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Reducing transfers of funds between subsidiaries or separate companies to a net amount.


Netting is a process the National Securities Clearing Corporation (NSCC) uses to streamline securities transactions.

To net, the NSCC compares all the buy and sell orders for each individual security and matches purchases by clients of one brokerage firm with corresponding sales by other clients of the firm.

Those orders can be finalized internally by adjusting the firm's books to reflect changes in ownership.

The small percentage of trades that aren't netted require firms with net short positions, whose clients sold more than they purchased, to deliver the required securities to the NSCC, or more precisely have them debited from their Depository Trust Corporation (DTC) custodial account for delivery to the NSCC.

The NSCC credits those shares to the firms with a net long position, whose clients purchased more shares than they sold.

In the final step, the DTC nets the total costs of buying and selling throughout the trading day to limit the amount of money that must be exchanged among firms. Firms with a net debit wire payment to the DTC, and firms with a net credit receive funds.


References in periodicals archive ?
4) Global netting should only be performed at a taxpayer's request and the taxpayer should bear the burden of computing the interest netting amounts and providing the supporting documentation.
5) Global netting generally should be performed only once.
Multilateral Netting When three or more institutions participate in a clearing and settlement arrangement with netting, the arrangement is called multilateral netting.
Participants in multilateral netting arrangements may exchange transactions either at a single designated time (which is typical for a paper-based payment system, such as checks, or for electronic systems that process in a batch mode, such as ACHS) or within a specified period of time (as with some large-value funds and securities transfer systems).
The following definitions of terms may help clarify the differences between the IRS's current practices and the "global" interest netting that is necessary to prevent inequities caused by the interest rate differential:
This is because the IRS does not net interest if an overpayment or underpayment was previously in existence but has been satisfied as of the time the netting computation is performed (i.
The operations of the New York Clearing House Interbank Payments System, also known as CHIPS, demonstrates the ability of netting to reduce systemic risk.
The ability to reduce the systemic risk to financial markets by netting is important not only to the safety and soundness of U.
On June 28, 1996, the Institute submitted detailed comments, which not only addressed the unquestionable need for interest netting, but also spelled out precisely how such netting could be accomplished.
Secretary, TEI earnestly believes that the prompt resolution of the interest netting controversy is essential to the fair and orderly operation of the tax system.
comprehensive netting procedures" within three years, no such procedures were developed by the agency.
In deference to the administrative difficulties confronted by the IRS in creating a comprehensive, automated computer system for calculating and crediting the proper amount of interest, Congress has tempered its calls for comprehensive netting with the acknowledgment that the procedures must be "consistent with sound administrative practice.