The center of post-trading infrastructure, whose activities are aimed at creating
mechanisms for guaranteed performance of concluded stock exchange transactions, is
clearing. In most countries with a developed market economy, clearing is a licensed
type of activity and is a subject of strict state control.
Independent legal companies carry out clearing through electronic interaction
with organized and regulated markets, including with stock exchanges. As a rule, a
clearing organization is a large joint-stock company; banks, investment institutions and
other financial organizations are its main shareholders. Such clearing organizations
provide clearing to several large stock exchanges. For example, there are the largest
clearing organizations, such as Clearstream, Euroclear, Eurex Clearing and others.
High efficiency with minimal risks is achieved through netting systems: only 4-
5% of transactions require a real move of financial assets or cash. Approximately from
the middle 1980s, post-trade services began to use the principle of multiple clearing
sessions during the working day, which allowed to break down the daily interval for
several short periods, to track operatively the situation in the systems and minimize
failures. In the future, real-time settlements were implemented in most of the trade
assets.
High turnovers also lead to low costs, which allow acceptable level of commission
for clients who are professional participants of financial market. At the same time, the
system of calculations is quite reliable; the risks of non-fulfillment of obligations under
the agreements are tiny. This is achieved by the use of the following methods:
- Calculations are conducted only in condition of "supply against payment", both
sides of the transaction must have enough money on the accounts in these systems to
conclude their obligations sufficiently;
- Preliminary reconciliation of parameters of all operations (number and value of
assets, which involved in trade);
- The use of cross-cutting data processing with automatic recognition of the results
of the operation. In particular, Euroclear and Clearstream have jointly developed
validation and verification systems that carry out an analysis on the day when the
transactions are carrying out, and subsequently systems of reconciliation which is
implementing in the immediate aftermath of operations;
- Coverage for operations in case of shortage or absence of relevant securities or
cash in the account of participants. Coverage is provided from a guarantee fund, which
is formed at the expense of participants' funds, and the system itself serves as a kind of
manager, which gives and returns resources, writes down and accrues remuneration,
manages existing risks. Funds are returned to the accounts of creditors at the first
request for payment of interest on its use. The repayment of funds is guaranteed both
by the system itself and by the banks with which the guarantee agreements have been
signed.
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