Entering into a contractual agreement

Contractual Agreements

Not all trading markets are markets in securities. For instance, a corporate may be looking to enter into a foreign exchange agreement, or to borrow cash for a period of time. In such cases, there is a bilateral contractual agreement between the relevant counterparties. Generally speaking, these obligations are not transferable, though it may be straightforward to enter into an offsetting transaction. However, in some cases, such as certain long-dated derivative transactions, parties agree in advance to allow contracts to be transferred so long as it can be done at no penalty to an original counterparty.

In some cases, such as syndicated loans, the relationship element of a bilateral transaction represents an important component. A client may be unwilling to allow the transfer of loan obligations to an alternative bank. Trading of obligations in these cases may be fraught with difficulties.