Settlement

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Settlement takes place when a transaction is finalized between a buyer and a seller. The settlement price is determined at the end of the regular trading hours. It is used to calculate gains and losses in futures market accounts, performance bond calls and invoice prices for deliveries. Settlement involves the official daily closing prices of a futures contract.[1]

Cash settlement is the most common method of settling financial futures. It involves closing out the position.[2]


References

  1. Glossary of Terms. CME.
  2. Glossary. Reuters.