Clearinghouses

Clearinghouses are organizations that act as middlemen in financial transactions, especially in securities and derivatives markets. They ensure that trades between buyers and sellers are completed smoothly, reliably, and securely. When two parties agree to a trade, the clearinghouse steps in to confirm the transaction, handle the transfer of assets, and guarantee that both sides fulfill their obligations—reducing the risk of default. Essentially, clearinghouses help maintain stability and trust in financial markets by providing a centralized system that manages and safeguards transaction processes.