Legal Definitions - off-board

Off-board describes a transaction or dealing that occurs directly between parties, rather than through a formal, regulated public marketplace such as a stock exchange. It indicates that the activity is conducted privately or "over-the-counter," bypassing the centralized trading systems of major exchanges.

Here are some examples to illustrate this concept:

• Imagine a scenario where a founder of a successful private technology company decides to sell a portion of their personal shares to an early venture capital investor. This transaction is negotiated and executed directly between the founder and the investor, without the shares ever being listed or traded on a public stock exchange like the NASDAQ or New York Stock Exchange. This direct sale is an off-board transaction because it bypasses the formal, regulated public market.

• Consider a large pension fund that wishes to purchase a substantial quantity of corporate bonds from a specific company. Instead of buying these bonds through a public bond trading platform where prices are displayed to all market participants, the pension fund's broker-dealer might arrange a direct purchase from the issuing corporation or another large institutional holder. This private negotiation and execution of the bond sale, outside of a major public exchange, is an off-board transaction.

• Two major banks might enter into a complex financial agreement, such as a customized interest rate swap, to manage their respective financial risks. The specific terms, conditions, and pricing of this swap are privately negotiated between the two banks and are not standardized or traded on a public derivatives exchange. This bespoke, direct agreement between the financial institutions is an example of an off-board transaction because it occurs away from a centralized, regulated exchange.