Clearing House Interbank Payments System - CHIPS

AAA

DEFINITION of 'Clearing House Interbank Payments System - CHIPS'

The primary clearing house in the U.S. for large banking transactions. CHIPS settles over 250,000 of trades per day, valued in excess of $1 trillion. CHIPS and the Fedwire funds service used by the Federal Reserve Bank combine to constitute the primary network in the U.S. for both domestic and foreign large transactions denominated in U.S. dollars.

INVESTOPEDIA EXPLAINS 'Clearing House Interbank Payments System - CHIPS'

CHIPS differs from the Fedwire transaction service in several respects. First and foremost, it is cheaper than the Fedwire service, albeit not as fast, and the dollar amounts required to use this service are lower. It is also privately owned by member banks and has only 46 members (as of 2006), compared to the approximately 50,000 members that use the Fedwire service. Finally, CHIPS acts as a netting engine, where payments between parties are netted against each other instead of the full dollar value of both trades being sent.

RELATED TERMS
  1. Same-Day Funds

    Money that can be transferred or withdrawn the same day that ...
  2. Clearing House Automated Payments ...

    A British company that facilitates the trading of European currency. ...
  3. Clearing House Funds

    Money that passes between Federal Reserve Banks in the form of ...
  4. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
  5. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
RELATED FAQS
  1. What does CHIPS UID mean?

    CHIPS UID stands for Clearing House Interbank Payments System Universal Identifier. This is just a fancy name for an electronic ... Read Full Answer >>
  2. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>
  3. What is the average range for the price-to-earnings ratio in the electronics sector?

    Investors purchase shares of company stock and other traded securities through capital markets in either primary or secondary ... Read Full Answer >>
  4. What are the benefits and shortfalls of the Herfindahl-Hirschman Index?

    Equity and debt are the two sources of financing accessible in capital markets. The term "capital structure" refers to the ... Read Full Answer >>
  5. What is the difference between open interest and volume?

    In the options market, two measurements describe the liquidity and activity of option contracts. Volume is the amount of ... Read Full Answer >>
  6. What are "fabless" chip makers and why are they important in the semiconductor market?

    Fabless chip makers are companies that produce semiconductors for use in various types of electronics, such as digital cameras, ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  2. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  3. Personal Finance

    Cut Your Bank Fees

    Find out how to get the bank to pay you for using their services, not the other way around.
  4. Investing

    Too Late To Invest In EM?

    Investors have flocked to developing markets amid continued low U.S. interest rates & hopes of further economic stimulus from emerging world central banks.
  5. Investing

    How Nasdaq Makes Money

    NASDAQ provides a marketplace which offers money-making opportunities to investors. Investopedia explains how NASDAQ makes money.
  6. Trading Strategies

    Is Liquidity Improved By High Frequency Trading (HFT)?

    Is the market liquidity provided by high frequency trading a reality or an illusion?
  7. Investing

    How The NYSE Makes Money

    We examine how the New York Stock Exchange, the leading US stock exchange, makes money.
  8. Investing Basics

    What is a Financial Market?

    “Financial market” is a broad term used to describe any forum where buyers and sellers meet to trade assets.
  9. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  10. Trading Strategies

    High-Frequency Trading Regulations

    Current regulations on high-frequency trading, and possible future ones. How some people think high-frequency trading should be regulated or illegal.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center