BGC Brokers' Capitalab Extends its Portfolio Compression Service

BGC Brokers Capitalab, an entity within US brokerage, BGC Partners, announced today that it has successfully launched its multilateral portfolio compression service for FX Options, as well as for Interest Rate Caps and Floors.

In a company statement, the firm said that since June 2016, five FX Options compression runs have been executed in USD/JPY and EUR/USD, with the participation of five and seven major FX Option dealers respectively.

In the last three Interest Rate Options compression runs organised by Capitalab, a division of BGC Brokers, participants have also included Caps and Floors, together with Swaptions.

Positive Impact

Combining products in the same compression cycle is proving to have a positive impact on efficiency. Caps and Floors i.e. options on Libor Libor Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Libor stands for London Inter-bank offered rate. It is an industry-specific term which most of us would never have heard of until the "Libor scandal" became popularized in 2012. Libor is considered to be one of the most important interest rates in finance, upon which trillions of financial contracts rest. The Libor rate effects over $800,000,000,000,000 in financial deals. Banks simply cannot lend money to one another whenever they like as there is a system in place. Every day a group of leading Read this Term and Euribor forward rates are known to be capital intensive, because of their large notionals.

Capitalab is the first provider of multilateral portfolio compression for options. The company's compression services are designed to allow participants to reduce their derivatives exposures while maintaining neutral portfolio risk, and to enable banks to make significant savings in capital and initial margin by reducing the outstanding gross notional of derivatives portfolios while optimizing the counterparty exposures.

Capitalab's compression services are highly customisable and accommodate many constraints and models used by options traders, using a state of the art proprietary internal risk and valuation engine.

Our compression services enable clients to navigate the complexities of an evolving derivatives marketplace in a seamless manner.

Gavin Jackson, co-founder of Capitalab, commented: "With these milestones, we continue to empower clients with innovative services across a number of critical derivatives products, now including OTC FX Options and Interest Rate Caps and Floors.”

“Our compression services enable clients to navigate the complexities of an evolving derivatives marketplace in a seamless and effective manner, by preserving both capital and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and minimising operational risk in this heightened regulatory environment," added David Bachelier, co-founder of Capitalab.

The new launches follow Capitalab's success in Interest Rate Swaptions, where it has so far compressed close to $3.5 trillion of gross notional. It has also seen substantial growth in the number of participants, approaching 25 institutions in total, which accounts for over 80 percent of the interbank volume 1 traded in the OTC market.