Clearing

DEFINITION of 'Clearing'

The procedure by which an organization acts as an intermediary and assumes the role of a buyer and seller for transactions in order to reconcile orders between transacting parties.

BREAKING DOWN 'Clearing'

Clearing is necessary for the matching of all buy and sell orders in the market. It provides smoother and more efficient markets, as parties can make transfers to the clearing corporation, rather than to each individual party with whom they have transacted.

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