Settlement of futures contracts on interest rate

• Daily Mark-to-Market Settlement
• Delivery Settlement

The positions in the futures contracts for each member is marked-to-market to the daily settlement price of the futures contracts at the end of each trade day.

The profits/ losses are computed as the difference between the trade price or the previous day’s settlement price and the current day’s settlement price. The CMs who have suffered a loss are required to pay the mark-to-market loss amount to NSCCL which is passed on to the members who have made a profit. This is known as daily mark-to-market settlement.

Daily mark to market settlement in respect of admitted deals in Interest rate futures contracts is cash settled by debit/ credit of the clearing accounts of clearing members with the respective clearing bank.

All positions (brought forward, created during the day, closed out during the day) of a clearing member in futures contracts, at the close of trading hours on a day, shall be marked to market at the daily settlement price and settled on T+1 day basis. The settlement shall be netted with the settlement of Currency futures.



Delivery Settlement

Trades in interest rate futures are physically settled by delivery of Govt. securities in the expiry month.The expiry month of the respective futures contract shall be the delivery month. This is based on providing of an intent to deliver.


Intent to deliver
The owner of a short position in an expiring futures contract is required to provide the intimation to the Clearing Corporation of his intention to deliver two business days prior to the delivery settlement day by 6.00 p.m.

The delivery settlement day of for Interest Rate Futures contract shall be last business day of the delivery month.



Deliverable Securities
The securities which fulfill below mentioned criteria are eligible deliverable grade securities.

• GoI securities maturing at least 8 years but not more than 10.5 years from the first day of the delivery month with.
  
• Minimum total outstanding stock of Rs 10,000 crore.

Allocation to long positions
The Clearing Corporation identifies the eligible long positions for allocation and assigns the deliveries to long position holders at client level starting with the highest vintage till the allocation is over. For a given vintage, if the total contracts to be allocated are less than the total long positions, the allocation to such long position holders shall be done on a ‘random’ basis.


Obligation for delivery settlement
The positions intended and allocated (at client level) for delivery are netted at the clearing member level and valued at the invoice price. The clearing members are informed of the settlement obligation by the Clearing Corporation by 8:00 p.m on the day of intent.