What is clearing activity?

Clearing activity is work aimed at the release of payment obligations between business entities. In the article we will consider the essence of clearing and its scope.

Clearing, clearing activities

Clearing translated from English (clearing) means “clean”, “clean”, “free”, and in the commercial field it is a special practice when working in the securities market. That is, clearing activity is an exemption from the obligation to pay in cash, established on the basis of mutual settlement between counterparties.

For example, a seller and a buyer meet on the market. First, the subject of sale and its value are determined. Next, a contract is concluded. As a result, an interchangeable operation takes place, on the basis of which the buyer pays, and the seller transfers the goods. This is a classic example.

On the securities market, such a meeting of counterparties is quite rare. The buyer and the seller are separated by time and space. The role of a liaison is played by intermediaries who organize, calculate and guarantee the fulfillment of obligations. Thanks to the technological development of modern automation systems, it has become possible to process huge amounts of information. Necessary calculations are made. exchange transactions: their registration and accounting, offset of obligations between counterparties, guarantee of collateral and other operations.

Counterparties can be organizations, international companies, and even entire countries. And the object of such activities are goods, services, securities.

On securities market clearing activity is a process whose main purpose is the calculation and fulfillment of mutual obligations. And the main condition of the transaction is the balance of payments.

Clearing activity: Federal Law No. 7 dated 02/07/2011

The activities of clearing organizations in the Russian Federation are regulated by Federal Law dated 07.02.2011 No. 7-FZ (as amended on 12.30.2015) "On Clearing and Clearing Activities".

In the Russian Federation, it is subject to compulsory licensing. The license is issued by the Bank of Russia, its validity is not limited, but can be canceled for the reasons specified in Article 28 of Law No. 7-FZ.

The list of activities in which the company cannot engage in clearing activities is clearly stated in clause 3 of article 5 of Law No. 7-FZ. It is important to note that for the implementation of the latter, the company must provide an initial amount of equity of more than 100 million rubles.

Clearing operations

The described operations are compensatory transactions. They can be with full, partial or without any security. In the first case, the risk of financial losses is minimized, since the amounts necessary for the transaction are on the participants' accounts.

With partial collateral in the accounts of participants, it is enough to have some of the funds or confirm with data from other contracts. Such operations can be carried out with a zero balance in the accounts of participants, that is, without collateral. But such a transaction is quite risky.

Clearing Types

Depending on the participants in the activity, there are:

1. Simple clearing. This is a calculation of obligations for both each participant and for each transaction.
2. Multilateral. It involves the calculation of obligations in aggregate.
3. Centralized. It is based on conducting transactions through the accounts of the clearing company. Moreover, she has all the rights of participants in the transaction.

The named company has the right to independently not only determine which type of clearing is preferable to use, but also to combine them. If the obligations on securities or cash flows are of a uniform nature, the intermediary organization may netting (offset) these obligations.

Types of Clearing Transactions

Depending on the methods of mediation, they distinguish:

1. Bank clearing. It exists in those countries where the banking sector is actively interacting and developing. It implies settlements between banks in non-cash form. The main condition is the offsetting of equivalent cash payments.
2. Currency Clearing. Refers to the international system of obligations. In this case, settlements can be made not only at set prices - a special clearing currency can be developed for this. This clearing method is resorted to if the participants do not have a converted currency for mutual settlements. Of course, you can pay with gold, but, as a rule, such resources in many countries are limited.
3. Commodity. It is represented by a system of payments between the exchange and the commodity market.

Clearing Members

The composition of the intermediary activities includes:

• an intermediary organization draws up documents in accordance with the legislation of the Russian Federation in this type of activity, receives a license from the Bank of Russia, then proceeds to work;
• clearing member. The legal entity or individual enters into a clearing service agreement with the organization;
• clearing center. It is an organization in which the process of clearing transactions occurs through stock exchanges and other trade organizers;
• a settlement depository is a guarantor in the securities market. Transactions go through trade organizers;
• settlement organization. Having received the clearing results, this business entity calculates cash flows;
• market organizers. The classic organizer is the stock exchange, which additionally carries out settlement, clearing and depository activities.

For the productive formation and development of the securities market, the role of a tender organizer can be played by a self-regulatory organization, which is formed from the composition of professional participants. Such an association is voluntary.

Clearing Process Features

Clearing activities in the securities market are functioning in stages. First, a contract is concluded with a broker on the stock exchange. Next, details of the transaction are clarified, volumes, cost, delivery times and other conditions are thoroughly prescribed.

Then the transaction is registered, and intentions are confirmed. The following is a calculation of the mutual requirements, with the help of which the participants determine who will have to pay for the services of a broker, a commission on the stock exchange and other professional market participants. At the final stage, mutual settlement occurs between them.

Banking clearing activities

In the banking sector, the role of intermediary operations is carried out by clearing houses and centers. The first of them are a powerful financial instrument and have an independent status. The chamber pledges contractual obligations, which reduces risks and guarantees financial results.

If the chamber is created inside the exchange, that is, it is its structural unit, then the exchange controls its activities. Therefore, it is the guarantor of transactions. Having chosen the legal form in accordance with the legislation of the Russian Federation, the chamber can be organized as an independent legal entity. Moreover, relations with the exchange are contractual in nature. It is important to note that such a clearing house can interact with several exchanges at once.

Stages of settlement and clearing activities

As soon as a deal is fixed by brokers on the exchange, the clearing procedure begins. Settlement and clearing activities have a certain feature and are undergoing a phased process of re-registration of a new owner of a security.

1. Registered on the exchange.
2. Confirmed by counterparties.
3. Securities and money through brokers are transferred to the exchange.
4. The re-registration process is underway.
5. The process of returning re-registered securities to the stock exchange.
6. Transferring money of re-registered securities through brokers to new owners.

Clearing is an important regulatory mechanism in the stock market. With its help, the amount of money supply between participants is minimized. The guarantee function in fulfilling obligations ensures high-quality liquidity of the market itself.