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 ?
The Rocket's total clearance came in the last frame of his last-16 clash in York against former practice partner Selt.
A total clearance of 141 in the final frame of the afternoon session carried him into a 5-3 lead at the break in their all-Essex tussle at the Crucible, a match O'Sullivan has revealed could be his last before retiring.
Reilly took the first two frames after a series of long-winded tactical tussles, but Maud, undaunted, responded in his usual cool fashion, to take the third frame with a superb fast total clearance and then claimed the next four frames to take the title by five frames to two.
But Selby won the final frame of the night with his first fluent break, a total clearance of 142, to at least end on a high.
Chinese player Ding was trailing former world champion Higgins 2-0 when he produced his total clearance.
Maguire (left) made his stunning total clearance in the second frame - the first ever in a ranking tournament in Asia.
But it was in the second frame that the Scot wrote his name in the record books, his superb total clearance the first ever to be compiled in a ranking tournament in Asia.
The 37-year-old claimed a superb 142 total clearance, the highest break so far, and polished it off with runs of 103 and 131 to complete the rout.
They give full support to the arrow and they all but disappear after the shot for total clearance.
But Wilson reeled off the last five frames and weighed in with a 142 total clearance, equalling the tournament's highest break.
Selby hit back with a run of 63 to secure the fourth but Doherty claimed his 4-1 advantage with a 131 total clearance to close in on a place in the final.
Gray, a regular practice partner of Jimmy White, rounded off his latest victory with a 130 total clearance after earlier breaks of 50, 89 and 60 had fired him 3-1 ahead.

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