Netting
/ˈnetɪŋ/
Definitions
- (n.) A legal arrangement or process by which mutual obligations or debts are consolidated to determine a single net amount owed by one party to another.
The parties agreed to netting the amounts owed to simplify their financial transactions.
- (n.) The act of offsetting exposures or claims between parties to reduce credit risk, commonly used in financial contracts and derivatives.
Netting reduces counterparty risk in derivatives trading by offsetting mutual obligations.
Related terms
See also
Commentary
In drafting, clarity is essential to distinguish netting arrangements from simple payments or set-offs, especially in complex financial contracts.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.