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What is a Clearing Broker?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 08 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Clearing brokers are financial professionals who function as the line of communication between an investor and a clearing corporation. Part of the responsibilities of the clearing broker involves making sure that all documents associated with the transaction are in order. Brokers who function in this capacity tend to be detail oriented and excellent at research as well as managing any funds associated with the business deal.

Many recognize the clearing broker as one of the most important components of the securities market. The broker will always work in the best interests of both the investor and the clearing house, making sure that any and all relevant information is presented before any purchase or sale takes place. Along with researching pertinent data, the clearing broker will also verify each detail and organize the information into a format that is logical and easy to understand.

Once the investor wishes to execute an order, the clearing broker will work to make sure that all documents are prepared according to current regulations. Before the final placement of the order, the broker will also go over the details with the investor, making sure there are no misconceptions about the terms and conditions associated with the transaction. Once the broker has verified all the details with the investor, the order is placed and the deal goes through.

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Once an order is executed, the clearing broker will work with the clearing corporation to make sure any funds involved with the transaction are handled properly. This will include making sure the proper transfers are made into the right accounts, and that both the corporation and the investor are credited accordingly. Only when all aspects of the transaction are complete and verified by the clearing broker can the task be considered fully complete.

For many, the clearing broker is the single most valuable component of any investment transaction, outside of the actual security that is being purchased or sold. With a commitment to excellence, brokers who function as clearing liaisons can make investing a much easier task for both newcomers as well as seasoned investors.

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