shared with each participant so they can assess the benefits available.
ClearCompress runs forward-based risk on the offset trades and proposes hedges to flatten this whilst also taking into account reset risk. The result brings the overall trade package to a net zero NPV whilst keeping risk flat at a net delta and by bucket level. Acting as an independent party both sides can be comfortable of the neutrality of ClearCompress in proposing the risk reinstatement hedges.
Once a final list of flattening trades has been agreed, standardised trade files, that are both sequenced and tested, are transferred to each of the participants ready for execution.
Using standardised Clearing House trade reports, the Banks’ cleared positions are lined up and offsets identified by the ClearCompress algorithm.
Where an offset exists, a new trade is proposed that allows both participants to reduce their outstanding gross notional. Following a Clearing House Compression cycle, the new trade and original positions are collapsed, releasing benefit to both sides.