clearinghouse
noun
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Definition of clearinghouse
Examples of clearinghouse in a Sentence
Recent Examples on the Web
Schachter proposed a national clearinghouse for best practices and lessons learned in school safety for districts to follow. — Scott Travis, sun-sentinel.com, "South Florida school districts ‘most problematic’ in complying with safety laws," 25 July 2019 Oregon joins Arizona in narrowing its aggravated murder statute this year, according to the Death Penalty Information Center, a non-profit that serves as a national clearinghouse for analysis and information about capital punishment. — oregonlive.com, "Calling Oregon death penalty ‘costly and immoral,’ governor signs bill limiting its use," 1 Aug. 2019 It was set up as a nonprofit entity that would act as the clearinghouse for vacant and abandoned properties, shepherding the properties through the foreclosure process and then putting them back to some kind of productive use. — Jordyn Grzelewski, cleveland.com, "After 10 years and 8,000 demolitions, Cuyahoga Land Bank shifts focus to rehabs," 23 June 2019 The agency is meant to dole out federal dollars allocated to election administration, act as a clearinghouse for quality election information and collect data on election administration nationally. — Jessica Huseman, ProPublica, "Federal Election Agency, Hungry for Funds, Now Pays for Officials to Get to Office," 19 July 2019 The site also acts as a clearinghouse for events and workshops around Birmingham tailored toward startups and small businesses. — William Thornton | [email protected], al.com, "Entrepreneurial tool Bham BizHub now available," 10 July 2019 In past years, employers generally led the effort and encouraged people to give to the United Way as a local clearinghouse for donations. — Deborah Yetter, The Courier-Journal, "Louisville nonprofits dealt another blow after United Way announces it will slash funds," 11 June 2019 One clearinghouse alone—the London Stock Exchange ’s LCH.Clearnet—cleared transactions with a nominal value of around $900 trillion last year. — Tom Fairless, WSJ, "The Next EU-U.S. Battleground: Clearinghouses," 1 June 2018 But actually the organization is more of an information clearinghouse. — Daniel Michaels, WSJ, "Interpol in Spotlight After Chinese Arrest," 8 Oct. 2018These example sentences are selected automatically from various online news sources to reflect current usage of the word 'clearinghouse.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for clearinghouse
clearinghouse
nounFinancial Definition of clearinghouse
What It Is
A clearinghouse is an intermediary between buyers and sellers of financial instruments.
How It Works
Clearinghouses take the opposite position of each side of a trade. When two parties agree on the terms of a transaction, a clearinghouse sits in the middle, acting as both the buyer and the seller. Clearinghouses exist to ensure the smooth functioning of financial markets. Fewer transactions would take place if sellers were worried that buyers would refuse to pay them, and vice versa. A clearinghouse ensures that transactions happen as planned.
For example, if you agree to sell your 100 shares of Company XYZ to John for $10,000, the clearinghouse ensures that John is delivered the 100 shares and you are delivered $10,000. It also records and reports the transaction to everyone involved. Either way, the clearinghouse is responsible for ensuring that the transaction happens in an accurate and timely manner.
Clearinghouses operate in most areas of the business world. For example, in the futures markets, clearinghouses ensure that the buyers and sellers fulfill their obligations related to the futures contract being traded and oversee the proper delivery of the underlying instrument. A country's central bank (e.g. the Federal Reserve in the U.S.) acts as a clearinghouse for checks, interbank payments, foreign exchange transactions, and other fund transfers in the banking system.
Why It Matters
Clearinghouses, acting as middlemen between buyers and sellers, provide both efficiency and stability to the financial markets they serve. However, they take on a high amount of risk because they act as both buyer and seller for a brief moment in almost every transaction. If a buyer fails to pay for the securities he has purchased, the clearinghouse must seek recovery of the funds or wait for them to become available.
Because the clearinghouse is on the hook if either party defaults on their agreement, they generally will not process transactions for traders who take on too much risk. To mitigate risk, clearinghouses also often require traders to deposit additional funds into their brokerage accounts in order to maintain minimum "margin requirements." These funds ensure that the clearinghouse will have access to enough funds to offset losses incurred by traders to get in over their heads and fail to meet their financial obligations.
Source: Investing Answers
clearinghouse
noun
English Language Learners Definition of clearinghouse
See the full definition for clearinghouse in the English Language Learners Dictionary
clearinghouse
noun
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