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Clearing Operations

Learn how to manage clearing and settlement operations for securities trading with T+2 or T+3 settlement cycles.

Overview​

Clearing operations require validator approval before tokens can be transferred or redeemed. This enforces regulatory compliance and jurisdiction-specific rules.

Why Clearing Mode?​

Different jurisdictions have unique regulatory requirements that may not be built into the ATS. Instead of trying to code every possible rule, clearing mode provides a flexible solution:

Without Clearing Mode (Standard):

  • Users freely transfer and redeem tokens
  • Only basic restrictions apply (KYC, control lists, pause)

With Clearing Mode (Regulated):

  • Users submit transfer/redeem requests on-chain
  • Validators review and approve/reject each operation
  • Only approved operations are executed
  • Provides flexibility to enforce any jurisdiction's rules

Key Concepts​

Clearing: Validator approval required before transfers/redeems execute

Validator: Account with CLEARING_VALIDATOR_ROLE that approves/rejects operations

  • You cannot choose which validator reviews your operation
  • Any account with CLEARING_VALIDATOR_ROLE can approve/reject
  • Validators approve or reject the entire operation (not partial)

How it works:

  1. You submit operation (transfer, redeem, or hold creation)
  2. Tokens are locked from your available balance
  3. Validator reviews the operation
  4. If approved: Operation executes, tokens transfer/redeem
  5. If rejected or expired: Tokens return to your available balance

Clearing vs Hold Operations​

Both lock tokens pending approval, but clearing has key differences:

FeatureClearing OperationsHold Operations
Validator selectionYou don't choose - any CLEARING_VALIDATOR_ROLE can validateYou choose the notary/escrow
Destination accountYou specify (required for transfers)Optional
Validator controlCan only approve/reject entire operationCan execute partial amounts
Token modesCleared mode: ONLY clearing operations allowedWorks alongside normal transfers
Use caseRegulatory compliance, jurisdiction rulesEscrow, marketplace, general holds

Important: When clearing mode is activated, you cannot use normal transfers, redeems, or hold creation. You must use the clearing versions.

Roles in Clearing​

CLEARING_ROLE:

  • Can activate/deactivate clearing mode on a token
  • Typically held by token administrators

CLEARING_VALIDATOR_ROLE:

  • Can approve or reject clearing operations
  • Typically held by compliance officers, regulators, or automated compliance systems

Prerequisites​

Clearing Mode Must Be Enabled​

Clearing operations require that clearing mode is activated on your security token.

Option 1: Enable During Token Creation​

When creating a new equity or bond token:

  1. In Step 1: General Information (or Bond Details)
  2. Locate "Digital Security Configuration" (or Bond Configuration)
  3. Enable "Clearing Mode" checkbox
  4. Complete token creation as normal

See guides:

Option 2: Enable After Token Deployment​

For existing tokens without clearing mode:

  1. Navigate to your security token from the dashboard
  2. Go to the "Management" tab
  3. Scroll to "Danger Zone" section
  4. Locate "Clearing Mode" setting
  5. Click "Enable Clearing Mode"
  6. Confirm the action (this is irreversible)
  7. Approve the transaction in your wallet

Warning: Enabling clearing mode is a one-way operation. Once enabled, it cannot be disabled. This ensures settlement process integrity.

Additional Prerequisites​

  • CLEARING_ROLE to create clearing operations
  • CLEARING_VALIDATOR_ROLE to approve/reject operations
  • Understanding of your settlement cycle requirements
  • Integration with clearing house (if applicable)

Accessing Clearing Operations​

  1. Navigate to your security token from the dashboard
  2. Go to the "Operations" tab
  3. Select "ERC1400" (securities are compatible with both ERC-20 and ERC-1400 standards)
  4. Select "Clearing" from the submenu

Note: If you don't see "Clearing" option, verify that clearing mode is enabled on your token.

From this interface, you can:

  • View clearing operations: See all pending, approved, and settled operations
  • Create clearing operation: Initiate a new settlement process
  • Manage operations: Approve, reject, or execute clearing operations

Creating Clearing Operations​

There are three types of clearing operations you can create:

Clearing Transfer​

Transfer tokens to another account (requires validator approval).

When to use: Selling, gifting, or transferring tokens to another investor

Steps:

  1. From Clearing Operations, click "Create Clearing Transfer"
  2. Configure:
    • Destination Account: (Required) Who receives the tokens
    • Amount: Number of tokens to transfer
    • Expiration Date: When the operation expires if not approved
    • Partition (if applicable): Token partition/tranche
    • Data (optional): Additional information/reference
  3. Click "Submit"
  4. Approve transaction in your wallet

What happens:

  • Tokens are locked from your available balance
  • Operation status: "Pending"
  • Awaits approval from any CLEARING_VALIDATOR_ROLE account
  • If approved: Tokens transfer to destination account
  • If rejected or expired: Tokens return to your available balance

Clearing Redeem​

Redeem (burn) tokens, typically for cash redemption or bond maturity.

When to use: Redeeming bonds at maturity, buying back shares, exiting positions

Steps:

  1. From Clearing Operations, click "Create Clearing Redeem"
  2. Configure:
    • Amount: Number of tokens to redeem
    • Expiration Date: When the operation expires if not approved
    • Partition (if applicable): Token partition/tranche
    • Data (optional): Redemption reason/reference
  3. Click "Submit"
  4. Approve transaction in your wallet

What happens:

  • Tokens are locked from your available balance
  • Operation status: "Pending"
  • Awaits approval from validator
  • If approved: Tokens are burned (removed from circulation)
  • If rejected or expired: Tokens return to your available balance

Note: Destination account is always address 0 (burn address) for redeems.

Clearing Hold Creation​

Create a hold that requires validator approval before the hold is established.

When to use: Creating escrow holds in clearing mode, marketplace orders in regulated tokens

Steps:

  1. From Clearing Operations, click "Create Clearing Hold"
  2. Configure clearing operation:
    • Amount: Tokens to lock for the hold
    • Expiration Date: When clearing operation expires
    • Partition (if applicable): Token partition/tranche
    • Data (optional): Operation reference
  3. Configure the hold that will be created:
    • Hold Escrow Address: (Required) Who manages the hold
    • Hold Destination (optional): Final recipient if hold is executed
    • Hold Expiration Date: When the hold expires
    • Hold Data (optional): Hold reference/instructions
  4. Click "Submit"
  5. Approve transaction in your wallet

What happens:

  • Tokens are locked from your available balance
  • Operation status: "Pending"
  • Awaits approval from validator
  • If approved: Hold is created with specified escrow
  • If rejected or expired: Tokens return to your available balance

Note: This is different from a direct hold. In clearing mode, even hold creation requires validator approval.

Common Fields Explained​

Amount

  • Must not exceed your available balance
  • Respects token decimals
  • Once submitted, cannot be changed (only approve/reject)

Expiration Date

  • Must be a future date
  • If validator doesn't approve/reject by this date, operation auto-expires
  • Tokens automatically return to you after expiration
  • Typical values: 24-72 hours for review

Partition (Advanced)

  • For tokens with multiple partitions/tranches
  • Leave default if token doesn't use partitions
  • Example: "tranche-A", "series-2024"

Data

  • Optional unformatted text
  • Use for reference numbers, notes, or instructions
  • Example: "Trade ID: 12345", "Redemption for maturity"

Viewing Clearing Operations​

Clearing Operations List​

The Clearing Operations interface displays all operations in a table:

Table Columns:

  • Operation ID: Unique identifier
  • From: Seller account
  • To: Buyer account
  • Amount: Tokens to settle
  • Value: Trade value (if recorded)
  • Status: Pending, Approved, Rejected, Executed
  • Settlement Date: Target settlement date
  • Actions: Approve, Reject, or Execute buttons

Filters:

  • By Status: Pending, Approved, Rejected, Executed
  • By Date: Settlement date range
  • By Account: Filter by seller or buyer
  • By Operation ID: Search specific operation

Clearing Operation Details​

Click on an operation to view complete details:

  • Operation ID
  • Creator account
  • From account (seller)
  • To account (buyer)
  • Amount
  • Value
  • Current status
  • Settlement date
  • Instructions
  • Creation timestamp
  • Approval/rejection timestamp (if applicable)
  • Execution timestamp (if applicable)
  • Validator who approved/rejected
  • Transaction history

Managing Clearing Operations​

Approve Clearing Operation​

Approve the operation, which immediately executes it.

Who can approve:

  • Any account with CLEARING_VALIDATOR_ROLE

Prerequisites:

  • Operation status must be "Pending"
  • Operation must not be expired
  • All on-chain restrictions must pass (KYC, control lists, pause)

Steps:

  1. Navigate to the clearing operation in the list
  2. Review all operation details carefully:
    • Operation type (Transfer, Redeem, Hold Creation)
    • From account, destination account (if applicable)
    • Amount
    • Expiration date
  3. Verify compliance requirements are met
  4. Click "Approve" button
  5. Confirm approval
  6. Approve transaction in your wallet

What happens immediately after approval:

  • If Transfer: Tokens transfer from sender to destination account
  • If Redeem: Tokens are burned (removed from circulation)
  • If Hold Creation: Hold is created with specified escrow
  • Operation status changes to "Executed"
  • Cannot be reversed

Important: Approval executes the operation immediately. There is no separate "execute" step.

Cancel (Reject) Clearing Operation​

Reject the operation and return tokens to the sender.

Who can cancel:

  • Any account with CLEARING_VALIDATOR_ROLE

Prerequisites:

  • Operation status must be "Pending"

Steps:

  1. Navigate to the clearing operation
  2. Review operation details
  3. Click "Cancel" or "Reject" button
  4. Provide rejection reason (optional but recommended)
  5. Confirm cancellation
  6. Approve transaction in your wallet

What happens after cancellation:

  • Tokens are unlocked and returned to sender's available balance
  • Operation status changes to "Cancelled" or "Rejected"
  • Operation cannot be approved later
  • Sender can create a new operation if needed

Common cancellation reasons:

  • Compliance check failure (destination account not KYC'd)
  • Jurisdiction restriction violation
  • Suspicious activity detected
  • Incomplete documentation
  • Regulatory hold or investigation

Reclaim Expired Operation​

Anyone can reclaim tokens from an expired clearing operation.

Who can reclaim:

  • Anyone (no special role required)

Prerequisites:

  • Operation status must be "Pending"
  • Current date/time must be after expiration date

Steps:

  1. Navigate to an expired operation in the list
  2. Click "Reclaim" button
  3. Confirm reclaim
  4. Approve transaction in your wallet

What happens after reclaim:

  • Tokens are unlocked and returned to sender's available balance
  • Operation status changes to "Expired"
  • Operation cannot be approved or executed

Note: Reclaim ensures tokens aren't stuck indefinitely if validators don't respond before expiration.

Clearing Workflow​

Standard Clearing Flow​

Step 1: User Submits Operation

  • User creates clearing transfer/redeem/hold
  • Tokens are locked from available balance
  • Operation status: "Pending"
  • Visible to all validators

Step 2: Validator Review

  • Any CLEARING_VALIDATOR_ROLE account can review
  • Validator checks:
    • Compliance requirements met
    • Destination account is valid (if transfer)
    • No jurisdiction violations
    • KYC and control list checks pass

Step 3: Validator Decision

If Approved:

  • Operation executes immediately
  • Transfer: Tokens move to destination
  • Redeem: Tokens are burned
  • Hold Creation: Hold is established
  • Status: "Executed"

If Rejected:

  • Tokens return to user's available balance
  • Status: "Cancelled" or "Rejected"
  • User can submit new operation if issues resolved

If Expires:

  • No validator action before expiration date
  • Anyone can reclaim tokens
  • Tokens return to user
  • Status: "Expired"

Common Use Cases​

Jurisdiction-Specific Compliance​

Scenario: Token has specific jurisdiction rules that aren't coded in the smart contract

Example:

  • Country X requires manual approval for all token transfers
  • Clearing mode is enabled on the token
  • Users submit clearing transfer operations
  • Compliance officer (with CLEARING_VALIDATOR_ROLE) reviews each transfer
  • Approves if compliant, rejects if not
  • Flexible enforcement without changing smart contract

Regulatory Review Required​

Scenario: All transfers require regulatory oversight before execution

Example:

  • Regulated security token with strict compliance
  • Enable clearing mode
  • Investors submit clearing transfers
  • Regulator or compliance team reviews each operation
  • Ensures all transfers meet legal requirements before execution

Smart Contract Wallets / Custodians​

Scenario: Token holder is a smart contract without private keys

Benefit:

  • Smart contracts can't use protected partitions (requires signatures)
  • Clearing operations work on-chain without signatures
  • Smart contract can create clearing operations
  • Validator reviews and approves
  • Enables regulated trading for smart contract holders

Bond Redemption with Approval​

Scenario: Bond maturity requires manual verification before redemption

Example:

  • Bondholder submits clearing redeem operation
  • Issuer's treasury team verifies payment is ready
  • Approves redemption
  • Tokens burned, cash payment processed
  • Controlled redemption flow

Best Practices​

For Users Submitting Operations​

Set Appropriate Expiration:

  • Give validators enough time to review (24-72 hours typical)
  • Too short: Operation may expire before review
  • Too long: Tokens locked unnecessarily

Include Helpful Data:

  • Use the "Data" field for reference numbers
  • Makes it easier for validators to track and approve
  • Example: "Trade ID: 12345", "Redemption: Bond Maturity"

Verify Before Submitting:

  • Double-check destination account address
  • Ensure amount is correct
  • Confirm compliance requirements are met
  • Reduces rejections and delays

For Validators (CLEARING_VALIDATOR_ROLE)​

Review Checklist:

  • Verify both parties pass KYC
  • Check destination account is valid
  • Confirm compliance with jurisdiction rules
  • Verify no control list violations
  • Check operation hasn't expired

Document Decisions:

  • Provide rejection reasons when cancelling
  • Helps users understand and fix issues
  • Creates audit trail for compliance

Timely Response:

  • Review operations promptly
  • Avoid letting operations expire unnecessarily
  • Communicate with users about delays

Common Issues​

Cannot Create Clearing Operation​

Problem: Clearing option not available or creation fails

Solutions:

  • Verify clearing mode is enabled on the token
  • Check you have CLEARING_ROLE
  • Ensure seller has sufficient token balance
  • Verify both accounts pass KYC and compliance checks

Cannot Approve Operation​

Problem: Approve button disabled or transaction fails

Solutions:

  • Verify you have CLEARING_VALIDATOR_ROLE
  • Check operation status is "Pending" (not already approved/rejected)
  • Ensure settlement date has not passed
  • Verify wallet is connected

Cannot Execute Operation​

Problem: Execute button disabled or transaction fails

Solutions:

  • Verify operation status is "Approved" (not Pending or Rejected)
  • Check current date is on or after settlement date
  • Ensure buyer still passes KYC and compliance checks
  • Verify you have CLEARING_ROLE or CLEARING_VALIDATOR_ROLE
  • Check wallet has sufficient HBAR for gas

Operation Stuck in Pending​

Problem: Operation not approved or rejected

Solutions:

  • Contact clearing validator to review
  • Check if additional information needed
  • Verify validator has CLEARING_VALIDATOR_ROLE
  • Check if multi-party approval is required

Settlement Date Passed​

Problem: Cannot execute operation after settlement date

Solutions:

  • Operations can usually be executed after settlement date
  • Check operation was approved before expiration
  • Verify buyer still passes compliance
  • Contact administrator if operation is locked

Tokens Still Locked After Rejection​

Problem: Tokens not released after operation cancelled/rejected

Solutions:

  • Verify rejection transaction was confirmed
  • Refresh the page and check operation status
  • Check if there are multiple operations locking the same tokens
  • Contact technical support if tokens remain locked

Cannot Reclaim Expired Operation​

Problem: Reclaim button disabled on expired operation

Solutions:

  • Verify operation status is "Pending" and past expiration date
  • Check you have sufficient HBAR for gas fees
  • Ensure wallet is connected
  • Try refreshing the page

Next Steps​