Whether an individual is looking to purchase shares as a medium to long-term investment or is looking to maximise profit on those shares as quickly as possible via trading, two key dates are important in the buying and selling process.

These two dates are the trade date and settlement date. 

The trade date refers to the date on which the trade order is given by a person or an agent in the market or stock exchange. 

The settlement date on the other hand refers to the date on which the funds are transferred. This is the date on which legal ownership of the securities are exchanged or the stock transfer agreement becomes legally valid. Clearing services play a key role in the whole process.

What are the key steps in clearing services?

There are a number of key steps in the clearance and settlement process as shares move through a settlement system.

Firstly, shares are offered to a broker who then entrusts them to a custodian. A custodian or custody banking is a financial institution that holds customers’ securities for safekeeping to keep them from being lost or stolen.

The broker will then execute the sale, with the stock exchange then passing the information on to the clearinghouse who carry out a range of clearing services.

How does a clearinghouse work?

A clearinghouse is designed to tackle these problems as well as to build trust between buyer and seller. It’s a designated intermediary between a buyer and seller in a financial market. In acting as a middleman the clearinghouse supports the efficiency and stability that’s integral to the overall stability of a financial market.

Clearinghouses provide what is known as clearing services by validating and finalising the transaction ensuring that both the seller and the buyer honour their contractual obligations. Rather than the trade being a contract between the buyer and seller, it then becomes a contract between seller and clearinghouse, and buyer and clearinghouse. This provides a strict framework in which the transaction will take place and establishes everyone’s liabilities as well as orchestrating the settlement process.

Custodians and depositories

Custodians are responsible for the safekeeping of assets, including stocks and shares. They are usually responsible for dealing with all the bureaucracy involved with the buying and selling of stocks. This will include any tax issues, foreign exchange or dividend payments that need to be carried out. 

The buyer and seller's custodians exchange shares for cash. If they both use the same custodian the process is a simple updating of an electronic record. If they use different custodians another body enters the process. Central Securities Depositories (CSD), sometimes known simply as depositories, act as a ‘Custodian of custodians’, an entity that provides a central point for depositing financial instruments such as shares. 

All of these processes are now carried out electronically and the movement of papers is rarely required. CSDs help to make the process of transferring assets safe and seamless.

High rates of settlement efficiency


The Global Investment Strategy team has administered 250,000 transactions of clearance and settlement values exceeding £50 billion over the last three years.

As a custodian, we develop and maintain strong relationships with Tier 1 custodians so you can be sure your assets are secure throughout the entirety of our clearing services process. Here at Global Investment Strategy, we believe transparency is key, which allows us to review and check our processes, ensuring there are never any safeguarding issues.


To find out more about our clearance and custody banking email us at info@gisukltd.com or phone us at 02070489440.


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