What is clearing?
Clearing is the process of settling financial transactions. An independent organisation called a clearing house acts on behalf of the buyer and seller in order to complete a transaction. It makes buying and selling more efficient, speeding up the process and ensuring stability in the financial system.
Where have you heard about clearing?
In the past you may have paid for goods or services by cheque. Typically it would take several days for your cheque to deposit into the seller’s account or 'clear', which comes from clearing. Today it’s more common for payments to be made electronically. Such payments are automatically cleared in a matter of hours.
What you need to know about clearing.
Clearing is required in trading as trades and deals can happen quickly, at a much faster rate than they can be processed.
A clearing house acts a counter-party to every trade and investment; ensuring funds are available, the transaction is documented and, where a security (such as stock, options or bonds is concerned), guarantees delivery to the buyer.
Find out more about clearing.
You can find out more about clearing in the UK via the Bank of England’s list of recognised clearing houses.