Clearing instructions

PrepNuggets

Instructions that specify how a trade is to be cleared and settled.  

Clearing instructions are usually standing instructions by the client and not attached to an order.  

Retail trades are typically cleared and settled by the same broker which arranged the trade.

Institutional trades may be settled by a custodian or another broker, which might be the trader’s prime broker.  Using two brokers allows the investor to keep one broker as the prime broker for margin and custodial services, while it engages other brokers for specialised arrangements.