March 2015
Intermediate to advanced
472 pages
12h 12m
English
Content preview from Financial Markets Operations Management
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CHAPTER 7 Securities Clearing
7.1 INTRODUCTION
In Chapter 5: Clearing Houses and CCPs, we defined clearing as: “The process of transmitting, reconciling and, in some cases, confirming payment orders or security transfer instructions prior to settlement, possibly including the netting of instructions and the establishment of final positions for settlement. Sometimes the term is used (imprecisely) to include settlement.”
Clearing, therefore, is the post-trade preparation for settlement, i.e. the completion of the trade. This preparatory phase should be completed shortly after the trade has been executed; how long afterwards depends on the market convention and type of asset.
By the end of this chapter, you will be able to:
- Follow the stages within the clearing cycle;
- Differentiate between securities and derivatives clearing;
- Forecast cash requirements and securities availability.
We have seen that a clearing house differs from a central counterparty (CCP) in one fundamental way.
In this chapter, we will look at clearing from the points of view shown in Table 7.1.
TABLE 7.1 Clearing House and CCP clearing
| Asset Type | Clearing Method | Example |
| Equities | Central counterparty | LCH.Clearnet |
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