You are here: HomeFuturesWhat Characteristics Distinguish Futures from Forwards?Which Obligations are Buyer and Seller of a Futures Contract Subject to? How can they Discharge Themselves from these Obligations?

Which Obligations are Buyer and Seller of a Futures Contract Subject to? How can they Discharge Themselves from these Obligations?

As we have already seen, buyers and sellers of a futures contract basically enter into opposing obligations:

POE02010020

The buyer obligates himself to take up and pay the underlying at the expiry date of the future. The seller obligates himself to deliver the underlying. The actual delivery can be compensated through cash settlement.

Both parties can free themselves of these obligations by closing a so-called countertrade.

A countertrade for the original buyer is the selling of an identical future on Eurex Exchange. The original seller must buy an identical future on Eurex Exchange.

The offsetting of both contracts becomes possible as buyer and seller do not have a direct commercial relationship with each other. Eurex Clearing AG acts as the counterparty to both sides so that the legal contractual conclusion is with Eurex Clearing AG (clearing house, central counterparty).

POE02010020a

The seller therefore firstly as an acceptance duty against the clearing house with the buying of a future. Should he sell an identical future (within anonymous trading to another market participant) he now also has a legal delivery obligation against the clearing house.

Both obligations can be offset with each other.

A new position is generated through entering „"O" (opening) into the Eurex system. The entering of a countertrade to the originally concluded trade is called "closing". The trader shows the closing to Eurex Exchange by entering "C" for closing in the order command.

error messagebox
00:00

Go to top