LSEG today announced that Post Trade Solutions has launched its innovative new service, Market Risk Optimisation, following a successful proof of concept involving 13 sell-side FX options desks. The service integrates with LSEG’s FXall, a leading multibank platform for foreign exchange. Market Risk Optimisation enables market participants to further utilise Post Trade Solutions’ proven optimisation technology to trade in and out of market risk, increase liquidity, and reduce transaction costs by unlocking trading opportunities that are not easily accessible via normal execution methods.

The multilateral process works by analysing all participant axes across a range of tenors and risks and proposing an optimised set of trades within the client’s specified constraints. Pricing and risk analytics within the service are powered by the Open Source Risk Engine (ORE), an industry-standard, transparent framework built on QuantLib, providing robust valuation and risk measures for FX options and other derivatives.

LSEG’s Optimisation service for counterparty risk was originally launched in 2017, through Quantile, as a pioneering service to optimise cleared and uncleared margin – and more recently, risk-based capital. Market Risk Optimisation shifts the focus to market risk by optimising a set of risk axes chosen by traders, rather than the predefined counterparty metrics. The multilateral service works by capturing constraints and risk axes from participants, delivering a hedge proposal that optimally puts participants into their desired risk positions at the best price, then automating the trade booking process. The end-to-end process aims to complete within 30 minutes, and can run at any frequency the market demands, making it highly responsive to market conditions.

Market Risk Optimisation capitalises on an efficient and resilient integration with FXall - demonstrating LSEG’s commitment to operational excellence. The integration is designed to provide seamless execution and straight-through processing, reducing operational risk and enhancing efficiency in the FX Options market.

Andrew Williams, CEO, Post Trade Solutions, LSEG, said: “Since launch, our optimisation runs have helped to reduce resource requirements, with a focus on counterparty risk. The next logical step in the evolution of our services is to use optimisation to reduce market risk. Our new service helps traders efficiently trade out of market risk and reduces transaction costs, which improves liquidity and leads to smoother functioning markets.”

He added, “FX options was an obvious asset class to target at launch, since its complexity and liquidity lends itself to optimisation. The front-office have been very receptive to the new service, and we look forward to working with new and existing clients as we evolve in line with market requirements”.