- There are futures specific settlement methods such as daily mark-to-market, offsetting transactions, and final settlement.
- Daily mark-to-market
In futures trading, if the settlement is done at once by the price difference between the contract day and the future settlement date (last trading day), the settlement amount would be too large.
As such, members are required to re-evaluate the open interests that were evaluated by the previous day's closing price and the contracts traded at the market price today with the last price at the market closing. Then members make receipts and payments for the difference every day so that the size of the settlement amounts remains small and the settlement procedure becomes simple.
- Offsetting Transactions
- Investors can close off their positions any time before the closing of the market on the last trading day by buying the identical opposite contracts or selling the identical opposite contracts, which is called an offsetting transactions.
- Final Settlement
- Final settlement is conducted in two ways: cash settlement and physical delivery. For the transactions of 10-year KTB futures, USD futures, JPY futures, EUR futures, and Gold futures, the remaining open interest which has not reversed by offsetting transactions until the last trading day, final settlement is made by physical delivery where the underlying asset is delivered and the settlement amount is paid on the last settlement day. For other futures products, cash settlements are made by paying and receiving the amount obtained by multiplying price difference between the futures settlement price and the underlying asset price (final settlement price) on the last trading day by the number of open interests and the multiplier.