17 Dec
2003
17 Dec
'03
11:17 p.m.
In an off-line system, is the cash really cleared immediately?
Clearing in this case is when the cash passes from you to me. This is a pretty non-standard usage of the word "clearing", which happens when the issuer accepts the instrument for deposit. Settlement happens when money actually moves. The significant activity that happens at clearing is a liability acknowledgement by the issuer. This acknowledgement makes clear that the issuer has a liability. If the issuer clears but does not settle, i.e. accepts the liability but does not act upon it, the depositor can use the clearing as a claim against the issuer. (N.B. Here 'claim' is used in its strict legal meaning as the opposite of a 'defense'.) Eric