A clearinghouse is a financial institution that acts as an intermediary between buyers and sellers in various markets, ensuring that transactions are completed smoothly. It helps to reduce the risk of default by guaranteeing that both parties fulfill their obligations. Clearinghouses are commonly used in stock markets, futures markets, and other trading environments. In addition to facilitating transactions, clearinghouses also manage the settlement process, which involves the transfer of funds and securities. They maintain records of trades and ensure that all necessary payments are made. This process is crucial for maintaining trust and efficiency in financial systems, such as those involving stocks, bonds, and derivatives.