credit netting

A process used by financial institutions which eliminates the need to do a credit check on every financial transaction. In some situations, such as stock market transactions, it is important for transactions to be completed in a timely manner. Most of these transactions would typically require a credit check, to make sure that the party will be able to pay the contracted amount. However, in some situations the financial institutions will agree to the system of credit netting, where all transactions are combined into one transaction, eliminating the credit check on every small transaction.

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