Clearing Cycle

A clearing cycle is a single processing round in a batch-based payment, card or securities system. Participants submit transactions up to a cut-off time; the operator then validates and sorts them, delivers them to the receiving institutions and calculates each participant's net position, which is settled at a set time. Systems may run one cycle a day or several. In the United States, the ACH network runs multiple processing windows, including those for Same Day ACH, while the UK's Bacs system works on a three-day cycle from submission to settlement. Card networks also run several clearing cycles each day, and the cycle in which a transaction is cleared affects when merchants are paid. The idea is closely linked to the clearing window and the settlement cycle. Real-time payment systems do not use cycles in the same way, because they clear each payment individually, though they may still settle in periodic batches under deferred net settlement.