Clearing Process

Introduction: The clearing process is a critical component of the securities trading cycle, ensuring that trades are settled efficiently and securely.
Key Components:
- Clearing Corporation: Acts as a central counterparty, guaranteeing the settlement of trades and managing the risk associated with clearing members.
- Clearing Banks: Provide banking services to the clearing corporation, facilitating the settlement of trades.
- Clearing Members: Entities that are authorized to participate in the clearing process, either directly or through a custodian.
- Custodians: Hold securities on behalf of their clients, facilitating the settlement of trades.
- Depositories: Electronic storage facilities for securities, enabling the efficient transfer of ownership.
- Depository Participants: Intermediaries that facilitate the interaction between investors and depositories.
Clearing Process Steps:
- Trade capture and confirmation
- Position keeping and netting
- Settlement and payment
Settlement Cycles:
- T+0 Rolling Settlement Cycle: A beta version introduced on an optional basis, allowing for same-day settlement of trades.
- Other Settlement Cycles: Such as T+1, T+2, etc., which provide for settlement on subsequent days after the trade date.