a special form of netting which occurs following some predefined event such as default. Close-out netting is intended to reduce exposures on open contracts if one party meets certain conditions specified by the contract (e.g.becomes subject to insolvency procedures) before the settlement date (also referred to as default netting, open contract netting or replacement contract netting), an arrangement to settle all contracted but not yet due liabilities to and claims on an institution by one single payment, immediately upon the occurrence of one of a list of defined events, such as the appointment of a liquidator to that institution. If such an event does not happen, then each trade is settled individually on due date unless the counterparties also have a supplementary obligation netting agreement. Close-out netting does not, by itself, reduce routine foreign exchange settlement exposures