Delivery and Settlement Course

Financial Regulation Courses (FRC)

Overview

The Delivery and Settlement course provides an in-depth understanding of the final phase of derivatives contracts, where assets or cash are exchanged.
The course covers both futures and options, with an emphasis on the roles of clearinghouses, novation, and the significance of the exchange delivery settlement price (EDSP).
Participants will explore the methods of closing out contracts, physical delivery versus cash settlement, and the procedures to follow upon contract expiry.
Whether for commodities or financial products, this course will ensure that learners are equipped to handle settlement processes confidently.

Learning Objectives

By the end of this course, learners will:

• Understand how delivery and settlement systems work in futures and options markets.


• Differentiate between physical delivery and cash settlement, understanding when each is applied.


• Master the steps involved in closing out contracts, including rolling over or delivering futures contracts.


• Appreciate the role of the clearinghouse in reducing counterparty risk via novation.


• Calculate and interpret the exchange delivery settlement price (EDSP) and its impact on contract closure.


• Navigate the processes related to the exercise and assignment of options and the mechanics behind automatic exercise.


• Understand the implications of uncleared margin rules in the context of over-the-counter derivative transactions.

Learning Outcomes

Upon successful completion of the course, learners will:

• Be able to effectively close out futures contracts or prepare for delivery, understanding the nuances of both processes.


• Confidently distinguish between cash-settled and physically delivered contracts and know when each applies.


• Accurately calculate the invoice amount for various types of settled contracts, using real-world formulas and examples.


• Execute decisions related to the exercise of options, manage assignments of obligations, and understand the procedures behind automatic exercise.


• Apply theoretical knowledge to practical scenarios, such as calculating profits and losses on delivery or expiry of futures and options.


• Comprehend and apply uncleared margin rules for derivative contracts not cleared through central clearing parties.