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Clearing

• Is the process of financial guarantee between clearing members. This activity intends to eliminate the risk of contractual or transactional default. For example, two clients execute a trade through two different clearing member firms. The clients are solvent but at the end of the day one of the clearing members is not. This transaction through a clearinghouse would preserve the integrity of the trade.

 
 Embedded terms in definition
 Clearing member
Clearinghouse
Default
Member firm
Member
Risk
Trade
 
 Referenced Terms
 Ach: Is the Automated Clearing House.

 Automatic exercise: Occurs after an option expires. Each exchange and its Clearing house has rules which govern this exercise. There are minimum in-the-money requirements. A holder of an option must inform the clearing house not to automatically exercise an option. These instructions not to exercise may be due to relatively high transaction costs, increases in position limits, or unacceptable alterations in position profiles. Also, after hours trading indications may suggest dramatically different prices than those used to determine the automatic exercise in-the-money amounts.

 British clearers: The large Clearing banks that dominate deposit taking and short-term lending in the domestic sterling market in Great Britain.The large Clearing banks that dominate deposit taking and short-term lending in the domestic sterling market.

 British clearers: The large Clearing banks that dominate deposit taking and short-term lending in the domestic sterling market in Great Britain.The large Clearing banks that dominate deposit taking and short-term lending in the domestic sterling market.

 Carrying broker: Is the Clearing member Futures Commission Merchant (FCM) which clears trades for customers and/or other Futures Commission Merchants.

 
 Related Terms
 Automated clearing house
Clearing float
Clearing house automated payment system
Clearing house interbank payment system
Clearing house or clearinghouse
Clearing member
Joint clearing members
Market clearing
Mortgage backed securities clearing corporation
Options clearing corporation

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