Clearing Corporation

What is a 'Clearing Corporation'

An organization associated with an exchange to handle the confirmation, settlement and delivery of transactions, fulfilling the main obligation of ensuring transactions are made in a prompt and efficient manner. They are also referred to as "clearing firms" or "clearing houses".

BREAKING DOWN 'Clearing Corporation'

In order to make certain that transactions run smoothly, clearing corporations become the buyer to every seller and the seller to every buyer. In other words, they take the offsetting position with a client in every transaction.

RELATED TERMS
  1. Clearing Broker

    A member of an exchange that acts as a liaison between an investor ...
  2. Settlement Period

    The period of time between the settlement date and the transaction ...
  3. New York Clearing House Association ...

    An organization established in 1853 to simplify the settlement ...
  4. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  5. Transaction Date

    The date upon which a security or other financial instrument ...
  6. Fixed Income Clearing Corporation ...

    An agency that deals with the confirmation, settlement and delivery ...
Related Articles
  1. Investing

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  2. Investing

    What Do Central Counterparty Clearing Houses Do?

    A central counterparty clearing house facilitates trading in European derivatives and equities markets.
  3. Trading

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  4. Investing

    Arm's Length Transaction

    An arm’s length transaction describes business deals in which the buyer and seller act independently and with no interest in the other’s benefit.
  5. ETFs & Mutual Funds

    Explaining Delivery Versus Payment

    Delivery versus payment is a common procedure for settling the exchange of securities.
  6. Investing

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  7. Investing

    Letter of Credit

    A letter of credit is a document from a bank promising to pay the holder a certain amount if the holder fulfills certain obligations. Sellers in commercial transactions often require buyers to ...
  8. Investing

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  9. Investing

    What Are Transaction Costs?

    Transaction costs are expenses incurred from buying or selling securities.
  10. Financial Advisor

    How Brokers Are Compensated for Selling Bonds

    Find out how brokers are paid for selling bonds and how the transaction costs are passed on to the investor through a markup or commission.
RELATED FAQS
  1. What's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
  2. When is a share purchase marked as 'settled' by a brokerage?

    Understand the process of purchasing stock, including ordering, clearing and settlement, and learn when a stock trade is ... Read Answer >>
  3. What do T+1, T+2 and T+3 mean?

    Whenever you buy or sell a stock, bond or mutual fund, there are two important dates of which you should always be aware: ... Read Answer >>
  4. How do mutual fund trades clear and settle?

    Learn how mutual fund trades are cleared and settled, and when the money owed must be available or the proceeds due must ... Read Answer >>
  5. How are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... Read Answer >>
  6. Do I own a stock as of the trade date or the settlement date?

    When it comes to buying shares, there are two key dates involved in the transaction. The first date is the trade date, which ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center