Pairoff

What is it? A security purchase transaction that is closed out or sold on or before the settlement or expiration date. In a pair-off, the investor commits to purchase a security. Then, prior to the predetermined settlement date, the investor offsets that purchase with a sale of the same security that is arranged to settle on or before the settlement date for the purchase. Instead of paying for the purchased security on the settlement date, the investor need only pay or receive the difference between the purchase and sale prices. Pair-offs are price speculations that are considered trading activities and may be criticized by bank examiners if not handled as trading activities.

Added By: Abby

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