Why TriOptima will matter even more for uncleared trades
Useful piece from IFR on how the capital charges for uncleared trades are driven by portfolio size (see snippet below), and therefore why continuing to use TriOptima to tear-up trades will be even more important, as it will directly reduce capital charges. Full article here (free I think).
“For counterparty exposures subject to zero threshold CSAs, a dealer’s capital charges will be based on its 10-day value-at-risk exposure calculation for netting sets of less than 5,000 trades and the 20-day VAR exposure for sets of more than 5,000. This should encourage dealers to reduce their outstanding trades through compression – an incentive that also applies to trades within CCPs, which are subject to 2% capital risk weightings.”