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Get Started in Shares by Glen Arnold

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Clearing

When your trade has been completed and reported to the exchange it is necessary to clear it; the exchange must ensure that all reports of the trade are reconciled so that the buyer and the seller are in agreement as to the number and the price of shares traded. The exchange also checks that the buyer and seller have the cash and securities to do the deal. Also, the company registrar, which keeps a record of who owns the shares, is notified of the change in ownership.

These days, clearing frequently does not just mean checking that a buyer and a seller agree on the deal; the clearing house also is a central counterparty, acting as a buyer to every seller and as a seller to every buyer. This eliminates the risk of failure to complete a ...

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