Introduction
Clearance:
Settlement:
Custody:
Clearance: Matching the details of a trade
Settlement: Money exchanged for securities
Custody: The safekeeping of cash and securities
Clearing Overview
DTCC
NSCC FICC
the above are both: clearing Firms
both are Introducing/(Correspondent) Firms
• Omnibus
• Fully Disclosed
same
Depository Trust and Clearing Corporation
The DTCC:
Provides what ? and is the parent of what organization?
Provides clearing, settlement, and information services
for its members
Is parent of the National Securities Clearing Corporation
(NSCC)
Transactions among members are completed through
computerized bookkeeping entries
Each member must post a daily collateral requirement
Guarantees settlement
Removes counterparty risk
Clearing Agreement
The agreement delineates what?
The agreement delineates the responsibilities of the
introducing and clearing firm regarding the opening/approval
of accounts, sending confirms/statements, and
receipt/delivery of funds and securities (clients receive written
notification of the agreement)
If the clearing firm receives a complaint from a client of the
introducing (correspondent) firm, it must:
Forward the complaint to the introducing firm and the
introducing firm’s primary SRO
Provide acknowledgement of receipt to the client
Brokerage Arrangements
Prime Brokerage
-When a primary B/D provides a large client (e.g., hedge fund) with the ability to clear all trades through a centralized firm with executions occurring with multiple B/Ds
The prime broker offers specialized services such as custody, securities lending, margin financing, clearing, processing, operational support, research, and customized reporting
