7

Step 7Clearing

Clearing includes those processes following a trade in which the details of the trade are agreed among all the parties and when a clearing corporation or some other form of central counterparty is present to guarantee settlement to the extent that a guarantee is feasible. The tasks required to accomplish both agreement among parties and some level of assurance that settlement will occur vary widely from market to market. For trading in liquid securities on automated markets, little error can creep into the process, and clearing corporations are usually able to ensure settlement in all but the most extreme situations.

In less liquid instruments, most transactions are bespoke; valuing the transaction between execution and settlement ...

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