​Clearing Houses 

Trades are settled after they have been organized by clearing houses and settlement agents. Any activity that takes place between the trade's arrangement and settlement is referred to as clearing. The last cash for securities exchange is known as settlement. 

Clearing houses facilitate the ultimate settlement of transactions. The only traders for whom a clearing house will settle trades are its members. It is therefore necessary for brokers and dealers who are not clearing house members to make arrangements for a clearing member to settle their deals at the clearing house.

When ownership and funds are not transferred on the designated settlement date, a trade is considered unsuccessful. Although there may be reasonable explanations for a transaction going bad, opportunity cost and wasted effort are the main causes of corrections. For both buyers and sellers, reliable trade settlement through a clearing house lowers settlement risk, or the possibility that counterparties won't complete their trades. A trader can safely arrange a trade with more counterparties when a secure clearing mechanism is in place.