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 ?
ECS is the central clearing services division of EquiLend, a leading provider of trading, post-trade and market data services for the securities finance industry.
FG Solutions International's decision of changing its clearing service firm will facilitate the firm to offer clients a comprehensive research resources to ensure that every active trader is kept updated and well-informed of the commodity market events, important market news and relevant industry information.
Lito Camacho, vice chairman for Asia Pacific and Singapore CEO at Credit Suisse added that becoming a member of SGX's OTC financial derivatives clearing service would strengthen the bank's abilities in the Interbank interest rate swap market.
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It will proactively enrich its RMB clearing products and services, with the objective to provide the most efficient, convenient and comprehensive RMB clearing services to participating institutions around the world.
This clearing service is the first yen-denominated IRS clearing service in Asia Pacific.
This is the first step in our broader initiative to provide clearing services for a wide range of FX products later this year," said Craig LeVeille, CME Group's Director of FX Products.
Bank of America Merrill Lynch (BAML) is to form a new clearing function, the Global Futures and Derivatives Clearing Services (GFDCS) group, in anticipation of an expected increase in OTC derivatives clearing following proposals in the US and Europe to centrally clear the majority of OTC derivatives trades.
TELECOMWORLDWIRE-2 March 2007-Turkcell renews clearing services agreement with BSG(C)1994-2007 M2 COMMUNICATIONS LTD http://www.
NEW YORK -- Goldman Sachs announced today the launch of its Derivatives Clearing Services (DCS) business.
CME Group (NASDAQ:CME), an owner and operator of large derivatives and futures exchange, on Tuesday announced that an agreement has been signed to develop clearing services for over-the-counter (OTC) risk management products used by the Japanese energy industry with Japanese provider of energy price and information services RIM Intelligence.
Global Banking News-November 22, 2011--Citi to offer direct clearing services in South Africa(C)2011 ENPublishing - http://www.