The Clearing House Payments Company

The Clearing House Payments Company L.L.C. (PayCo) is a U.S.-based limited liability company formed by The Clearing House Association L.L.C. PayCo is a private sector, payment system infrastructure that operates an electronic check clearing and settlement system (SVPCO), an automated clearing house (EPN), and a wholesale funds transfer system (CHIPS).

The Clearing House Association L.L.C. and The Clearing House Payments Company L.L.C conduct business under the name The Clearing House. The Clearing House is the oldest banking association and payments company in the United States. The Clearing House governance model includes a supervisory board and two managing boards, one for the Payments Company and one for the Association. The businesses and affairs of PayCo and the Association are managed by the Supervisory Board. The managing boards of PayCo and the Association have responsibility for the oversight of their respective businesses and financial performance and for the establishment of their agendas.

The Clearing House Interbank Payments System (CHIPS) is a bank owned automated funds-transfer system for domestic and international high value payment transactions in U.S. dollars. It is a real-time final settlement payment system that continuously matches, off-sets and settles payments among international and domestic banks.

CHIPS provides real-time, immediate and final settlement of payment messages continuously throughout the day similar to Fedwire. During the business day, system participants can send their payments to CHIPS. Funds are released by available funds on hand (no overdrafts are permitted) or through offsetting. A “Balance Release Algorithm” continuously searches the queue of unreleased payments and uses this patented off-setting algorithm to match and release payments.

CHIPS’ ability to perform real-time bilateral and multi-lateral off-setting means that very large payments can be released earlier in the day, and that participants realize greater liquidity efficiency savings than those possible in pure RTGS systems. With real-time off-setting, the system continuously offsets payments between two or more CHIPS participants. A payment is considered final and irrevocable at the instant CHIPS releases it.

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