A useful piece of perspective

From the ISDA blog

SwapClear has quietly worked at another project – compression. In this effort they work closely with TriOptima, which has a long track record of compressing cleared and non-cleared swaps. This past week, they were able to cancel nearly $26 trillion of contracts. Since this program started, SwapClear has torn up $89 trillion of contracts. TriOptima has compressed a total of $158 trillion, including $74 trillion of uncleared trades since 2003. Compression will work even better as more dealers join SwapClear and participate in the compression process. It is a great way to ensure volumes at clearinghouses do not grow excessively large.

"Compression" is the business of doing the admin work to get all the trades into a database, so that you can run an SQL command to find all the pairs of trades which are perfect negatives of each other. Then "tearing up contracts" is basically what it says; unlike in securities business, a buy followed by a sell don't cancel each other out unless somebody does the work of matching the two up, but once you have done so, you can cancel the two contracts out.

It is worth keeping this in mind when people are chucking round mega-numbers for the size of the derivatives market - any time anyone fancies taking on the work of checking how many of them are economic nullities, they typically find that you can ex out $29 trillion in a week.