the.com/clearinghouse
the middleman who trusts nobody so everybody else doesn't have to.
means an institution that sits between two parties in a trade to guarantee the deal even if one side flakes.
from born in 1770s london, where bankers tired of runners crisscrossing the city with sacks of cash started meeting at a pub to net out who owed whom, cutting thousands of trips down to a handful of settlements.
risk absorberif one trader defaults, the clearinghouse eats the loss, not you.
novation trickit legally becomes the buyer to every seller and vice versa.
2008 lessonlehman's trades cleared fine; its uncleared swaps caused chaos.
margin callsmembers post collateral daily so failures get caught early, not late.
for instance
dtcc — clears nearly all us stock and bond trades, trillions daily.
cme clearing — backstops chicago futures and options since 1925.
lch — london clearinghouse handles most of the world's interest rate swaps.
fedwire — the federal reserve's own settlement system for interbank payments.