‘Trireduce’ refers to a trade compression service that aims to reduce the gross notional exposure of derivative portfolios by identifying and eliminating economically redundant trades among three or more counterparties. In crypto, this concept applies to optimizing exposure across institutional options and futures positions.
Mechanism
This process involves analyzing existing bilateral trades to identify opportunities for replacing multiple smaller, offsetting contracts with a single, net contract, or for terminating specific trades without affecting net risk. It operates through a centralized calculation engine that proposes multilateral trade novations, requiring consent from all participating parties.
Methodology
Implementing a tri-reduction strategy in institutional crypto derivatives markets demands a robust netting infrastructure and sophisticated algorithms to identify optimal compression opportunities. This approach significantly reduces operational overhead, lowers capital requirements by decreasing gross notional values, and mitigates systemic risk within the broader crypto financial system, particularly for large-scale trading desks.
Multilateral netting applies to non-standardized derivatives through portfolio compression, a process that algorithmically terminates offsetting contracts.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
