You need to be confident that your money reaches the correct destination when you’re completing a financial transaction. 

When it comes to trading on the markets, global clearing, safe custody and settlement services will be handled by your clearing broker. These play a crucial role when it comes to ensuring that trades actually take place. 

How do you choose the right broker for you, particularly when you’re looking to trade in a market with which you might be less familiar, such as Hong Kong? 

First, let’s take a quick look at what clearing brokers do and why they’re so important. 
 

What clearing brokers do 

Clearing brokers act as the common ground between two parties in a trade. They manage the risk of a transaction between the parties and ensure that everything is settled to everyone’s satisfaction. 

Clearing brokers help to minimise the risk that one of the parties might fail in their obligation during a transaction. In short, they act as a financial middle man. 

There’s more to it than just that, of course. Safe custody is a key part of the service that they provide. Clearinghouses work to limit wider market risk, so using one can help protect your assets and reduce the chances of losing money through a trade breaking down. 
 

How does it work? 

As soon as a trade is executed between two parties, the clearing broker will step in. The trade title will be transferred to the firm using a process known as novation. In effect, this means that the clearinghouse takes on the legal counterparty risk associated with a transaction. 

The clearinghouse will help to ensure that trade is completed as it’s now responsible for it. If one of the parties fails to honour their obligations, it has fewer consequences as the clearing broker is responsible for ensuring that the trade is completed. Global clearing and safe custody services can help to isolate any negative effects of a failing market participant. 

Clearing brokers help to build confidence in the market and minimise the risks associated with a participant failing to honour their commitments. This can be particularly important when you’re trading globally.
 

What should you look for when choosing a clearing broker? 

There are a range of factors it’s helpful to consider when choosing the right clearing broker, global clearing and safe custody service, particularly when you’re trading in a market such as Hong Kong where you might be less familiar. 

A good question to ask is: where are they based? 

If you’re looking to trade in Hong Kong, a clearing broker that is based in the territory can give you an advantage. They understand how local markets operate, will have multiple contacts and a wealth of experience when it comes to tackling any issues that may arise. They will also have counterparty relationships that they have built up over many years. 

Check what services they provide. Do they offer what you are looking for, and are those services technology-led?  

You will also need to take a look at their pricing structure. Is their pricing realistic for your trading volume?  
 

Reliable clearing and safe custody services based in Hong Kong 

Traders and investors, whether corporate or private, need clearing and safe custody services that are reliable and experienced. Ideally, they should be able to build up a strong ongoing relationship. 

At GIS HK, we offer global clearing services that are future-proof, quick to adapt to technological change and any regulatory requirements. Crucially, we’re based here in Hong Kong and our team is made up of people with a huge collective knowledge of Asia-Pacific markets. 

Call +852 3018 3009 or email info@gishkltd.com to find out more.

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