Back-to-back (B2B) - Financial definition
Financial acronyms
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Concise definition of the term back-to-back
A back-to-back transaction consists of two legally separate but economically linked sale and purchase transactions which otherwise share the same trade details. It typically involves three counterparties, of which one is the buyer in one transaction and the seller in the other, thus acting as an intermediary between the two others.
Comprehensive definition of the term back-to-back
Back-to-back transactions are very frequent in financial markets, and they are done for various reasons. An investor may, for example, want to purchase a specific security from a bank he does business with, but the position may be held by a branch or subsidiary of that bank which the investor does not have a business relationship with.
In that case, and in order to avoid the investor having to go through the client adoption process with the other financial institution just for that transaction, the bank subsidiary which holds the position may sell the securities to the branch which the investor does business with, which in turn would immediately sell it on to the investor with the same trade details.