Clearing
Clearing is a financial term that refers to the process of settling a trade between two parties. It is the process of verifying and settling a transaction between two parties, usually a buyer and a seller. The process involves verifying the details of the transaction, such as the price, quantity, and terms of the trade, and then settling the transaction by transferring the funds and securities between the two parties. Clearing is an important part of the financial system, as it helps to ensure that trades are settled in a timely and accurate manner.
History of Clearing
Clearing has been around since the early days of trading. In the past, clearing was done manually, with traders and brokers manually verifying and settling trades. However, with the advent of technology, clearing is now done electronically, with trades being settled in a matter of seconds. Clearing is now an integral part of the financial system, and is used to ensure that trades are settled in a timely and accurate manner.
Comparison of Clearing Methods
| Method | Time to Settlement | Cost |
|---|---|---|
| Manual | Days | High |
| Electronic | Seconds | Low |
Summary
Clearing is an important part of the financial system, as it helps to ensure that trades are settled in a timely and accurate manner. Clearing has been around since the early days of trading, but has since been automated and is now done electronically. There are two main methods of clearing, manual and electronic, with the latter being much faster and cheaper. For more information on clearing, you can visit websites such as Investopedia and The Balance.
See Also
- Settlement
- Payment Processing
- Securities Trading
- Derivatives Trading
- Clearing House
- Margin Trading
- Risk Management
- Regulatory Compliance
- Financial Markets
- Financial Instruments
