Forex broker strategy - Clearing house
"Clearing house" is one of the broker's
strategies.
Clearing is the process by which a
clearinghouse maintains records of all
trades and settles margin flow on a daily
mark-to-market basis for its clearing
member. A trade can either be a bilateral
trade between a buyer and a seller. Or it
might involve a third party “clearing” the
trade. In the first instance the parties to
the trade will have to assess and mange the
Credit Risk (the risk that the other party
will default on its obligations of the
trade).
Using a Clearing House – the clearing
house is the counterpart of the trade – both
for the buyer and the seller. The advantages
are twofold:
a) Most often the Clearing House is more
financially sound
b) The Clearing House has a more advanced
system for monitoring risk exposure for each
clearing house member.
c) The buyer and seller saves the
resources needed to maintain a separate
credit department.
Clearinghouse is an independent house
settles trades acting as a guarantor for all
trades cleared by it. The clearinghouse is
responsible for settling trading accounts,
clearing trades, collecting and maintaining
margin monies, regulating delivery, and
reporting trading data.
A good clearinghouse is the partner with
which you trade the money you have deposited
with them in your trading account.
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