Clearing

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Russian: Клиринг

A clearing arrangement [1] (also called a bilateral clearing agreement) is a form of barter in which the counterparties (governments) contract to purchase a certain amount of goods and services from one another. Both parties set up accounts with each other that are debited whenever one country imports from the other. At the end of an agreed-upon period of time, any account imbalances are settled for hard currency, or by the transfer of goods. The clearing arrangement introduces the concept of credit to barter transactions, and means bilateral trade can take place and does not have to be immediately settled. Account balances are periodically determined and any trade imbalances are settled in an agreed-upon currency. It is known that last two decades bilateral clearing agreements have usually taken place between Third World and Eastern European countries.

There are different fields of clearings: trading, banking, stock exchanging, currency exchanging. However, there is a currency clearing [2] that is in the subject of the present article. This is a settlement system between the participants of foreign trade on the basis of international clearing systems (cyberclearing included) and intergovernmental clearing agreements. The most important actors of currency clearings are clearing banks that deal with accounting and offsetting assets and liabilities, can also lend to members clearing operations.

Therefore, there are two different classes of international clearing arrangements in international trade:

International Clearing System is used for futures contract[3] transactions when a transaction is entered on an international level. This type of clearing was developed in order to induce world trade as well as market efficiency. The majority of these types of transactions are administered through an international clearing house[4].

References

  1. Eun, Ch.S., Resnick, B.G. International Financial Management, McGraw-Hill, Irwin, - Ch. 20.
  2. Katasonov, V. International clearing - our answer to monetary and financial U.S. dictates. RUfacts - http://ru-facts.com/news/view/35377.html
  3. A standardized, transferable, exchange-traded contract that requires delivery of a commodity, bond, currency, or stock index, at a specified price, on a specified future date. Unlike options, futures convey an obligation to buy. The risk to the holder is unlimited, and because the payoff pattern is symmetrical, the risk to the seller is unlimited as well. Dollars lost and gained by each party on a futures contract are equal and opposite. In other words, futures trading is a zero-sum game. Futures contracts are forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. Futures are distinguished from generic forward contracts in that they contain standardized terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearinghouses. Also, in order to insure that payment will occur, futures have a margin requirement that must be settled daily. Finally, by making an offsetting trade, taking delivery of goods, or arranging for an exchange of goods, futures contracts can be closed. Hedgers often trade futures for the purpose of keeping price risk in check. - http://www.investorwords.com/2136/futures_contract.html#ixzz37fK29eWw
  4. http://www.investorwords.com/12182/international_clearing_system.html#ixzz37fI6ngHG
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