Clearing settlements

Clearing: determining the mutual obligations of settlement participants and offsetting them. Instead of many separate transfers, the parties net their claims against each other over a period, and only the final difference is transferred in money. Clearing settlements are settlements built on such offsetting. In Russia, clearing activity on the financial market is governed by Federal Law No. 7-FZ “On Clearing, Clearing Activities and the Central Counterparty”.

Where it is used

• Between banks. Payment systems collect banks’ payments over the day and settle net positions. The US dollar system CHIPS, for example, works this way.
• On exchanges. A clearing organization matches the participants’ trades and is responsible for settling them.
• Between countries. Under clearing agreements, states keep mutual records of deliveries and offset mutual payments.
• Between companies. Offsetting mutual claims with a single counterparty is called netting.

How it differs from a direct transfer

In a direct transfer, each payment goes separately along a chain of correspondent accounts. In clearing, the participants first work out who owes whom and only then transfer the balance. This saves liquidity and fees, but requires trust in the settlement center and discipline from all participants.

What it means for a trade payment

A company usually does not see clearing. It sends a transfer, and the banks and systems decide among themselves how to settle. But the way settlement is organized determines how many banks are in the chain and where the payment may be delayed. For the client, one thing matters: its own payment must leave a complete set of documents tied to its contract. These are the agency agreement, the payment order, the payment confirmation, and the agent’s report and completion certificate.

For each payment, we select an agent whose route to the beneficiary’s country is working right now: Route selection.