clearinghouse

play

noun clear·ing·house \ -ˌhau̇s \

Updated on: 26 Jul 2017

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

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Examples of clearinghouse in a Sentence

an online clearinghouse for information on museums around the world

Recent Examples of clearinghouse from the Web

The nonprofit has been a clearinghouse for missing kids under the age of 20 since it was founded in 1984.

— ciara o'rourke, The Atlantic, "Solving a Murder Mystery With Ancestry Websites," 16 Aug. 2017
Photo Illustration/Getty Images While Donald Trump was running for President, his Twitter account was an obnoxious clearinghouse of racist MAGA nationalism, unfounded attacks on his opponents, and Pepe avatar replies.

— jack moore, GQ, "Donald Trump's Twitter Account Is Very Much in Violation of Twitter's Terms of Service," 11 Aug. 2017
Bowden had not been with the team throughout the first week as UK waited for the NCAA clearinghouse to approve his academic eligibility.

— jon hale, The Courier-Journal, "Top-100 recruit Lynn Bowden cleared by NCAA to join UK camp," 5 Aug. 2017
Designed by a group of techies in Oregon, the app was intended to be a clearinghouse where bands and musicians could be hired directly, cutting out the booking-agent middlemen.

— bryan burrough, The Hive, "Fyre Festival: Anatomy of a Millennial Marketing Fiasco Waiting to Happen," 4 July 2017
But the central bank would have the power to monitor clearinghouse operations and take action in a crisis.

— jack ewing, New York Times, "E.C.B. Seeks Control Over London Trading After ‘Brexit’," 23 June 2017
Manfra said the agency has also worked with the federal Election Assistance Commission, an information clearinghouse for states, to share some information.

— deborah barfield berry, USA TODAY, "Federal officials say they're stepping up efforts to protect election systems," 21 June 2017
For patients, this can seem like an elaborate, never-ending maze—and there is no central clearinghouse for the information.

— helaine olen, The Atlantic, "Even the Insured Often Can't Afford Their Medical Bills," 18 June 2017
Building off of 300 million mod downloads for Fallout 4 and Skyrim, Bethesda announced Creation Club, a new, more integrated in-game modding clearinghouse.

— kyle orland, Ars Technica, "Bethesda’s E3 features new Wolfenstein, Evil Within, VR Fallout and Doom," 12 June 2017

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.

First Known Use of clearinghouse

1792

Other Business Terms

amortize, caveat emptor, divest, due diligence, emolument, green-collar, marque, overhead, perquisite

Financial Definition of CLEARINGHOUSE

clearinghouse

noun

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