Clearing firm

Clearing firms handle the back-office details of securities transactions between broker-dealers, making the settlement process streamlined and efficient.

In brief, when a broker's order to buy or sell a security has been filled, the clearing firm electronically compares and verifies the details of that trade. Then it nets down the trades to minimize the number of securities that must be received or delivered at settlement.

Cleared trades are settled within a specific time after the trade date, based on the type of security being traded.