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The process of settling transactions. Most exchanges have one or more clearing houses, which are charged with matching orders together, ensuring that deliveries are made to the correct parties, and collecting margin money. Because so many trades take place on an exchange in a given day, clearing houses exist to process what each party owes or is owed in a central location so the fewest securities actually change hands. For example, suppose that a broker-dealer buys 1000 shares of a security and then, in a completely separate transaction, sells 700 of the same shares. At the end of the trading day, the clearing house would determine that the broker-dealer must only buy 300 shares as the other 700 belong to another party. Clearing houses receive a clearing fee in exchange for clearance services.


Clearance is the first half of the process that completes your order to buy or sell a security. During clearance, the details on both sides of the transaction are compared electronically to ensure that the order to buy and the order to sell correspond.

For example, in a stock transaction, the Committee on Uniform Securities Identification Procedures (CUSIP) number, the number of shares, and the price per share must match.

Next, transactions within each broker-dealer are netted down, or offset, by matching its clients' buy orders against sell orders from others of its clients or among a group of affiliated firms. Their records are then updated to reflect the new ownership and account balances.

Any unmatched orders are forwarded to the National Securities Clearing Corporation (NSCC), which instructs selling broker-dealers to provide the relevant securities and the buying broker-dealer to send the cash.

References in periodicals archive ?
DST's clearing services will be offered through DST Market Services, LLC, a wholly owned subsidiary of DST Systems, Inc.
Lee Waite, global head of Direct Custody and Clearing, Citi Global Transaction Services, said, 'We are delighted to offer Direct Custody and Clearing services in South Africa, the leading economy and largest securities exchange in Africa.
Hamick, executive vice president of SWS Group and head of Clearing Services.
In choosing our clearinghouse, we needed a clearing services provider with global credibility and competence and we are glad we have found it in The Clearing Corporation.
She moved from a position on the trading desk, which she later managed, to Clearing Services as a relationship manager.
The bank said that it is planning to offer clearing services for securities lending and borrowing.
We are confident that our fixed-income clearing services, along with our powerful technology, will provide this firm with the support they need to continue to grow.
BSG Clearing Solutions (BSG), a global provider of clearing and settlement, payment services and financial risk management solutions for communications service providers today announced that Edge Wireless has renewed its agreement with BSG for GSM wireless financial clearing services.
In connection with the acquisition of Schonfeld's clearing business, Penson has signed long-term contracts with Schonfeld Securities and the six correspondent firms for which Schonfeld Securities provides clearing services.
BNY Clearing Services LLC, a subsidiary of The Bank of New York, announced today that its fully-disclosed correspondent clearing system was selected by Incapital LLC.
has provided comprehensive futures clearing services to retail, commercial and institutional customers through a network of Introducing Brokers, non-clearing FCM and affiliated branch offices around the world.