clearinghouse

noun

clear·ing·house | \-ˌhau̇s

Definition of clearinghouse

1 : an establishment maintained by banks for settling mutual claims and accounts

2 : a central agency for the collection, classification, and distribution especially of information broadly : an informal channel for distributing information or assistance

Examples of clearinghouse in a Sentence

an online clearinghouse for information on museums around the world

Recent Examples on the Web

That undermined Eurex, which hoped to clear trades through the same clearinghouse as CBOT. — Alexander Osipovich, WSJ, "Did Chicago Exchanges Muscle a Rival Out of Town? A Jury May Soon Decide," 15 Apr. 2018 MoveOn, a liberal advocacy organization, is one of four lead partners for the Families Belong Together events and its website MoveOn.org is a clearinghouse of information about the protests across the country. — Pamela Ren Larson, azcentral, "Immigration protests set for Saturday in Phoenix, Tucson and Nogales," 29 June 2018 The wonderful website Atlas Obscura is a kind of clearinghouse of these discoveries, only spread across the globe, an unlikely museum here, a disturbing military milestone there. — Christopher Borrelli, chicagotribune.com, "In a city full of journalists and photographers, does Chicago have any secrets left?," 1 May 2018 But the data RapidSOS transmits goes through a clearinghouse and is only available to 911 operators. — Hallie Detrick, Fortune, "Cellphone Calls to 911 Can Be Catastrophically Bad. Apple Has a Plan to Fix Them.," 18 June 2018 In addition to the expo, there is a new website, caregiverSD.com, serving as a comprehensive clearinghouse of information, resources and support for caregivers. — Lori Weisberg, sandiegouniontribune.com, "Thousands turn out to caregivers expo in search of help," 9 June 2018 Brents is also working out with the Cardinals' football team while awaiting approval from the NCAA clearinghouse, which is examining his transcripts in order to determine his eligibility to play this season. — Jake Lourim, The Courier-Journal, "Former Waggener star Jairus Brents enrolls, awaiting NCAA clearance," 13 July 2018 With a national clearinghouse, students could upload their academic records and accomplishments during their high school career and then in their senior year simply press a button to apply to colleges. — Jeffrey Selingo, The Atlantic, "The Best Ways to Fix College Admissions Are Probably Illegal," 27 Apr. 2018 The office was designed to serve as a clearinghouse for complaints, referring appropriate cases to the inspector general for further investigation. — Ben Kesling, WSJ, "VA’s Acting Secretary, Watchdog Fight Over Whistleblower Records," 21 June 2018

These 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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Last Updated

18 Sep 2018

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The first known use of clearinghouse was in 1792

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More Definitions for clearinghouse

clearinghouse

noun

Financial 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