The triangulation technology used by Stockholm-based TriOptima is more efficient than traditional bilateral tear-ups as banks often have large numbers of one-sided deals with one counterparty that may in turn have the opposite positions with a counterparty that makes up the triangle. Close-out amounts are always higher than the net value of the unwind proposal for each counterparty using its own valuation. This ensures no parties make trading losses through the use of TriReduce.
TriOptima estimated that participating banks freed €229 million in capital and achieved an operational cost saving of €8.75 million. TriReduce had previously torn up €250 billion in swaps notionals during two previous trials of the system.
TriOptima now plans to offer runs in US dollar and sterling swaps. The company has also received interest from banks interested in reducing their internal transactions.
Of the 17 banks that took part in the euro run, leading participants included Deutsche Bank, Barclays Bank, Lehman Brothers, HSBC, WestLB, Commerzbank, Rabobank and Toronto Dominion.
UK interdealer broker Icap bought a 30% stake in TriOptima in March last year.