324 THE WORK OF THE STOCK EXCHANGE

amount, or price of their transaction, the Stock Clearing Corporation
 refuses to act for them in clearing and settling it; the
transaction is removed from the Corporation’s clearing records,
and. declared “ex-Clearing House.” Unless the parties to it
can agree as to the terms of their contract, the case may be
adjudicated by the Arbitration Committee, and in case of appeal
 from the latter's decision, by the Governing Committee.
Meanwhile, the differences arising from the disputed comparison
 are reduced to money amounts by “purchase, sale, or
mutual agreement.”’**
But in case no such disagreement occurs, all exchange
tickets must be promptly delivered to the Distributing Department
 by 4:20 at the latest, in order that the firm to whom they
are being sent can in turn send them to the Night Branch with
its “Night Sheet.” Somewhat more latitude is allowed with
tickets for non-cleared securities, yet these too must be exchanged
 in time so that the Day Branch can in turn receive
them the next morning in good season. Tardiness by members
in these matters is subject to fine by the Stock Clearing Corporation.
 The time schedule applying to these processes has
in recent years been more difficult to establish with exactitude
owing to the increasing volume of business.”
By this process of comparison, all Stock Exchange transactions
 are checked by both parties to them, and preparation is
made to afford to the Stock Clearing Corporation evidence of
agreement as to their terms. Thus the first act of the settlement
 process is concluded, and the stage is set for its second
act—that of security clearance.

Theory of Security Clearance.—Although the technique
and practice of security clearance usually prove confusing to
the layman, the theory of it is very simple. If A owes $5 to
B, and B owes $5 to C, obviously both debts can be extinguished
 by a single payment of $5 from A to C. Also, if A
owes $5 to B, and B owes $10 to C, equally obviously all will
"14 See Chapter XVI p. 454