Clearing house
A typical contract between two financial-market participants involves one agreeing to sell and later deliver a product (say, shares) and another agreeing to pay for it...
A typical contract between two financial-market participants involves one agreeing to sell and later deliver a product (say, shares) and another agreeing to pay for it. The seller and buyer can agree terms privately (or 'over the counter').
But there are at least two problems. First, what if a big seller wants to remain anonymous so that word doesn't spread that they are trying to dump assets? And what if one party fails to honour their side of the bargain by not paying (buyer) or delivering (seller) on the agreed date?
Enter a clearing house. When share deals are arranged anonymously via, say, the London Stock Exchange, they are immediately adopted by the clearing house LCH.Clearnet. It guarantees the buyer will pay and the seller will deliver, typically three working days later, for shares.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Watch Tim Bennett's video tutorial: What is a clearing house?
-
Most expensive street in Britain to buy on has houses with '£10m average asking price', Rightmove finds
News Rightmove found Buckingham Gate, close to Buckingham Palace, was the most expensive street in the country. Do you live near one that's been included on the list?
By Henry Sandercock Published
-
Smaller companies: starting to turn?
The long-awaited turnaround in smaller companies is unlikely to happen just because shares are lowly-valued. However, an improving economic and interest rate backdrop could spark renewed interest in the sector. M&A activity is also providing support for the smaller companies sector
By MoneyWeek Published