Clearance

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Clearance

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.

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 classic literature ?
Machua Appa had no need to look twice at the clearing to see what had been done there, or to scratch with his toe in the packed, rammed earth.
So it was that as Kulonga emerged from the shadow of the jungle a slender coil of rope sped sinuously above him from the lowest branch of a mighty tree directly upon the edge of the fields of Mbonga, and ere the king's son had taken a half dozen steps into the clearing a quick noose tightened about his neck.
The utensils drew back and allowed them to pass without protest, although Captain Dipp marched the Spoon Brigade in close order after them until they had reached the edge of the clearing.
Come," and he led me across the clearing and about the end to a pile of loose rock which lay against the foot of the wall.
In the center of the clearing below her, clearly visible in the bright moonlight, she saw fully twenty huge, manlike apes--great, shaggy fellows who went upon their hind feet with only slight assistance from the knuckles of their hands.
The blacks were half-way across the clearing when Tarzan's attention was attracted by the actions of one of the apes.
Before the clearing had been half crossed the Arabs opened up a withering fire from behind the palisade.
Suppose the government sells you Pari-Sulay at a pound an acre; clearing will cost you at least four pounds more; that is, five pounds for four hundred acres, or, say, ten thousand dollars.
Half an hour later, sheltering under the summits themselves, he came out on a clearing.
The nearest house was quite a distance away, while his own stood in a clearing in the thick jungle which approached no where nearer than sixty feet.
Was he still bent on clearing up his suspicions of Sir Jervis's housekeeper?
His progress was more rapid now, as he came down into the valley, and at the end of half an hour he halted at an ancient rail fence on the edge of a clearing.

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