How Do Compression Cycles Make $30 Trillion of Credit Default Swaps "Just Go Away"?
Meet TriOptima: The Cosmetic Surgeons and Wellness Specialists of Credit Derivatives
If you really want to poop in your pants just read the following Reuters Article from January 12th, 2009 on a company called TriOptima. Their services sound remarkably like those offerred by Park Avenue Plastic Surgeons but for cellulite-laden portfolios of the biggest derivatives players in the systemically-fragile global financial markets. George Soros' econolypse awaits as the sword of Damocles (his term) hangs overhead. But TriOptima offers a broad range of cosmetic procedures that can be best described, admittedly on the graphic side, as somewhere between a massive group financial enema and downright lyposuction for the formerly-reported $62 trillion credit default swap market.
Using a web-based technology known as "compression cycle eliminations", one of many derivative-shedding products from TriOpima such as "triReduce" that sounds like a metrocal-based diet for financially obese.Then there is "triResolve" for conflict resolution. Using these products and services TriOptima has helped participating institutions shed some $30 trillion of CDS exposure! I wonder where they put it waste product? Doesn't a compression cycle sound more like a piece of exercise equipment you buy at the Gym Source? No, we're not exactly sure of what it is and can promise you no one voting on an $850 billion stimulus/bailout package in Washington understands what it is either. So let's assume they have cut the reported CDS numbers from $62 trillion (as per the Bank for International Settlements) to $30 trillion, estimates still put CDS activity at $10 of speculation for every $1 dollar in underlying securities. Earth to regulators.
Maybe that's why nobody's lending and nobody's spending?
Check out the TriOptima website:
Click here for the Reuters article in its entirety:
TriOptima CDS compression cycles eliminate $30.2 trillion in notional principal during 2008
Mon Jan 12, 2009 9:00am EST
NEW YORK--(Business Wire)--
TriOptima`s portfolio compression service, triReduce, eliminated $30.2 trillion
in CDS notional principal during 2008. TriOptima offered 50 compression cycles
in 2008 contributing significantly to industry efforts to reduce the notional
principal outstandings. Reductions in notional principal continued to accelerate
throughout 2008, increasing 300% over 2007 levels as indicated in the graph
below.
"In cooperation with the dealing community, we were able to accommodate the
demand for additional regular cycles and support the special default cycles that
were required as market conditions deteriorated," commented Brian Meese, Group
CEO. "It is important to note that the $30.2 trillion notional eliminated by the
dealers this year exceeds the year end outstandings of $29.3 trillion reported
by DTCC. By reducing exposures through regular compression cycles the dealers
were able to continue providing effective risk mitigation tools while responding
to regulatory concerns about counterparty exposure and operational challenges."
TriOptima`s CDS compression cycles include American, European, Emerging Market,
Asian and Japanese indices; ABX and CMBX indices; American and European
tranches; US, European, Emerging Market, Japanese, and Asian single name CDS;
and special cycles for single names and indices affected by credit events like
Washington Mutual, Fannie Mae, Freddie Mac, Lehman and the Icelandic banks.