What is a clearing house?
A clearing house is a 'middle man' for buyers and sellers trading financial instruments. It helps to keep the market stable and efficient by navigating trades and finalising transactions.
Where have you heard about clearing houses?
Most likely, you've heard of clearing houses in the context of banking: institutions that facilitate transactions between banks. In the trading world, clearing houses are most often associated with the futures market.
What you need to know about clearing houses.
As an agency, a clearing house is responsible for a number of things, among them clearing trades and settling trade accounts.
Acting as a third party to transactions, clearing houses take the opposite side to a trader. If they're mediating a transaction, like the purchase and sale of a security, they act as the middle man to help ensure the trade is done properly.
In the futures market, members of futures exchanges have to clear their trades through a clearing house at the end of each session.