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Banks Racing to Pare Swaps Holdings Ahead of Rules, Goldman Says

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.