Clearing and settlement

Clearing broker

The firm that clears, settles and holds customer assets, often behind an introducing broker that handles the client relationship but touches no money.

Continuous net settlement

The process that nets each clearing member's buys and sells in a security to one delivery or receipt obligation, hugely reducing the movements required to settle.

Futures commission merchant (FCM)

A registered firm that accepts futures orders and holds customer margin funds, which must be segregated from the firm's own money.

NSCC

The DTCC subsidiary that acts as central counterparty for US equity trades, guaranteeing settlement and netting members' obligations down to a single figure per security.

Omnibus account

An account holding many underlying clients' positions in aggregate under one name, so the clearing layer sees the intermediary rather than the individual owners.

Settlement cycle

The number of business days between trade date and the date cash and securities actually change hands, written as T plus a number.

Threshold security

A stock flagged for persistent settlement failures, triggering stricter close-out requirements on brokers under Regulation SHO.

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