A master transaction agreement is a contract reached between two parties in a financial transaction in which the parties agree to most of the terms that will govern future transactions. Many master transaction agreements are standardized and most are bilateral.
Financial service institutions often agree to Master Transaction Agreements, specifying terms such as the types of transactions to be covered, credit limits, margin requirements for open positions, delivery, failure of delivery and other default, clearing and settlement, dispute resolution, and the like. Under the Master Transaction Agreement, individual transactions can be negotiated in seconds—the traders only need to agree to the security, the quantity, and the price. Most master agreements are bilateral, one pair of firms per agreement.
Most exchanges and electronic communication networks (ECNs) require member firms or customers to enter a "Trading Agreement," a contract that sets out the obligations and rights of the exchange and one particular firm or customer. Each executed trade is typically a separate contract, with an obligation to deliver cash in one direction and securities in the other, with most terms of the single-trade contract controlled by the master agreement.