A clearinghouse is a financial institution that acts as an intermediary between buyers and sellers in various markets, such as stocks or commodities. Its primary role is to facilitate the settlement of transactions, ensuring that both parties fulfill their obligations. By managing the risks associated with trading, clearinghouses help maintain market stability and confidence. In addition to settling trades, clearinghouses also provide services like margin management and default risk assessment. They collect and hold collateral from participants to cover potential losses, which helps protect the overall financial system. This function is crucial in markets involving derivatives and other complex financial instruments.