Capitolis’ proprietary technology optimizes risk-weighted assets and funding requirements for the OTC FX market to mitigate counterparty credit risk across global banks
NEW YORK–(BUSINESS WIRE) — Capitolis, the technology company creating safer and more vibrant capital markets, announced it is connecting to LCH’s FX Smart Clearing solution. This will add another layer of optimization benefits to help banks overcome the challenge of increased costs resulting from the introduction of the Standardized Approach to Counterparty Credit Risk (SA-CCR) and other risk measures in the FX industry, particularly relating to FX forwards, FX swaps and cross-currency swaps.
In collaboration with LCH ForexClear, part of London Stock Exchange Group’s post trade division, Capitolis’ innovative post-trade optimization technology helps find the optimum capital and funding state between cleared and uncleared markets by moving optimized trades where they best fit.
In a proof-of-concept with nine global banks, Capitolis demonstrated the benefits in capital and funding that FX Smart Clearing would provide to the company’s existing SA-CCR optimization service. It reached a network yield of 42% of total funding costs including the funding of capital.
“Combining FX Smart Clearing with our post-trade optimization technology is the ideal approach to managing capital for our customers,” said Gil Mandelzis, CEO & Founder, Capitolis. “The relationship with LCH ForexClear, coupled with our network of participating global banks, is a sophisticated and advanced model for the industry, bringing multi-lateral optimization to the next level by including a clearing node.”
“We are pleased to work with Capitolis,” said James Pearson, Head of LCH ForexClear. “Through this initiative, more market participants can benefit from FX Smart Clearing, enabling capital and funding
requirement benefits under SA-CCR. FX Smart Clearing is another tool we are providing for banks to financially optimize their resources, unlock capital constraints and help to ensure a safe and efficient financial system.”
Following the proof-of-concept, Capitolis will roll out the service in conjunction with LCH ForexClear to reduce capital burdens and balance margin requirements for global banks. With this functionality, Capitolis hopes to add additional banks into future FX Smart Clearing exercises, increasing the benefit for all.