Clearing Corporation

A clearing firm is a financial institution that acts as an intermediary between buyers and sellers in financial markets to ensure the smooth, secure, and efficient settlement of trades. They manage the confirmation, delivery, and settlement of transactions, ensuring that securities are properly transferred from seller to buyer and that funds are correctly exchanged. Clearing firms also handle the risk management aspect by guaranteeing the completion of the transaction, which reduces the risk of default by either party. Essentially, they ensure that when you buy or sell a stock, the transaction is completed reliably and securely.
A clearing corporation not only facilitates the actual exchange of securities or funds but also significantly lowers the systemic risk in financial markets by ensuring trades are completed reliably, regardless of individual participant failures which puts additional risk onto their books.