Futures delivery

Futures contracts are designed to go to delivery. As we know, delivery can be either physical delivery of the underlying or by cash settlement. There can also be an Exchange For Physical (EFP) or Exchange For Swap (EFS) option on some futures.

The physically delivered futures can be commodities or financial products like bond futures or some stock futures. The exchange decides what is deliverable, i.e. the type and grade of commodity or the bond. A list of deliverable grades or bonds is then published to members. For example, Figure 4.4 shows the list of deliverable Bunds against the Eurex Bund future and Figure 4.5 gives the specification of the contract.

Expiry month Dec 2004

Deliverable Bond ISIN

Coupon Rate (%)

Maturity Date

Conversion Factor

DE0001135234 DE0001135242 DE0001135259

3.75 4.25 4.25

04.01.2014 04.07.2014

0.852400 0.880175 0.874942

Expiry month Mar 2005

Deliverable Bond ISIN

Coupon Rate (%)

Maturity Date

Conversion Factor

DE0001135242 DE0001135259

4.25 4.25

04.01.2014 04.07.2014

0.882591 0.877455

Expiry month Jun 2005

Deliverable Bond ISIN

Coupon Rate (%)

Maturity Date

Conversion Factor

DE0001135242 DE0001135259

4.25 4.25

04.01.2014 04.07.2014

0.885049 0.880217

Figure 4.4 Deliverable Bond List

Figure 4.4 Deliverable Bond List

Eurex German Bund Future Contract Specifications (Version 03 Mar 2004)

Contract Standard

A notional long-term debt instrument issued by the German Federal Government with a term of 81/2 to 101/2 years and an interest rate of 6 per cent.

Contract Size EUR 100,000

Settlement

A delivery obligation arising out of a short position in a Euro-BUND Futures contract may only be fulfilled by the delivery of specific debt securities - namely, German Federal Bonds (Bundesanleihen) with a remaining term upon delivery of 81/2 to 10l/2 years. The debt securities must have a minimum issue amount of 2 billion euros.

Quotation

In a percentage of the par value, carried out two decimal places.

Minimum Price Movement

0.01 per cent, representing a value of EUR 10.

Delivery Day

The 10th calendar day of the respective delivery month, if this day is an exchange trading day; otherwise, the immediately following exchange trading day.

Delivery Months

The three successive months within the cycle March, June, September and December. Notification

Clearing Members with open short positions must notify Eurex which debt instruments they will deliver, with such notification being given by the end of the Post-Trading Period on the last trading day in the delivery month of the futures contract.

Last Trading Day

Two exchange trading days prior to the delivery day of the relevant delivery month. Trading in the contract for this delivery month ceases at 12:30 CET.

Daily Settlement Price

The closing price determined within the closing auction; if no price can be determined in the closing auction or if the price so determined does not reasonably reflect the prevailing market conditions, the daily settlement price will be the volume-weighted average price of the last five trades of the day, provided that these are not older than 15 minutes; or, if more than five trades have occurred during the final minute of trading, the volume-weighted average price of all trades that occurred during that period. If such a price cannot be determined, or if the price so determined does not reasonably reflect the prevailing market conditions, Eurex will establish the official settlement price.

Final Settlement Price

The volume-weighted average price of the last ten trades, provided they are not older than 30 minutes - or, if more than ten trades have occurred during the final minute of trading, then the volume-weighted average price of all trades that occurred during that period - is used to determine the final settlement price. The final settlement price is determined at 12:30 CET on the last trading day.

Figure 4.5 Eurex German Bund Future Source: Eurex.

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