Wall Street banks are racing to simplify their swaps holdings before new rules make it more costly to own the derivatives starting in 2017, according to a Goldman Sachs Group Inc. executive.
They’re doing so increasingly through a process known as compression, said Andy Hudis, a managing director at Goldman Sachs who runs the credit valuation adjustment desk in London. Through this technique, offsetting transactions are eliminated so that a bank can reduce, say, 100 trades into 10 that give the identical position.