Ensure accurate accountability of individual positions and obligations, while netting positions to reduce the costs of trading and servicing securities
Providers of clearing services must operate in a highly-automated environment in order to ensure accurate records are kept of mutual positions in the exchange of cash and securities between counterparties or among a group of participants and to effect orderly settlement of their obligations on a net basis.
The netting of positions to reduce a large number of individual positions or obligations to a small number is the crux of clearing. Service providers and clients should pay attention to the form which the netting takes - and the underlying legal agreements - in order to ensure the appropriate degree of legal enforceability in the event of default of one of the parties.
Providers of clearing services should offer a wide array of credit products, such as overnight loans, day loans, letter of credit, revolving credit and intraday credit.
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