GlobalCapital – Q&A: Lucio Biase, CEO and Hilary Park, chief strategy officer at LMRKTS

Tools that enable firms to reduce the number of line items in a portfolio, while keeping the same risk profile, are changing the way market participants trade derivatives. These tools are becoming the new market norm as users look to optimise their balance sheets as increased regulation envelops the derivatives market. Gabriel Suprise was granted an exclusive interview with Lucio Biase, CEO, and Hilary Park, chief strategy officer at LMRKTS, a new firm that offers a novel type of tool in order to minimise counterparty risk. Topics of discussion included what LMRKTS is, how it works and why it is different from other compression offerings in the derivatives marketplace.

Hilary Park: One of the biggest differences between LMRKTS and other providers of compression is that the primary objective of LMRKTS has always been to minimise counterparty risk. The basic tenet is that, any time counterparty risk exceeds net market risk, you have unnecessary counterparty risk. Rather than focus on riskless compressions, LMRKTS aims to actually reduce systemic risk. Towards that end, LMRKTS doesn’t start with position-level information, but rather with actual counterparty exposure. Parties report their counterparty risk by currency and by tenor. Then, LMRKTS can optimise this risk in three dimensions (arguably four, because there are deltas across both tenors and currencies).

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