Counterparty Risk Product of the Year

Quantile wins Counterparty Risk Product of the Year

In a dynamic financial landscape in which risk management is paramount, Quantile has emerged as the winner of the Counterparty Risk Product of the Year award at the Markets Technology Awards 2024. As part of London Stock Exchange Group’s Post Trade division, Quantile’s Counterparty Risk Optimisation service is recognised for its global impact, reducing counterparty risk, capital requirements under the standardised approach to counterparty credit risk (SA-CCR) and internal models method frameworks, and cleared and uncleared initial margin for over-the-counter derivatives market participants.

In the past year, Quantile has significantly expanded its service and met industry needs by delivering what is believed to be the market’s largest margin reduction across foreign exchange, interest rates and equities. The service, launched in 2017 to cut funding costs for initial margin, has evolved to concurrently address counterparty risk, initial margin and capital requirements through rapid five-hour optimisation runs. The multilateral approach captures trade data, reconciles across counterparties and employs algorithms to rebalance exposures, resulting in proposals that significantly cut funding costs, often by more than 50%.

In response to rising capital requirements for FX participants under SA-CCR, Quantile has developed a unique process that optimises initial margin using non-deliverable forwards first, and then capital using FX forwards, ensuring capital efficiency without compromising initial margin reduction.

A key differentiator for Quantile is its responsiveness to industry needs. Regular client working groups capture market priorities and feedback, facilitating the evolution of the service based on direct client input. This client-centric approach not only ensures the service remains aligned with industry requirements, but also drives broad industry adoption with the network, including tier one banks, regional banks, buyside firms and institutional market participants.

In 2022, Quantile became the first to transition collateralised-to-market to settled-to-market contracts at LCH SwapAgent, reducing capital usage by 50%. Quantile also recently launched FX Delta Sweep Optimisation, which enables clients to transfer risk from regular credit support annexes to SwapAgent, reducing capital requirements by 30–60%. Unlike traditional multilateral runs, FX Delta Sweep operates bilaterally so is not dependent on a multilateral network, providing participants with flexibility.

This year also saw Quantile become the first to execute FX forward hedges at LCH SwapAgent, simplifying the booking process, enhancing risk management and enabling participants to better manage risk across SwapAgent and non-SwapAgent portfolios.

Other innovations include the launch of Interaffiliate Optimisation, an on-demand service that optimises capital between multiple entities of the same bank, using bespoke constraints to target capital in the most efficient way for the bank’s structure.

Quantile’s service is operationally efficient and has an application programming interface, which streamlines the process end-to-end. This feature has been welcomed by buy-side firms looking to reduce the operational resources required to participate in Quantile’s optimisation runs.

The judges said:

• “Good track record, impressive stats.”
• “Quantile has not only expanded its services but has been proactively addressing long-standing industry challenges.”
• “Appreciate the approach to mitigating inter-affiliate exposure, which has been an issue for a long time.”