John Jayasankar
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JJ-SYS-030→1 · Market structure3 min read

Multilateral compression for trillions in trapped notional

Banks held large cross-currency books that could only net in pairs. A central settlement path made network-wide offsets executable, so notional stuck in pairs became eligible to compress.

  • Quantile · LSEG
  • 0→1 launch
  • 2024
  • Product Manager
Next: Dual-Source ValuationAll work

Cross-currency compression · central settlement

Before: banks can only net in pairs · network offsets sit unused

+34%reduction per run vs bilateral

Schematic · eligible notional ≠ cash saved · 18 banks · 12 pairs

Phases1-4 · select to hold

Reading the schematic interfaceEighteen banks netting only in pairs, then a multilateral run settled through a central settlement service, compressed with trillions of dollars of notional made eligible and 34% more reduction per run, each book inside its constraints.

Cross-CurrencyBroken01/08

What was broken

Cross-currency exposures were optimized in bilateral relationships. Offsets across the wider network sat unused because there was no settlement structure that could support a multilateral outcome.

Product decision

Launch multilateral cross-currency compression with a clearing house’s settlement service as counterparty. The engine finds compatible offsets across participants. Value only matters if eligibility, constraints, and settlement remain executable.

Flow

  1. 01BeforeBilateral only

    Offsets across the wider network were unreachable.

  2. 02DecisionCentral settlement

    A structure that could actually clear a multilateral result.

  3. 03AfterTrillions unlocked

    18 banks, 34% more reduction per run.

In plain terms

  • Banks hold large cross-currency positions. Pairwise netting left network-wide offsets stuck
  • Eligible notional means exposure that became eligible to enter the compression run. It is not revenue, AUM, or cash saved
  • A clearing house’s settlement service provided the counterparty, so a multilateral proposal could actually clear
  • Success was measured as notional made eligible and notional reduced per run, with risk intent held inside constraints

What I owned

  • Owned the 0→1 launch: product design, eligibility rules, workflow, institutional onboarding, and GTM
  • Treated settlement design as part of the product: a mathematically good offset is worthless if it cannot clear
  • Kept the risk envelope explicit so compression did not silently change the book’s intent

How it works

  • Expands optimization from bilateral pairings to a multilateral network
  • Identifies economically compatible offsets across participants, not pairwise cancellation
  • Uses the settlement structure so the reduced book remains executable
  • Measures value in notional made eligible and notional eliminated, while the risk intent of the book stays inside constraints

Role & tags

Product Manager. Owned the 0→1 launch across product design, eligibility, workflow, institutional onboarding, and GTM.

  • Multilateral network
  • Settlement design
  • Eligibility
  • Executable outcome

Impact

$X.XT of previously ineligible bilateral notional became available across 12 currency pairs. 18 banks achieved 34% greater notional reduction per run than bilateral optimization.

Next systemDual-Source Valuation−91% · resubmissionsRead the case

Also seeCompression Setup AgentIncident Triage Agent

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