Benchmark Conversion

By triReduce

Alternative Benchmarks for Swap Risk

  • In 2017, Andrew Bailey (UK FCA) announced that banks will no longer be required to contribute to ICE LIBOR fixings beyond the end of 2021.
  • Across the top 5 currencies, 85% of outstanding ICE LIBOR exposure is cleared.

Starting with Compression

Maximize reduction of gross notional across ICE LIBOR swaps and the alternative benchmark

  • Multilateral compression can help market participants to reduce their gross notional and line items while keeping their swap positions market risk neutral overall.
  • In triReduce compression cycles, gross exposures are brought down towards each firm’s core net risk position.

Simultaneous compression in the alternative benchmark helps keep overall gross notional down throughout the conversion process.

Bringing Optimization Services to ICE LIBOR Transition

Article: How TriOptima can bring its optimization service to ICE LIBOR transition

To mitigate concerns that market participants have concerned with TriOptima, triReduce has developed three solutions to aid the smooth adoption of SOFR based OTC swaps.

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Delivering Certainty in Uncertain Times

TriOptima explains how it combines the reduction of gross notional exposure and the conversion of net risk exposure to deliver outsized results, partnering its portfolio compression network with core net ICE Libor over-the-counter swap portfolios.

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…And Adding Conversion Functionality

Convert remainder of ICE LIBOR swap exposure to the alternative benchmark

  • A portion of the remaining ICE LIBOR swap exposure, that cannot be compressed through terminating trades or amending their terms, can be converted to the new benchmark through the introduction of risk replacement trades in the alternative reference rate, as part of the regular triReduce compression cycles.
  • Each party sets constraints on outright risk, as well as the basis risk between the various ICE LIBOR term rate tenors and the alternative benchmark, providing each firm with certainty throughout the conversion process on their risk impact.
  • Risk-based constraints allow each participant to control the amount of conversion taking place. Tighter limits will mean only termination of trades or amendment of terms take place, wider settings facilitate inclusion of risk replacement trades in a single cycle.
  • Firms with illiquid or netted portfolios are included in the same conversion exercise, benefiting from the triReduce liquidity pool.
  • Should alternative benchmark term rates become available, risk and basis tolerances can be applied to control conversion into any new alternative rates.

Key Features

  • Will be available to all market participants in 2020
  • Participants retain complete control of their market risk
  • A single unified process
  • Preserves CCP cash flow neutrality
  • Expandable to all IBORS and CCPs
  • Deep liquidity pool, proven process and established connectivity to CCPs and market infrastructure
  • Can support multiple benchmarks and term rates, as required

Opening the Buy-Side Liquidity Pool

Vikash Rughani, business manager at triReduce and triBalance, outlines a new approach enabling buy and sell-side participants to optimize the transition of legacy ICE LIBOR OTC swaps contracts to alternative reference rates. 

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Webinar: TriReduce Benchmark Conversion

Adoption of alternative RFRs in OTC IRS portfolios
Learn how to transition your existing legacy OTC ICE LIBOR swap portfolios to the new alternative reference rates, or risk-free rates (RFRs).

We will explain how triReduce’s award-winning multilateral compression service will be adapted to assist the market and provide a proactive, orderly mechanism for conversion, available to all.


We’re here to help you configure TriOptima’s services to work for you.