What Is a Clearing Fee?

A clearing fee is a charge assessed on securities transactions by a clearing house for completing transactions using its own facilities. It is most of✃ten associated with the trading of futures and includes all actions from the time a commitment is made to the time a transaction is settled.

澳洲幸运5开奖号码历史查询:Transaction fees often include both a 澳洲幸运5开奖号码历史查询:brokerage fee and a clearing fee, but seldom include a delivery fee, since the actual delivery of the underlying asset in a futꦗure contract is rare. The actual clearing fee cost can be variable, as it is based on the type and size of the transaction. The fees are passed on toౠ the brokers by the exchange where the transaction was conducted.

How a Clearing Fee Works

To earn a clearing fee, a clearing house acts as a third-party to a trade. From the buyer, the clearing house receives cash, and from the seller, it receives securities or futures contracts. It then manages the exchange, thereby collecting a clearing fee for doing so. In today's automated, high-speed trading world, the need for clearing is often taken for granted, but the existence of the clearing house and its role makes it possible for traders and investors to negate the worry that the party on the other side of their trade will somehow negate the effects of their trade by acting in bad faith.

A clearing fee is a 澳洲幸运5开奖号码历史查询:variable cost, as the total amount of the fee may depend on the size of the transaction, the level of service required, or t𓃲he type of instrument being traded. Investors who make several transactions in a day can generate significant fees. In the case of 𓆏futures contracts, clearing fees can pile up for investors who make many trades in a single day, since long positions spread the per-contract fee out over a longer period of time.

Why Clearing Fees Are Necessary

Clearing houses act as middlemen in trades to guarantee payment in case either party involved in the trade defaults on the contractual obligations of the trade. The technology, accounting, recordkeeping, assumed 澳洲幸运5开奖号码历史查询:counterparty risk, and liquidity is what investors and traders are paying for with their clearing fees. This keeps markets efficient and encourages more participants in the securities markets. Counterparty and 澳洲幸运5开奖号码历史查询:pre-settlement risk are often take⛎n for grant🥀ed because of the role the clearing house plays.

Clearing houses are subject to significant oversight from regulators, such as the Commodity Futures Trading Commission (CFTC). Since the 澳洲幸运5开奖号码历史查询:Great Recession in 2007-2009, new regulations have resulted in far more money passing through clearing houses. As such, their failure could lead to a significant market shock. As of the end of 2017, the three major clearing houses passed liquidity stress tests by proving they could maintain enough liquidity to settle obligations in a timely fashion even if their two-largest members (banks and broker-dealers) defaulted.

Who Charges Clearing Fees?

The three largest clearing houses are CME Clearing (a unit of CME Group Inc.), ICE Clear U.S. (a unit of Intercontinental Exchange Inc.) and LCH Ltd. (a unit of London Stock Exchange Group Plc).

⛎ Clearing houses can trace their beginnings to around 1636; the financier of Charles I of England, Philip Burlamachi, first proposed them, along with the idea of a central ban🐠k.