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Clearing house - Definition and Overview |
| Related Words: Absolution, Acquittal, Aperture, Broaching, Check, Cleft, Crack, Defecation, Depletion, Desert, Discharge |
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A clearing house is an organization affiliated with a securities or derivatives exchange that completes the transactions on that exchange by seeing to validation, delivery, and settlement.
A clearing house (var. "clearinghouse") may also offer novation, the substitution of a new contract or debt for an old, or other credit enhancement services to its members.
The London Clearing House, for example, provides clearing and settlement services for the International Petroleum Exchange, London, which is affiliated with the Intercontinental Exchange, Atlanta. LCH also acts as the clearing house for the London International Financial Futures and Options Exchange and the London Metals Exchange.
In 2001, the United States' Commodity Futures Trading Commission registered LCH as a derivatives clearing organization in the US as well, making it the first offshore DCO to be recognized under the statutory mandate of the Commodity Futures Modernization Act of 2000.
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