Graduation Year

Fall 2012

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Eric Hughson

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© 2013 Samuel W. Wong


As a financial institution that clears and settles payments for equity and other securities, a clearinghouse essentially reduces the counterparty risk. It diminishes the risk of one party failing to meet its obligations, and makes markets more efficient through netting. This paper examines the impact of the establishment of the Day Clearing Branch on April 26, 1920, which allowed the NYSE Clearinghouse to net cash values and clear loans, supposedly resulting in savings in banking, time, and labor. The common and preferred equity securities that traded on the NYSE during the year 1920 were analyzed. The effect on bid-ask spreads and volume traded were scrutinized. It was found that these securities had increases in bid-ask spreads and decreases in volume traded, contrary to prior hypotheses.

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Finance Commons