Compression 101 Revisited

Compression is a clear example of how the greater use of technology can expedite and streamline trading processes, while helping market participants comply with regulatory requirements. Today the need to optimise portfolio management of outstanding line items via compression represents a significant portion of buy-side trading activity on swap execution facilities (SEFs). On Tradeweb alone over $6.6 trillion in notional has been compressed since November 2013.

Tradeweb led the industry with the first electronic compression trade completed on its SEF. Customer feedback has been extremely positive as evidenced by growing volumes. According to ClarusFT, Tradeweb had the largest market share of IRS trading in August and September 2016 among SEFs, and also has the leading compression tool. In addition, we were awarded Best Compression/Compaction Service of the Year by GlobalCapital in June 2016.

Compression volumes continue to grow as market participants have become comfortable with trading derivatives on SEFs and executing electronically. In Europe as well, traders are embracing the functionality, even ahead of mandated clearing under the European markets Infrastructure Regulation (EMIR). What started as a time-consuming manual process of netting or terminating individual trades sitting on books at the clearinghouse has evolved into an indispensable part of derivatives trading on regulated venues.

Click here for a longer version of this article explaining how market participants using compression tools can reduce clearing costs and streamline trade processing.