Escrow is a financial arrangement where a neutral third party holds funds, documents, or assets until specific conditions are met in a transaction. In trading contexts, escrow services provide security for large transactions, commodity deliveries, or complex financial arrangements where counterparty trust is essential. Escrow reduces counterparty risk and ensures transaction completion.

Escrow services are commonly used in commodity trading, real estate transactions, and merger and acquisition deals. The escrow agent releases funds or assets only when predetermined conditions are satisfied, protecting both parties in the transaction. Digital escrow services have emerged for cryptocurrency and online trading applications.

Real-world example: A gold dealer places $5 million in escrow with a bank before receiving physical gold shipment, with funds released to the seller only after independent assay confirms gold quality and quantity specifications.