An exchange facilitates trades between two parties and should not hold client assets at all, not even custodial basis. A clearing house settles trades between

An exchange facilitates trades between two parties and should not hold client assets at all, not even custodial basis. A clearing house settles trades between two counter parts often acting as counterpart to both sides of the trade for a nominal fee. Some clearing houses also hold performance bonds (think of margin on futures). For instance, NYSE uses National Securities Clearing Corporation (NSCC) which is a subsidary of the Depositary Trust Clearing Corporation (DTCC). DTCC is a private company owned by many banks and brokers.