How Does Novation Simplify the Netting of Obligations between Multiple Market Participants?

Novation centralizes all obligations to the clearing house (CCP). Instead of having to track and settle bilateral obligations between every pair of traders, the CCP can net all of a member's long and short positions into a single net obligation for that member.

This significantly reduces the total number of payments and the amount of collateral required, streamlining the settlement process.