Clearing, Settlement and Custody

Chapter 1

The structure of clearing and

settlement

W

hat is clearing and settlement? An interesting question and one

that, on the face of it, could be answered by a simple definition

and yet in the financial markets it is often a very little understood but

vital process.

For every transaction that takes place in the markets there is a process

that concludes the transaction. In general terms that will mean some

kind of exchange taking place between the two parties to the trade.

The exchange may be cash for a security or the netted outcome of

more than one transaction, for instance the end result of a purchase

and sale.

Clearing is a term that is easily associated ...