Clearing is the process of reconciling and settling trades between buyers and sellers after a transaction is executed. It involves the confirmation, matching, and netting of trades, as well as the transfer of securities and funds to complete the settlement process. Clearinghouses play a vital role in maintaining market integrity by managing counterparty risk and ensuring that both sides of every trade fulfill their obligations.
Example
“The trade was executed on the exchange floor, but clearing and settlement took two business days to complete through the central clearinghouse.”