clearinghouse

clear·ing·house | \ ˈklir-iŋ-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 The data that Pence requested fed into a piece of software called HHS Protect, which was meant to serve as a clearinghouse of coronavirus data for the Trump administration, according to a spokesperson for the Department of Health and Human Services. — Alexis C. Madrigal, The Atlantic, "The CDC Has Quietly Started Releasing Nationwide Testing Data," 17 May 2020 It will be converted Saturday, April 18, into a clearinghouse to allow employees to do the shopping and loading, and be ready to handle orders Sunday, Giant Eagle spokesman Dan Donovan said. — Marc Bona, cleveland, "Giant Eagle looks to the future, adding 2nd store for curbside-pickup-delivery only," 9 Apr. 2020 The Washington Post, which first reported on the move, said that the group will be a clearinghouse to set priorities, gather information and coordinate approaches to the threat coming from China, including dealing with legislation. — Fox News, "House Republicans launch China Task Force amid growing scrutiny over coronavirus response," 7 May 2020 His nonprofit is a one-stop clearinghouse for post-death information and planning. — Sharon Grigsby, Dallas News, "After his 11-year-old son’s death by suicide, Coppell dad builds a village for families in their first hours of loss," 24 Apr. 2020 Unfortunately, the seafloor has become a clearinghouse for plastics. — Alex Fox, Smithsonian Magazine, "Lobsters Crush Ocean Plastic Into Even Smaller Pieces—and That’s Bad," 22 Apr. 2020 The agency has partnered with the American Red Cross to set up a kind of clearinghouse to match eligible plasma donors who have recovered from the virus with patients who need care. — Jill Cowan, New York Times, "Why a Lawmaker Is Pushing to Change Plasma Donation Rules," 7 Apr. 2020 She was advised to check her credit and report the incident to the State of Ohio Attorney General clearinghouse. — cleveland, "Police follow footprints, nab trespasser: Middleburg Heights Police Blotter," 19 Feb. 2020 The London Stock Exchange Group Plc, owner of the dominant clearinghouse, has seen its share price double since Brexit. — Washington Post, "London’s Fight to Remain a Financial Hub After Brexit," 3 July 2019

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

28 May 2020

Cite this Entry

“Clearinghouse.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/clearinghouse. Accessed 4 Jun. 2020.

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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