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 ?
Even Sheeta, the panther, crouched for a spring at the edge of the little clearing, moved uneasily as the mighty voice sent its weird cry reverberating through the jungle.
Quickly the beast trotted across the clearing toward the anthropoids.
There was no releasing of the ancient padlocks in the time that was left him, so the ape-man called to them to follow him as they were, and, snatching the gun and cartridge belt from the dead sentry, he led the now happy band out through the village gate and into the forest upon the far side of the clearing.
A deserted farmhouse, large, with many outbuildings and an orchard, standing in a clearing.
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.
Armed men rushed from the interior of many a hut and raced madly across the clearing toward the excited sentry.
Tarzan of the Apes, returning from a successful hunt, with the body of Bara, the deer, across one sleek, brown shoulder, paused in the branches of a great tree at the edge of a clearing and gazed ruefully at two figures walking from the river to the boma-encircled hut a short distance away.
All hands now set to work cutting down trees, clearing away thickets, and marking out the place for the residence, storehouse, and powder magazine, which were to be built of logs and covered with bark.
With the intrepid woman who was his wife, and a few natives, he landed there, and set about building a house, and clearing the scrub so that he could plant cocoa-nuts.

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