Clearing and settlement
Clearing and settlement are fundamental processes in financial markets.After the trade is executed, the record is submitted to the clearing agency, which matches the buyer and seller record and confirms that the counterparts agree to the terms. The agency reports discrepancies to traders in case the reports do not match, who then try and resolve them. After the clearing process is performed, through settlement, agencies fulfil the delivery requirements of the securities object of a trade. The settlement agency receives cash from buyers and securities from sellers and, at the end of the process, gives the securities to the buyer and the cash to the seller. Agencies perform an important function in case a trader is not trustworthy or creditworthy.