Self-clearing members: brokers that settle their own trades

Some brokers not only place trades but also settle them. These are self-clearing members. This guide explains what a self-clearing member is and how it differs from other members.

Quick answer

A self-clearing member, or SCM, is a broker that both places trades on the exchange and settles its own trades through the clearing house. It combines the roles of a trading member and a clearing member for its own business, rather than relying on a separate clearing member for settlement.

Key takeaways

• A self-clearing member both trades and settles its own trades.
• It combines trading and clearing roles for itself.
• It does not rely on a separate clearing member.
• It must meet the standards for clearing.
• It is one of several types of exchange members.

What is a self-clearing member?

A self-clearing member, or SCM, is a broker that both places trades on the exchange and settles those trades itself through the clearing house. It handles both the trading and the clearing for its own business.

So instead of using a separate clearing member to complete settlement, a self-clearing member does this step on its own, within the rules.

How is it different from other members?

A plain trading member places trades but relies on a clearing member to settle them. A clearing member may settle trades for others. A self-clearing member does both, but only for its own trades.

So the key point is that a self-clearing member is self-sufficient in both placing and settling its own trades, without depending on another member for clearing.

Why choose to be self-clearing?

A broker may become a self-clearing member to control its own settlement, reduce reliance on others and possibly cut costs. It gives the broker more control over the whole process.

However, this requires meeting the standards and safeguards for clearing, since settlement carries responsibility and risk that must be managed properly.

Why does the role matter?

The role matters because it shows how member roles can be combined. It helps explain the different types of members that make up the market's structure.

For the market, having clear categories of members, with proper standards for each, supports safe and orderly trading and settlement.

What should investors know?

For investors, whether your broker is self-clearing is a background detail. What matters is that trades are placed and settled reliably under the rules.

Understanding self-clearing members helps you see the market's structure. Any investment decision should be your own after proper research.

Frequently Asked Questions