International Clearing System

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DEFINITION of 'International Clearing System'

A trading system used when a futures contract transaction is entered on an international level. It is designed to promote world trade and market efficiency. Most international clearing transactions are administered by an international clearing house.

BREAKING DOWN 'International Clearing System'

For example, if a company wanted to purchase a futures contract for wheat from a foreign party, they would need to contact a clearing house, which will use the international clearing system to find another party. The other party, who will assume the opposite position (in this case, the one who is looking to sell the wheat contract) in the futures contract, will have also contacted a clearing house in their respective country, who will also use the international clearing system.

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RELATED FAQS
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    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
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