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Related to Clearance: renal clearance, clearance letter, drug 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.