Clearinghouse

A clearinghouse is an organization that acts as an intermediary between parties in financial transactions, such as buying and selling securities or settling loans. Its main role is to facilitate the smooth transfer of funds and assets, ensuring both sides complete their obligations. By centralizing and verifying transactions, the clearinghouse reduces the risk of defaults and increases efficiency. It also manages risk by maintaining reserve funds and setting standardized processes, which helps stabilize markets and protect participants from potential losses.