A brokerage firm that handles a customer’s orders to buy and sell securities, and additionally maintains custody of the customer’s securities and other assets (like any cash balance in the customer’s account). A carrying firm is responsible for maintaining the sufficient amount of funds for trade settlement associated with customers buying securities. In other words, carrying firms must maintain higher levels of net capital than other firms that do not provide custody service (introducing firms), while appropriately segregating the customer funds and securities in their custody. The role of carrying firms is to keep publicly traded markets flowing uninterruptedly for all market players.
For trade execution (buy or sell), the carrying firm assumes the risk as a central counterparty to both the buyer and the seller, bearing the risk of either side (in case of failure or reluctance to execute). To that end, these firms match the buyer and seller, process, and reconcile trades and transactions.
A carrying firm is also referred to as a clearing firm or broadly also as clearing houses or clearing corporations.
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