Major banks complete AcadiaSoft derivatives risk reduction pilot
Banks including JP Morgan, Goldman Sachs and Citibank have undertaken a wide-ranging risk-reduction exercise using the AcadiaSoft Quantile Optimisation Service. The programme tested the institutions' compliance with margin requirements for over the counter trading of derivatives. Quantile said the service allowed banks to "operate under the new margin regulations in the most operationally and capital efficient way possible" and hoped to scale up activities in coming weeks. Credit Suisse, Deutsche Bank HSBC, Nomura and Royal Bank of Scotland also undertook the exercise and made material reductions in their initial margin requirements as a consequence.

 

JP Morgan, Goldman Sachs and Citi are among several large investment banks to have completed a large-scale risk reduction pilot exercise, in relation to initial margin requirements for OTC derivatives.

The exercise was carried out through the AcadiaSoft Quantile Optimisation Service, designed to reduce risk by arranging transactions and ensuring less volatile exposures.

Credit Suisse, Deutsche Bank HSBC, Nomura and Royal Bank of Scotland also completed the exercise and saw material reductions in their initial margin requirements as a result.

Initial margin requirements for banks trading uncleared OTC derivatives are determined via the AcadiaSoft Hub using the ISDA SIMM model.

Quantile’s risk optimisation technology has been integrated into the service to reduce risks between market participants through portfolio rebalancing strategies as part of the margin process.

Chris Walsh, chief executive officer of AcadiaSoft, explained the launch of the optimisation service has allowed banks “to operate under the new margin regulations in the most operationally and capital efficient way possible.”

He added the pilots were an important step and the company is looking towards scaling up activities over the next few weeks and months.