Memorandum of Understanding/MOU

A memorandum of understanding, or MOU, is a written statement in which two or more parties lay out what they have agreed to in principle before any final, legally binding contract is signed. Think of it as a handshake put on paper: it says "here is what we both think we've agreed to," without locking anyone into the full legal obligations a formal contract would create.

In practice, an MOU spells out the broad shape of a deal — who is involved, what each side intends to do, and roughly on what terms — while leaving the fine print, exact numbers, and enforceable commitments to a later contract, merger agreement, or regulatory filing. Companies, governments, and regulators use them constantly, for example when two firms announce they intend to merge, partner, or share data, or when a regulator and an exchange agree on how they'll cooperate.

The nuance that trips people up: an MOU is generally not legally binding in the way a signed contract is, so it does not guarantee the deal will actually happen. Either side can usually walk away, terms can change, and financing or regulatory approval can still fall through. For a trader, seeing "MOU signed" in a headline should read as "a deal is more likely now" rather than "a deal is done."

This term shows up in trading mostly through corporate news — a company announces an MOU with a supplier, a potential acquirer, or a foreign government — and traders react to the announcement as a piece of information, not as a settled fact.