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A clearing house is a financial institution formed to facilitate the exchange (i.e., clearance) of payments, securities, or derivatives transactions. The clearing house stands between two clearing firms (also known as member firms or participants). Its purpose is to reduce the risk of a member firm failing to honor its trade settlement ...
1888 – The London Produce Clearing House (LPCH) is established to clear commodities contracts in London. Shares are in public ownership and the company is listed on the London Stock Exchange. 1951 – LPCH is wholly acquired by United Dominions Trust. 1971 – The company is renamed the International Commodities Clearing House (ICCH).
The Options Clearing Corporation (OCC) was founded in 1973, initially as a clearing house for five listed markets for equity options. Prior to its establishment, due to a great deal of encouragement from the SEC, the Chicago Board Options Exchange had its clearing entity, the CBOE Clearing Corporation. [citation needed]
The Clearing House is a banking association and payments company owned by the largest commercial banks in the United States. The Clearing House is the parent organization of The Clearing House Payments Company L.L.C., which owns and operates core payments system infrastructure in the United States, including ACH, wire payments, check image clearing, and real-time payments [1] through the RTP ...
A central clearing counterparty (CCP), also referred to as a central counterparty, is a financial market infrastructure organization that takes on counterparty credit risk between parties to a transaction and provides clearing and settlement services for trades in foreign exchange, securities, options, and derivative contracts. CCPs are highly ...
A major clearing house is working on a prototype to explore how a central bank digital currency (CBDC) could be settled if adopted.
Dig deeper: Online banks vs. traditional banks: How they compare on rates, perks and the safety of your money. Banking mistake 6: Locking too much money up in a CD.
In trading, clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction. It involves the management of post-trading, pre-settlement credit exposures to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement.