Also known as a central clearing counterparty or CCP. A central body through which derivatives and securities trading takes place. The clearing house monitors transactions and provides a system for financial settlement. Trading is carried out through members of the clearing house (either on their own behalf (referred to as proprietary trading) or on behalf of a client). The clearing house acts as an intermediary for the trades. So, for any purchase by a client of a member, the member will have an equal and off-setting purchase contract with the clearing house which will in turn have an equal and off-setting purchase contract with another member. As a result, the clearing house is exposed to a member’s insolvency and guards against this by having rules requiring a margin to be paid to the clearing house.

Examples of clearing houses are the London International Financial Futures and Options Exchange (LIFFE) and the London Metal Exchange.

The glossary to the FCA Handbook sets out a definition of this term. When considering this term in the context of financial services, reference should be made to the FCA Handbook glossary definition of clearing house.

For an overview on clearing of securities, see Practice note, Clearing and settling securities.

For an overview on the clearing of exchange-traded derivatives, see Practice note, Derivatives: overview (UK): Exchange-traded derivatives.

For information on requirements for certain classes of over-the-counter (OTC) derivatives contracts to be cleared through a CCP, see Practice note, EMIR: requirement to clear OTC derivative contracts through a CCP.