Clearing

Category: finance

The process of ensuring all parties to a trade have the necessary funds or securities to complete the transaction.

Clearing is the "accounting hub" of the market. It happens behind the scenes. When you buy, the clearinghouse ensures you have the money, and the seller has the stock, before they officially swap ownership on the settlement date.

Common Examples

• The clearing process is the invisible backbone that prevents systemic failure if one party fails to deliver their assets on time.
• After the trade is executed, the exchange’s clearing system performs the vital accounting reconciliation required for final settlement.