After the trade has been executed, we step into a critical phase known as clearing. At its core, clearing is the process of reconciling and confirming trade details between the buyer and the seller. This stage ensures both parties understand and agree upon the terms of the trade. Understanding the nuances of clearing is vital as it represents a foundational safeguard in the trade lifecycle, minimizing risks, and ensuring the integrity of the financial market. Let's look at this process step by step, trade capture. As soon as a trader enters into a trade, the core details of that trade, such as the security traded direction, size, and price are captured in the system. The correct trade capture is the responsibility of the trader. Trade enrichment, after this initial recording, additional relevant data is added to enhance the details of the trade. This could, for example, include security details, trading venue and associated fees, trade validation. The trade validation step ensures that the captured trade details align with market and internal rules and regulations. Are the time and date within expected trading hours? Is the agreed upon price consistent with market prices at that time? Is the security as well as the traded quantity within the trader's limits? Any discrepancies or errors will be immediately flagged for correction. Trade reporting after a trade has been validated, the trade details are reported to the relevant parties such as trade repositories or regulators. Most of these reporting requirements have been put in place to improve market transparency and enhanced transparency protects investors as it helps to deter or detect manipulative behaviors such as insider trading, and increases the fairness and functionality of markets. Trade confirmation and affirmation. The final step in the clearing phase is the trade confirmation and affirmation. Trade confirmation refers to the mutual agreement of the trade details between the counterparties, ensuring there is mutual understanding and no discrepancy. Trade affirmation is the formal acknowledgement of the confirmed trade details by the counterparties.