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    Thread: What is a clearing house?

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      Default What is a clearing house?

      Hello fellow members.
      I hope you will be able to exhaust everything you have on this.
      What is a clearing house?


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      The clearing House is actually plays a middleman role in a transaction that takes place between two or more parties which includes buyers and sellers. Their functions is facilitate the transaction which is mainly the exchanges of payments that is made between the parties that are involved in the transaction.
      CLEARING HOUSE can be defined as a financial organization that is formed and acts as an intermediary between different parties involved in a transaction so as to enable the smooth landing of the transaction. The areas where they function cuts across all financial security tradings and derivatives transactions. The clearing house helps to reduce and probably prevent he possibility of a party failing to honor his own side of the obligations in a financial transaction.
      They acts as third party in futures transactions and also in options too. They also function in clearing trades, regulate buying and delivery of financial instruments, settling of trading accounts etc. Organisations that acts as clearing houses can include brokers, Nasdaq, NYSE etc.


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      Clearing house take the opposite position of each side of a trade. When two parties agree on the terms of a transaction, a clearinghouse sits on the middle, acting as both the buyer and the seller. Clearinghouses exist to ensure the smooth functioning of financial markets. Fewer transactions would take place if sellers were worried that buyers would refuse to pay them, and vice versa. A clearinghouse ensures that transactions happen as planned. For example, if you agree to sell your hundred shares of company xyz to a person for ten thousand dollars, the clearinghouse ensures that he person is delivered the hundred shares and you are delivered ten thousand dollars. It also records and reports the transaction to everyone involved.


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      Quote Originally Posted by Damkidah     
      Hello fellow members.
      I hope you will be able to exhaust everything you have on this.
      What is a clearing house?
      A Clearing House :
      is an agency or corporation that act as a broker between any two parties (Buyer and seller) that are engaged in a financial transaction which is relate to one of the financial instruments especially in equities or futures markets for a purpose of :
      - Collecting and setting margin monies .
      - Setting trading accounts and clearing trades.
      - Ensuring that delivery is made to the correct party.
      - Facilitating the execution of trades by transferring funds.
      - Guaranteeing the efficiency and the stability to the financial markets.
      - Reporting trading data and facilitating the trading in the financial markets.
      - Ensuring that two parties followed the rules and the proper procedures for executing a successful transaction.
      So, clearing houses play an important role in the financial markets and without them there will not be stability and efficiency in the financial markets because they are the intermediary who guarantee the proper execution to all the transactions in the financial markets.


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      Clearing house is a platform that mutualizes the collaterals of financial contracts, so as to reduce counterparty risk. A clearing house literally clears the trade that was agreed upon an exchange. As expected during trading, we trade on an exchange. This is the most exposed entity in a system. Clearing house functions in operating behind the exchange and comes into picture once the trade is executed on the exchange. Clearing house often takes the responsibility of transferring the stock from the seller's account to receivers account and transferring money from receivers account to the seller.
      Another essential responsibility of a clearing house is its act as a counter party.


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      A clearing house is a banker's agency or organization where bills and cheques from member banks are exchanged, such that only the balances are paid in cash. It facilitates the exchange of payments, and security of the transaction. it also reduce the risk of members failing to honour their settlement obligations.

      A clearing house may also be an agency that acts as intermediary between buyers and sellers, which ensures that the process from trade inception to its settlement is smooth. A clearing house ensures that there is security and efficiency. This is an integral aspect of financial market stability.

      A clearing house may serve as a mediator between two parties that are involved in a financial transaction. They provides security and integrity to the transaction, and ensures that it is successfully completed.
      POSSIBILITIES ARE INFINITE IN THE FOREX MARKET, YOU CAN ACCOMPLISH ANYTHING !


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      Clearing house is what we see mostly in banking,it serves to facilitate the exchange of payment between mostly one bank and another bank,for example if you give me a cheque belonging to bank A and i deposited the cheque in my Bank B,that cheque will definitely need to go through clearing before my account can be credited,So the clearing house stands between the two banks ,so the clearing houses are very useful to every economy they help to promote efficiency among financial institutions too,we also have international clearing houses that takes care of international transactions,these international clearing houses have various domestics members that uses them.


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      In any organization,clearing house is another sensitive part where the supplier and the buyer can reach a point of successful transaction about the purchase.What is clearing house is all about? CLEARING HOUSE can be defined as a financial organization that is formed and acts as an intermediary between different parties involved in a transaction so as to enable the smooth landing of the transaction. The areas where they function cuts across all financial security tradings and derivatives transactions. The clearing house helps to reduce and probably prevent he possibility of a party failing to honor his own side of the obligations in a financial transaction.
      They acts as third party in futures transactions and also in options too.


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      In the trading of securities in terms of buying and selling, there is an agency or a body that acts as an intermediary between the involved parties to ensure the smooth running of the transactions is called the clearing house. the responsibilities of the clearing house involve these but not limited to he following;
      a. Ensuring that the involved parties perform the transactions according to the laid down rules and regulations thus delivery are properly done and trading accounts set and trades properly cleared
      b.Setting and the collection of margin monies
      c.Ensuring that there is efficiency and the stability to the financial markets.


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      What is a Clearing House?
      A clearing house serves as a broker between any bodies or entities that are committed in a financial trade. The major role of the mediator is to make sure that the trade is successful with no glitches, with the buyer receiving the sellable goods he wishes to receive and the seller received the adequate amount reimbursed for the sellable good he is selling. Any entity that partake in any type of financial trade wants to be covered as far as trade is concerned. The buyer needs assurance that goods will safety gets to him or her, and the seller on the other hand needs assurance of payment. The clearing house represents the interest of both entities in making sure they both get what they deserved.

      Functions of a Clearing House
      Just like Iíve been explaining, the clearing house essentially the peacemaker between the parties. Nevertheless, there are other functions of clearing house. The clearing house vouches that the transactions will happen without any glitches or problem in the course of the trade. This is achieved by monitoring the financial proficiencies of both entities to go into legal trade, irrespective of their status (a person or company). The cleaning company also ensures that the entities involved abides by the rules of the agreement in order to make the transaction go smoothly. And lastly, the clearing house facilitated a level playing field for the two entities, where they can both decide and come to agreements on the terms of the transaction.


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