Clearing houses
Discussion
I have to do some research on clearing houses. Before this morning I did not know they existed, let alone what they did.
I know there are a lot of financial type people on here. Just so I don't make an almighty balls-up, can one of you very kindly just check my basic understanding of their function:
Essentially, entities in a market deposit money in the clearing house as collateral against any trades they make. The clearing house then acts as a middleman between its members when they make a trade with each other.
If one of the members goes tits up during the trade, the clearing house has sufficient funds available to ensure the trade is completed. This is the risk that the clearing house takes on behalf of its members. It makes money by a) charging a comission on trades and b) by requiring a greater amount of money to be deposited (from all members) than it has to pay out.
Have I got the right end of the stick?
Have I missed anything out?
TIA.
I know there are a lot of financial type people on here. Just so I don't make an almighty balls-up, can one of you very kindly just check my basic understanding of their function:
Essentially, entities in a market deposit money in the clearing house as collateral against any trades they make. The clearing house then acts as a middleman between its members when they make a trade with each other.
If one of the members goes tits up during the trade, the clearing house has sufficient funds available to ensure the trade is completed. This is the risk that the clearing house takes on behalf of its members. It makes money by a) charging a comission on trades and b) by requiring a greater amount of money to be deposited (from all members) than it has to pay out.
Have I got the right end of the stick?
Have I missed anything out?
TIA.
sday12 said:
s
t that website's amazing. Can't beleive that wasn't the exact page I looked at first thing this morning.Gassing Station | The Lounge | Top of Page | What's New | My Stuff