D higgins bilateral compression
- 2. 2
- 3. • • • 3
- 4. • • • • • • • • • • • 4
- 5. Prop%trading:%Analyze%compression%twice%per%year%% Opera7onal:%repor7ng%requirements% Clearing% OTC%Threshold% Margin % No7onal % Credit % 5
- 6. 6
- 7. Before After “Equivalent” all or within “Tolerances”: P/L: unrealized is cashed in or out Credit exposure Overall volume / zero Volume by time buckets Dates: Delivery, Start, End, Strike, Payment Less trades “Buys” Less trades “Sells”: Thousands of Underlying physical / trades “Buys” LESS NOTIONAL financial: ie NBP Gas Thousands of LESS USE OF trades “Sells” THE EMIR THRESHOLD!!! 7
- 8. Termina7on% Nego7a7on% Valua7on% Trade% matching% Agree%with% counterparty% Agree% Internally% 8
- 9. Front%Office% Market%Risk% Credit%Risk% Opera7ons% (physical% Legal% delivery)% My% Company% Informa7on% Finance% Technology% Backoffice% Treasury% 9
- 10. 10
- 11. • • – • – 11
- 12. Bilateral% % % % % % % % % % My% % Cpty.% Co.% % % % % % % % % 12
- 13. % % % Mul7lateral% % % % % % Cpty.% % % % % Cpty.% % % % % % % %“Place”,% Rules,% % Engine% % % Same% Day,% % My% % Time% Co.% % % % Mul7lateral% % % service% % % % % Cpty.% % % % % % % % % % Cpty.% % % % % 13
- 14. Step Bilateral TriReduce® Ovovis® 1-Agree terms with Counterparty ☕ ☕ Standard terms Standard terms 2- Agree terms within my Company 3- Trade matching ☕ ☕ Engine matches Triangles, no match required 4- Valuation ☕ MtM as given Engine: price, volume, value 5- Negotiation ☕ ☕ Win-Lose, (W-W?) Win-Win P/L neutral 6- Documentation ☕ ☕ Standard Standard: adds trade to simplify, no termination 6- Termination ☕ 14 Standard
- 15. Benefits'/'Risks' Bilateral' TriReduce®' Ovovis®' 1S%EMIR%Benefit% % “Flexible”%tolerances,%choose% %vs% Mix %(EMIR%value%up%if% who,%what% Mul7ple% not%terminated)% 2SPar7es%in%/%out% 3S%Confiden7ality% 4S%Benefit%Margin% Credit,%Opera7on% 5S%Profits%or% Losses% WinSLose% WinSWin% Neutral,%then%Bilateral% 6S%Resources% 7S%Time%to% termina7on% Agree,%Nego7a7on%Engine?% 2S6%days% 2S3Sdays%% (not%working% % % Plus%Nego7a7on% hours)% Plus%opera7ons% Plus%opera7ons% Plus%opera7ons% 8S%Cost% Internal%plus% Cash%out%plus% Cash%out%plus% Internal% Internal% Internal% 15
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