Clearing House

A clearing house is an intermediary organization that ensures the smooth transfer of payments and securities between parties in financial transactions. It acts as a central counterparty, standing between buyers and sellers to guarantee that both sides fulfill their commitments, reducing the risk of default. For example, in stock trading, the clearing house confirms and settles trades, ensuring money and shares move accurately and efficiently. This system enhances trust and stability in financial markets by standardizing processes and minimizing the potential for errors or disagreements during transactions.