Chapter 04 · Section 4.1

Clearing for Exchange Members

Some clearing members only clear their own trades (often called direct clearing members). Others also clear for other exchange members.

What advantage does a clearing member have representing other exchange members in the clearing process?

a) It gets a fee (called clearing fee) from the institution it clears for. This commission exceeds the clearing commission it has to pay the clearing house.
b) It gets margin deposits from the institution it clears for. These may be higher than the amount it has to deposit as margin with the clearing house for the non-clearing members' positions.
c) None of the above.
• d) a and b
  Yes. (a) is the prime reason and (b) may be one too. The margin deposit that does not go to the clearing house generates interest income. (More about margining in the next section). Continue
  e) a & c

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