Clearing House

The clearinghouse is an organization established with an objective to assist the process of settlement of various transactions related to derivatives, securities, and payments. The clearing house is authorized with the function to ensure that all trade transactions should take place with integrity. Orders are cleared by means of clearinghouse which acting as a buyer to all the sellers and a seller to all the buyers. Clearing houses provide a range of services related to the guarantee of contracts, clearance, and settlement of trades and management of risk, etc. for their members and associated exchanges.

Some of the roles of clearing house are as follows.

  1. It ensures that the member should be obedient to the established system and procedures for smooth trading.
  2. It acts as a buyer for every seller and a seller for every buyer.
  3. It has a well-defined system of daily accounting for calculating all gains or losses.
  4. In case of an outstanding contract, it ensures the settlement of payment or delivery of assets happens on the maturity date.
  5. It monitors the maintenance of speculation margin.

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