Netting techniques are methods used to simplify financial transactions between parties by offsetting mutual obligations. This approach allows organizations to reduce the number of payments made, minimizing transaction costs and risks. For example, if two companies owe each other money, they can net their obligations, paying only the difference instead of settling each debt separately. In the context of trading, netting can also apply to securities and derivatives. By using netting techniques, traders can manage their positions more efficiently, reducing the need for large cash reserves. This practice is common in financial markets, where institutions like clearinghouses facilitate the netting process to enhance liquidity and stability.