"Ex-Clearing" simply means that the trade comparison process is performed without the services of an electronic clearing house. Ex-Clearing is a manual comparison process that is performed by the brokerage firmís Purchase and Sales Department when the traded security does not meet the eligibility standards of the designated clearing corp.
The Ex-Clearing clerk in the P&S Department sends or faxes a standard comparison form ñ a "Comp" ñ to the P&S Department of the contra broker. The standardization of the trade Comp is provided for under New York Stock Exchange Rule 101. Rule 101 requires firms to include the following trade details on all manual comparison forms:
Trade Date Settlement Date Security Traded Quantity Traded Transaction Price Accrued Interest (Fixed Income Only) Net or Settlement Dollar Amount Due to standardization set forth under rule 101, the term "101" is used synonymously with Comp to refer to the manual comparison form. The result is a compared Ex-Clearing trade.
If the contra broker agrees with the specific trade details on the Comp, the Comp is signed and returned to the originating brokerage firm.
On settlement date, the firmís Settlement area will create a Fail Record on the firmís accounting books and records to represent the open receivable or deliverable. The Settlements department will ëset-upí a Fail-to-Deliver for securities sold to another firm, and a Fail-to-Receive for securities purchased from another firm.
The transaction is concluded when the selling firm delivers the sold securities to the buying firm, and the buying firm pays the selling firm for the delivered securities. At such time, the open fail record is removed from the firmís books and records. The ultimate removal of the open receivable or deliverable is referred to as a "Clean-Up".
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