Clearing House

Clearing House

Clearing House

An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. A clearinghouse is a mediator between buyers and sellers of financial instruments. It acts as third parties to all futures and options contracts, as buyers to every clearing member seller, and as sellers to every clearing member buyer.

Clearinghouses act as third parties to all futures and options contracts, as a buyer to every clearing seller and a seller to every clearing member buyer. They are a liaison between buyers and sellers of financial instruments. The reason for a clearing house is to progress the effectiveness of the markets and add constancy to the financial structure.

For example, if you consent to sell your shares (for example 100) of Company ABC to (A buyer name X) for $5,000, the clearinghouse ensures that (A buyer name X) is delivered the 100 shares and you are delivered $5,000. It also records and reports the deal to each one involved.

Share This Post