I try to understand how the clearing system works in the US stock market.
I know that the clearing house (NSCC - National Securities Clearing Corporation) is made up of member clearing firms (For example, Electronic Transaction Clearing, Apex Clearing, Wedbush Securities...). I also understand what is multilateral netting.
What I don't understand is this:
"The decision to work with multilateral netting led to the formation of the NSCC. Today, this corporation serves as a seller for every buyer, and buyer for every seller for trades that settle in U.S. markets."
https://www.investopedia.com/terms/n/nscc.asp
Who is meant by the buyer and the seller? Clearing firms or broker clients? I thought buyers and sellers could also be settled internally within a clearing firm?
Thank you for any information.
I know that the clearing house (NSCC - National Securities Clearing Corporation) is made up of member clearing firms (For example, Electronic Transaction Clearing, Apex Clearing, Wedbush Securities...). I also understand what is multilateral netting.
What I don't understand is this:
"The decision to work with multilateral netting led to the formation of the NSCC. Today, this corporation serves as a seller for every buyer, and buyer for every seller for trades that settle in U.S. markets."
https://www.investopedia.com/terms/n/nscc.asp
Who is meant by the buyer and the seller? Clearing firms or broker clients? I thought buyers and sellers could also be settled internally within a clearing firm?
Thank you for any information.