Clearing and settlement during the crash

This article is a reexamination of the clearing and settlementprocess in financial markets (particularly the futures market)and its performance during the 1987 stock market crash. It providesboth some institutional background and some conceptual perspectiveon the problems faced by the system during the week of October19. Much of the discussion is based on the useful analogiesthat can be drawn between the clearinghouse and other financialintermediaries, such as banks and insurance companies. A majorconclusion is that the Federal Reserve played a vital role inprotecting the integrity of the clearing and settlements systemduring the crash.