ISDA have published some guidance on how to run a portfolio compression process.
They have published three documents:
- A descriptive outline on the process
- A matrix showing products that ISDA feel can be compressed
- A slide showing the overall process
This overview is rather basic, and is not all that useful for those who practically wish to implement a process.
firstly, the process of identifying trades for compression is varied. The success or failure of such a process depends on the quality of the identification algorithm. This guidance does not really begin to talk about how this could work.
Secondly, the close out and new trade process requires careful orchestration. More detailed guidance would be of more practical use for this.
Finally, the press release from Trioptima last week shows what is really possible in commodities if the effort is put in.