What is Clearing?

As it relates to the banking and finance industry, clearing is the process of settling a financial trade or purchase of an asset by correctly and efficiently transferring funds to the seller, and in return, by transferring the corresponding asset to the buyer. Typically, a specialized organization acts as an intermediary in the clearing process to both buyer and seller to ensure procedure and finalization. The interrelated processes of clearing and settlement are what make up the post-trade process.