A clearing house is an entity through which transactions are cleared and settled. Clearing involves actions that take place after the commitment to a transaction until its settlement, including reporting, monitoring, risk margining, trade netting, failure handling and tax handling. For financial exchanges, a clearing house is responsible for collecting and maintaining margin funds/performance bonds, reporting trading data and regulating delivery. In sum, it serves an essential function of being the buyer to every seller and the seller to every buyer, thus virtually negating counterparty risk.
A clearing house may be a division of a particular exchange, an adjunct or affiliate thereof, or a freestanding entity. Also called a multilateral clearing organization, or clearing association. 
Some exchanges have their own internal clearing houses, while others contract with independent clearing organizations to handle clearing functions. In the U.S., all security options business is cleared by The Options Clearing Corporation, which operates as a utility owned by five of the seven U.S. options exchanges, but with a board of directors majority held by member firms.
In February 2008, the Department of Justice called for a review of clearing services – including their ownership by exchanges.. The largest exchange impacted by this review would be CME Group, which derives a substantial portion of its revenue from its clearing business. In 2003, prior to the 2007 merger of CME and the Chicago Board of Trade (CBOT), the CBOT had moved its clearing business from the third-party Board of Trade Clearing Corp. (now The Clearing Corporation) to CME Clearing.
In July 2012, CME Group proposed that its clearing house, CME Clearing, which handles 98 percent of US futures transactions, could provide third-party custodial services for clearing member firms. That means that all excess customer funds held by clearing member firms would be held at a clearing house, with any interest earned from that cash going back to the clearing firms. 
Restoring Customer Confidence Video Series
Customer Segregation: A Clear View
Moving excess customer funds to a clearing house is one way to reduce the amount of capital at risk. Byron Baldwin, SVP, Buyside Relations at Eurex, says his exchange developed segregated account services that can be as wide or granular as needed. Published Nov. 27, 2012.
- clearing organization. CFTC.
- DoJ Challenges Ownership of Clearinghouses. Financial Times.
- "CME Group Statement,” Feb. 6, 2008. CME Group.
- CME Exploring Use of Clearinghouses to Hold Client Funds. Dow Jones Newswires.
- Customer Segregation: A Clear View. John Lothian News: Restoring Customer Confidence.
- Origins Of The Modern Exchange Clearinghouse: A History Of Early Clearing And Settlement Methods At Futures Exchanges. Federal Reserve Bank of Chicago.