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 periodicals archive ?
It was his second total clearance of the season and equalled Stephen Hendry's record of eight maximums in professional snooker.
Maguire had the momentum and in frame 21 he compiled a magnificent 131 total clearance ( his seventh ton of the tournament ( after Higgins had missed a red into the right black pocket.
In a high-class Irish Masters quarter-final with Stephen Lee on Wednesday he rattled in two tons - one a 141 total clearance - and two more breaks over 60 on his way to a 6-4 victory.
2 chalked up a brilliant 141 total clearance during a sparkling 6-4 win over Stephen Lee - just days after arriving in Dublin faced with the prospect of losing his top-16 status.
I can't believe I missed the yellow, and should really have had a total clearance of 137," admitted Read, whose break knocked Simon Stockwell's 84 off the top perch.
However a slight change to his cue has worked in his favour and the Scotsman needed only 74 minutes to beat Shaun Murphy 6-0, completing victory with a total clearance of 144.
Bingham knocked in a 144 total clearance as he built a 3-1 lead before Swail levelled at 3-3 and again at 4-4.
Mark Gray, of Peterborough, produced his highest break in professional competition, a 145 total clearance, in the final frame of his 5-3 victory over Rory McLeod.
Stevens goes forward to face John Higgins, who had a day off after compiling a tournament record 145 total clearance during his 5-4 win over Joe Swail on Wednesday night.
Parrott, down to 22nd in the current world rankings after losing his opening match in five of the eight counting events last season, looked in trouble when Ali went into the midsession interval with a 3-1 advantage thanks to a 115 total clearance in frame four.
Craigie's purple patch of three wins in a row was extended to four when his 138 total clearance made the score 5-1.

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