“For us, the goal is to build central infrastructure that streamlines OTC processing and ultimately reduces operational cost,” says Andrew Williams, CEO of Post Trade Solutions at LSEG. “Our role is to bring the processing and risk management of uncleared derivatives closer to the cleared standard, and to provide a more seamless way to manage clients’ risk across both.”
Post Trade Solutions integrates three businesses within LSEG, with more innovations in the pipeline. There is optimisation provider Quantile, which Williams founded a decade ago and has been a previous GC award winner for its optimisation services. Then there is SwapAgent, a processing platform for uncleared derivatives, and Acadia, which handles workflow processes for margin and collateral, and calculation services. The success of this integrated offering comes down to the quality of its products and the service it delivers to clients. But Williams highlights that optimisation in the derivatives space is also part of a larger challenge that Post Trade Solutions aims to address.
“When we look at how to optimise a bank’s exposure, there are generally three steps”, he says. The first is collecting data from banks and market participants that outlines their positions. Then there is an optimisation process to assess which risks to move where. Finally, the feeding of those trades into the system. LSEG is working to solve the end-to-end challenge of how to get accurate, centralised data from the outset. Then build the mathematical optimisation process and automate the booking or unwind of trades.
“One of the advantages of LSEG is that, while we focus carefully on building the best optimisation module, it also sits within a bigger platform”, Williams says. “A big part of what we’re trying to do is move to a centralised world with a golden source of data. From that golden source, everyone can compute values, cashflows, risk — reducing disputes and the need to reconcile, because everyone is working from the same record.”
This is by no means a straightforward task. Post Trade Solutions sees it as a “long-term deliverable”, but one where work is already well underway. “SwapAgent is a good example: it’s our central processing platform for uncleared derivatives, and its record is a golden source”, says Williams. “So when we optimise SwapAgent trades, we can rely on that central record, which removes many of the data problems that exist in the traditional bilateral world.”
From infrastructure to impact
Clients measure success in hard numbers. Three metrics matter most: counterparty risk, capital requirements and gross notional. In mature networks, optimisation can typically cut exposures by 25–50% and sometime more, depending on what participants submit — savings that translate into lower funding costs, leaner capital charges, and stronger balance sheets. “We focus on those three core areas”, Williams says. “In the right conditions, the reductions can be very significant.”
The breadth of LSEG’s relationships has also accelerated adoption. Almost every major market participant is already a customer somewhere in the Group, making it easier to build out the network. Alongside that, Post Trade Solutions runs bilateral meetings to review performance and priorities, and working groups to build consensus on how optimisation services should evolve. “We have a long history of long-term partnerships with clients”, Williams says. “That’s been essential to growing the service.”
What began with tier-one global banks has since expanded to regional banks and buy-side firms, who are focused on managing margin and funding efficiently. Geographically, Post Trade Solutions has also made a push into Asia, including a Tokyo office aimed at engaging Japanese domestic banks. “They are key players in the OTC market, so having people on the ground has really helped and we’re seeing significant growth in the region”, Williams says.
Williams is cautious about revealing numbers, but growth is undeniable. “We’ve been running for 10 years now, and in the last couple of months all of our records have been broken — and then broken again”, he says.
Looking ahead, LSEG’s ambition is for optimisation to become a daily, fully automated process. Williams believes the technology and algorithms are already in place; what’s needed now are the data flows and connections to make it seamless. That future would mean lower systemic risk, fewer disputes and more efficient, dynamic derivatives markets.
“Our goal is to build end-to-end optimisation processes that run frictionlessly every day”, he says. “If you could optimise your risk daily, operationally efficiently, why wouldn’t you?”