Purchasing shares in something is an excellent way to build up (and potentially diversify) a portfolio, allowing for financial prosperity. If you’ve never done it before, though, the process will be unfamiliar.
The important thing to note is that it’s not simply a case of deciding to buy something and then doing it the way you would with a standard purchase. You have to go through a process from trading to settlement, with clearing services playing a pivotal role in this. Precisely what does this entail, though?
That’s what this short guide will explain.
Acting As A Middleman
In its most basic terms, a clearing broker – who provides the aforementioned services – acts as a middleman between you and whoever you’re purchasing shares from. Rather than you doing a transaction directly with the other party, your contract is with the broker. They receive the shares that you’ve purchased, and then the exchange is carried out on the settlement date.
Validating The Transaction
Trying to purchase shares when you don’t have the means to won’t end well. Neither will trying to buy assets that don’t exist or aren’t as advertised. Fortunately, clearing brokers don’t merely act as a middleman for the exchange; they also validate it. They’re able to give both parties peace of mind by ensuring that the transaction is sound before anything trades hands.
Offering Precision And Security
One of the purposes of a clearing broker is to offer you more comfort when doing something like purchasing shares. With them around, the exchange is supposed to be smoother, more precise, and incredibly secure. If these elements aren’t present, you’re no better off than if there wasn’t any middleman in the first place.
When it comes to choosing the best clearing broker, these are obviously factors you need to consider thoroughly. A company like Global Investment Strategy, which has administered over 250,000 clearance and settlement transactions in the space of a few years, can offer that. Their vast experience handling billions of pounds in assets means that you never have to worry about a transaction going sour.
Entrusting Securities With A Custodian
One way that a clearing broker is able to offer you additional security is by entrusting securities to a custodian. Custody banking is designed to prevent the loss or theft of assets, which is why you can feel safe knowing they’re involved in the exchange.
Their inclusion is a lot more seamless than in the past, now that most of the processes are done electronically. Things are also a lot easier if both the buyer and seller use the same custodian. If they don’t, depositories are brought in to essentially act as a custodian for the custodians. Either way, exceptional security is assured.
Purchasing shares for the first time can potentially be daunting, but with clearing services ensuring that everything goes smoothly, you’ve little to worry about. As long as what you’re buying is a sound investment, everything should go off with a hitch.