To free from encumbrance. Bonds, stocks, or any securities, are " cleared " when the person who has contracted to purchase them pays for and receives delivery of the same. Or a broker, acting without sufficient capital, may purchase $50,000 bonds from Scott, and sell them almost immediately to Hall, making a profit or commission on the transaction. He is not able to pay Scott for the bonds and he, therefore, employs his bank, or possibly some other broker, to pay for and receive the bonds, and then make delivery to Hall; the difference between the purchasing and selling price, less the clearing charges, to be paid the first broker. This is called "clearing." At the time of purchasing bonds, a broker may say to the seller: " Jones & Co. will clear these bonds for me," meaning that the seller will make delivery of the bonds to Jones & Co. for the broker's account; the broker in the meantime instructing Jones & Co. as to the transaction.
Many firms make a specialty of " clearing " securities for other brokers, the usual charge for this work being about $3.50 for each 100 shares of stock or for each $10,000 in bonds.
The most common use of this term is in connection with the " clearing-house" (to which refer) system by which " to clear' is understood to pass through it; i.e. the collection of a check or other item through the medium of the association; or the general settlement for the day of a bank's accounts in this manner.