Clearing House
The clearing house is a structural subdivision of the exchange, which settles transactions, registers them and controls their execution.
The clearing house acts as an intermediary between the parties to the futures contracts. Both the buyer and the seller undertake to make a deposit and pay the margin. The clearing house acts as a guarantor of the contract terms. Its income consists of the registration fee and a certain percentage of the deposit operations. Main functions of the clearing house are to exercise control over the transactions, carried out on the stock exchange, and ensure its financial stability.
Structure of Clearing House
Clearing house is created by resolution of the exchange committee. Sometimes the clearing house is created as a separate entity in the form of an LLC or joint stock company. In the latter case it serves several commodity exchanges. Only legal entities, which have paid an entrance fee and are members of the exchange, may obtain membership in the chamber. Also, their authorized capital must be at least a certain amount, and as representatives to the chamber are admitted only persons with impeccable reputation, who have successfully passed the qualification test.
The member organizations open accounts with the chamber for settlements between the intermediary companies, the chamber itself and the relevant exchange. The legal entities granted membership execute client orders for the purchase or sale of futures contracts. The general management is entrusted to the chairman, who is elected by the members of the chamber. But his candidacy must also be approved by the exchange committee.
The structure of the clearing house is formed by two departments. The staff of the first deals with settlements, in particular, receipt of money and its payment, registration of necessary documents. The second department deals with information, software and technical support of trading activities. Fees are collected for each registered transaction, at the expense of which the employees' salaries are paid.
Functions of Clearing House
The following functions are assigned to clearing houses today:
- Obtaining information on contracts awarded and analyzing it.
- Correction of received data if there are discrepancies.
- Registration of exchange-traded contracts.
- Determination of obligations of parties, which have concluded a deal and performance of mutual settlements between them.
- Ensuring fulfillment by the parties to the exchange-traded contract of their obligations, including delivery of securities or cash settlements.
- Providing guarantees of timely fulfillment of obligations under futures transactions.
