Bilateral compression takes off as banks tackle leverage

It used to mean the tearing-up of perfectly matching trades, but compression has become something bolder and more ambitious in recent months – at the same time, it has also become more confusing, and smaller banks fear they may have the wool pulled over their eyes. Lukas Becker reports

Dealers have always measured the size of the over-the-counter derivatives market on a net basis – $3.9 trillion as of June 2013, according to the latest figures from the Bank for International Settlements. The reasoning is sensible, but it's also convenient, because it ignores the layers of offsetting trades that have accreted over time, giving the market its more widely used, and alarming, gross