Right of Set-Off

A right of set-off is the clause allowing a firm to combine what it owes a client with what the client owes it, and to settle the difference. In practice it means balances held across several accounts in the same name are not walled off from one another: a credit on one can be taken to cover a shortfall on another, and the clause normally allows the firm to convert currencies at its own rate in order to do so. The consequence is that separate accounts are separate for reporting rather than for liability. An arrangement built to keep exposures apart — one account per strategy, or one per currency — is a single position from the contract's point of view the moment one of them goes into deficit. Clauses differ on scope: some reach only accounts held with the same legal entity, some reach every account across a group, and some extend to money held in a client's name for a different service altogether. That scope, and whether notice is owed before set-off is applied, is the part that decides what the separation is actually worth.