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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Business manager at Emmaus Merseyside, Angela Quinn, said: "Emmaus Merseyside collects furniture for our shops so it makes sense that we expand our service to include house clearances.
He explained: "I was doing a house clearance for a family following the death of a relative and I found this medal in a box tucked away deep in the shed.
He said: "During a house clearance we had been conducting in Anglesey, we came across 12kg of 1967-dated mint condition threepenny bits.
When the couple died, thei r son and daughter brought in house clearance exper ts and auct ioneers When the couple died, their son and daughter brought in house clearance experts and auctioneers Bainbridges.
A MAN sparked a bomb scare at a police station when he handed over suspected military explosives found in a house clearance.
Warwick Crown Court heard he then sold the whole contents to a house clearance company, so that when his mother returned she found her home stripped bare.
MONKS are planning a house clearance with a difference.
The last house clearance I did was a massive house in Caldy - and I loved it because it took me four days to sort through everything.
He said one of his most collectable items ever sold came a year ago, after his team catalogued a local house clearance.
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.
FAMILIES were forced to evacuate their homes after a grenade was discovered during a house clearance.
The setting was a small auction house in Ruislip, West London, and the lot was an antique vase (below) found during a routine house clearance. A pensioner had inherited the house from her late sister and was selling off the contents.