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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 ?
The 16-inch high piece was discovered dur ing a house clearance by a brother and sister in the London suburb of Pinner.
It is part of the largest country house clearance in the North-East of England since the sale of Callaly Castle near Alnwick in 1986.
I lay awake, and I couldn't stop thinking about how we'd emptied the outhouse after the house clearance.
It had been collected by 43-year-old Gavin Talbot, father of Streetly singing star Connie, during a house clearance in Leicester that day.
A MAN sparked a bomb scare at a police station when he handed over suspected military explosives found in a house clearance.
But it was found hidden in a house clearance at the agent's West Country home.
He said: "A lot of people in my profession used to take house clearance items to landfill sites.
Specialist contractors were brought in to deal with the most recent fly-tipping, which included concrete, bricks and rubble, suggesting it was the result of a house clearance.
The seller claims he bought the burgundy suite in a house clearance but that it was once given by Ken to his older brother Stan.
Auctioneers Mullock Madeley are selling a six-page manuscript rescued from a builder's rubbish skip during a house clearance and renovation.