Clearing Member
A member of a clearing corporation that settles trades and posts margins, either for itself or on behalf of trading members.
How it is identified
Test: the firm holds clearing membership and is directly liable to the clearing corporation for settlement obligations
Unit
qualitative
In depth
Not every broker is a clearing member; smaller trading members clear through a larger firm, which becomes liable for their obligations. This creates a chain, and the client's protection depends on where in the chain their money and securities actually sit. Segregation rules requiring client collateral to be held separately from the member's own exist precisely to break the chain of contagion when one link fails. The 2019-2021 broker defaults in India turned largely on whether client securities had been properly segregated.
Worked example
A small broker clears through a large clearing member. If the small broker defaults, the clearing member must settle its trades. Client shares held in the client's own demat account are unaffected either way, which is the point of holding them there.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Clearing Member” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.