Clearinghouses

A clearinghouse is a financial intermediary that facilitates the settlement of trades by acting as a central counterparty to both sides of a transaction. Clearinghouses operate in securities, derivatives, and commodities markets, and the term is also used in other sectors, such as healthcare, to describe entities that process and route transactions.

In financial markets, clearinghouses perform trade matching, novation (replacing contracts with the clearinghouse’s obligations to the buyer and seller), netting, and settlement. They require participants to post margin and maintain collateral, operate risk-management controls, and enact default procedures if a member fails. By standing between buyers and sellers, clearinghouses reduce counterparty risk and improve settlement efficiency, but this centralization concentrates risk within the clearinghouse itself and can create systemic exposure if governance, liquidity, or failure mechanisms are inadequate.

Regulation and oversight: Clearinghouses are typically regulated as systemically important financial market utilities. They implement risk controls, capital and margin requirements, governance standards, and default-management procedures, with oversight under national and international regimes such as EMIR, Dodd-Frank, and related authorities. Ongoing risk assessment and stress testing are common features to ensure resilience during market stress.

Healthcare clearinghouses: In healthcare, a clearinghouse processes electronic claims between providers and payers. They validate eligibility, code claims, format submissions, and transmit remittance advice. They support HIPAA-compliant data handling and often provide data normalization and reporting services to improve interoperability and speed of payment.

Overall, clearinghouses play a central role in reducing risk and improving efficiency across traded markets and transactional sectors, while requiring robust governance and risk-management frameworks.