Differentiate between ‘Bilateral Netting’ and ‘Multilateral Netting’

Bilateral netting involves two parties aggregating their mutual obligations (e.g. all trades between Party A and Party B) into a single net payment. Multilateral netting involves three or more parties, typically facilitated by a central entity like a CCP, where all obligations are netted across the group.

Multilateral netting achieves a much greater reduction in gross exposure and required settlements.