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Clearing (finance)

Clearing (finance) Definition

In banking and finance, clearing denotes all activities from the time a transaction is made until it is finally settled (see settlement (finance)). Some of the activities in clearing are reporting/monitoring, risk margining, netting of trades to single positions, tax handling, and failure handling.

In its wider sense clearing involves the management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, even if a buyer or seller becomes insolvent prior to settlement.



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