system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Why must stocks be traded through clearing houses? Why can’t they be traded directly between entities?
gpt
Most people who trade stock do not actually get the stock. Actually moving stock from one entity to another does take quite some paperwork and waiting for the right records to be updated. So most stocks will be in the possession of the stock exchange or the banks. This means that stock trades can happen much quicker, even less then a week. But it does mean that all trades now have to go through the stock exchange or a clearing house.