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 ?
Ray Whewell has been clearing houses via the Allsorts House Clearances business for about a year, while Bertie's Bargains in Stanley Road, Bootle, the second-hand goods store he runs with his daughter, Caroline, has been open since March.
The auction will be conducted by Fr John's brother George, a retired auctioneer and house clearance expert.
Another local house clearance turned up a Beatles Please Please Me stereo LP with a gold and black Parlophone label.
The medal, along with a portrait, which carried a sign describing the Great Dane's brave deeds, was found by auctioneers during a house clearance in Bristol, the Mirror reported.
The explosive was found during a house clearance in the Quarry Bank area at 9pm.
Auctioneer Richard Bramwell said little is known of the history of the photos - bought from a couple in a house clearance eight years ago - except they were probably taken in 1951 or 1952, adding: "In a way, they are very poignant.
I lay awake, and I couldn't stop thinking about how we'd emptied the outhouse after the house clearance.
A CHINESE vase found during a routine house clearance sold for a world record pounds 53million yesterday.
The house and contents I think were sold to a house clearance company, including my ring.
A MAN sparked a bomb scare at a police station when he handed over suspected military explosives found in a house clearance.
The book, which was found in a house clearance in Derby, had the date of 1739 written on its cover.
BUYERS snapped up bargains in a massive house clearance sale yesterday.