A clearing house acts as an intermediary between a buyer and seller and seeks to ensure that the process from trade inception to settlement is smooth. Its main role is to make certain that the buyer and seller honor their contract obligations. Their responsibilities include settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery of the bought/sold instrument, and reporting trading data.

The clearing house enters the picture after a buyer and seller have executed a trade. In acting as the middleman, a clearing house provides the security and efficiency that is integral for financial market stability.