a mitigation tool to offset outgoing and incoming payments to reduce the settlement risk; this mitigant is part of FX business and derivatives stipulation as concluded in respective documentation (like ISDA, TMA etc.) and is binding for both counterparties. Its main purpose is to reduce the necessity for exchanging whole notional flows and to minimize the settlement risk. In practice it means that when for instance Citi and Deutsche enter into an FX swap representing a spot Sell/Buy and forward Buy/sell transaction between EUR and USD on the same day, they may actually offset mutual payments in same currency which would be normally transferred back and forth, but send out only the difference amounts for each currency. This step enables to perform more trades while consuming the less from settlement limit, so it represents an advantage from commercial and risk point of view.