I agree that fat finger trades should stick.
That is not what clearing and settlement are about. They are about liquidity and stability. In countries with well designed systems, equities settlement is an atomic action.
So, for a transaction involving a UK stock, the Bank of England moves money from one party to the other, and stock from the second party to the first as an atomic transaction.
Trading flows get complex. Some illustrations,
1. If your balance sheet is smaller than a global investment bank, you are regarded as higher risk to deal with. A clearing house won't onboard you on your own account. Instead, you have to get a kind of coverage from a major player who the clearing house does respect, at a cost to you, to clear against their balance sheet. The exchange membership might be yours, and the trades are yours, but for clearing and settlement you are represented by an IB who has a desk that specialises in covering trading risk for scrappy trading firms for a tidy profit.
2. Most participants in markets are not direct members - e.g. hedge funds and mutual funds tend not to be. Non-member access the market via a broker who is a market. Often a broker will outsource activity for some markets to another participant who is more effective at accessing a particular market.
You will have noticed that these arrangements create long chains of inter-dependencies. If there was only trading and settlement, a small error at one bank would cause a cascade effect that would affect hundreds of other participants and disrupt atomic settlement. The system would quickly and regularly stall. So between trading and settlement there is a round of "clearing". Here, everyone confirms that the details are right ahead of settlement. If a participant failed to send a transaction from their trading engine to their clearing system, that would be revealed. If a market maker closed the previous day with a short position they weren't supposed to have, they would get assistance to patch that up. There is lots of forgiveness and room for correction within the clearing round, but big-stick consequences if you don’t come to the right conclusions before it has closed. In this way, when the Bank of England goes to move positions, everyone ends up with what should have.
This three-tier trading/clearing/settlement model allows entities to focus on types of risk that they are good at managing. Without them, the exchange would have to do it all (this is not realistic), there could be no activity between jurisdictions (e.g. french bank trading on swiss market) and it would be far harder to bring liquidity to market.
A system with fewer layers would be far riskier. The clearing houses act as a buffer if there is an insolvent participant. According to legend, when Lehmans was in collapse, the risk process at London Clearing House kicked in to unwind their positions and made a profit on that unwind. This mechanism reduces the possibility for contagion.
If a country tried to build a system that had less liquidity or worse stability, companies would move from that jurisdiction to another that suited them better. I am not sure of the details but understand Sweden blew up its finance sector through vindictive/populist legislation in the late nineties. Activity moved to London and the world moved on.
Clearing needs to be a day because if there are misalignments, you will need analysis and developers to have time to review what happened on the trading day, and have phone calls to discuss with teams at their other partners until a problem is uncovered. If this failed, the senior management would get involved on the T+1 evening. Hence, T+2 settlement is the optimal.
24/7 markets. Someone who wanted to build a trading desk would need to ensure coverage from risk and compliance officers, and to be on top of market events. With a traditional open/close market, it is feasible to do this with a single team. With a 24/7 market, you can't so you either miss liquidity, or are forced to put together an expensive, complicated global team for no increase in total trading opportunity. And on the exchange side, 24/7 makes the software far more complicated for no benefit beyond the bragging rights.