Protecting the Futures Markets

The Clearing House: The Integrity Behind Every Trade

Clearing is a fundamental benefit in the futures markets. Long before a trade is cleared through a clearing house, clearing firms check the financial strength of both parties to the trade, whether they’re a big institution or an individual trader. They also provide access to trading platforms, where the buyer and seller agree on the price, quantity and maturity of the contract. Then, when the contract is cleared by matching these offsetting (one buy, one sell) positions together, the clearing house guarantees that both buyer and seller get paid. This offsetting or “netting” process takes risk out of the financial system as a whole.

How clearing works

Clearing houses provide clearing and settlement services for futures traded at an exchange. They act as the neutral counterparty between every buyer and seller, ensuring the soundness and integrity of every trade.