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What are the Alternatives for Settlement of a Futures Contract?

As a rule, futures can be settled physically or in cash.

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Futures with physical delivery require the buyer of the future to actually accept and pay for the delivered underlying instrument (for example bonds) on the maturity date.

Physical delivery:
Regardless of wether future contracts are settled physically or incash; offsetting of profit and loss is conducted daily, in cash!

Futures that are settled in cash replace a physical delivery in favor of a cash settlement. The reason for this is that a delivery for such futures is not possible, or only possible with some difficulty (for example equity index future). The following futures on Eurex Exchange are physically settled:

  • Fixed Income-Futures
  • Futures on Exchange Traded Funds
  • Futures on Exchange Traded Commodities

The fixed income futures on Eurex Exchange (futures on bond issues such as Euro Bund Future) have a fictitious underlying and therefore cannot be physically delivered, but a pallet of similar shares will be delivered. You may find further information in the next chapter. CO2 futures have a distinctive feature. Eurex Exchange market participants can trade these via cooperation with the European Energy Exchange. Fulfillment for these futures occurs via transfer of so-called EU emission allowances within the internal accounts of exchange participants.

The following futures on Eurex Exchange are cash settled:

  • Equity Futures*
  • Equity Index Futures
  • Money Market Futures
  • Dividend Futures
  • Volatility Index Futures
  • Euro Inflation Futures
  • Commodity Futures (incl. Power Futures)

*OTC traded equity futures that are entered for settlement into the system can be EurexOTC Flex products with physical delivery if the contractual partners have agreed to this term.

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