Netting Agreements

A netting agreement is a financial arrangement between parties that simplifies multiple transactions by consolidating their obligations into a single net payment. Instead of settling each trade separately, the parties offset their mutual debts to determine a single net amount owed. This reduces the number of payments, minimizes risks, and improves efficiency, especially in complex trading or trading with multiple instruments. Netting agreements are common in financial markets and help manage credit exposure and streamline payments between entities.