Schematic view of clearing en settlement
Clearing and settlement (C&S) is the process whereby a transaction on a trading platform is actually executed.
The position of C&S in the trading of shares is shown in below figure.
Notes to schematic view
1. A trading transaction is concluded between two trading members, possibly on the instructions of an underlying final investor (buyer or seller).
2. The transaction is transmitted to the clearing organisation by the trading platform.
3. Clearing is effected between a clearing house and its clearing members.
4. Reconciliation is effected between the clearing members and the trading members.
5. The clearing house sends instructions for settlement to the settlement platform (CSD).
6. The settlement platform then effects the actual share transfers and ensures that the relevant funds are also transferred. The customers of the settlement platform are known as member firms.
7. Reconciliation is effected between the member firms and the clearing members.