Financial Clearinghouse Firms Key Terms
Learn more about using a financial clearinghouseA financial clearinghouse is a type of third party for commodities, securities and futures trading. The job of the financial clearinghouse is to ensure that both parties arrive with the proper amount of funds and/or commodities to trade. Financial clearinghouses also serve another purpose after the initial trade. They take part in maintaining the performance bond of the transaction. Financial clearinghouses are essential for brokers and companies in all types of trading.
Futures contractsA futures contract represents a transaction for buying or selling commodities or stock at a certain price in the future. This is a common tool in the hedge and speculation markets.
Securities, ETFsA security is anything that represents a specific financial value in a market. This can be stocks, bonds, equity or debt securities. Most types of securities can be traded through a financial clearinghouse. A security traded on any market is commonly known as an exchange-traded fund, or ETF.
Securities and Exchange Commission (SEC)The Securities and Exchange Commission is the regulatory body that oversees the securities industry. This government commission is in place to protect investors and maintain the integrity of the market.
SEC website gives a detailed explanation on the history and function of the SEC as well as information for investors, advisers and brokers.
Commodity Futures Trading Commission (CFTC)The Commodity Futures Trading Commission works similarly to the SEC. The CFTC oversees the futures and options markets with market surveillance and oversight advisers to prevent abuses of the system.
CFTC website provides information on the commission, information for customer protection and a variety of market reports.
SolvencySolvency in the financial world refers to the ability of a company or individual to pay debts with cash on hand. If a company has good solvency, it will have a good financial standing.
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