Like options, futures contracts have a fixed term. The end date of a future is called the expiration or expiration date. In futures trading, a distinction can be made between clearing contracts (cash settlement) and delivery contracts. In the case of clearing contracts, no delivery of the underlying value takes place on the expiry date, but the exchange rate differences are settled. In the case of delivery contracts, physical delivery of the underlying asset normally takes place on the expiry date.
At Saxo Bank, physical delivery is not supported. We therefore recommend that you are aware of the expiry and first notice day (FND) of all futures contracts in which you have positions and ensure that they are closed before the correct day. If the expiry date falls before the FND, the contract is concluded on the expiry date. If the FND is the same as or before the expiry date, the contract will be closed on the trading day prior to the FND.
Be aware! If futures positions are not closed before the relevant date, Saxo Bank will close the position on your behalf at the first available opportunity at the prevailing market price.
What is cash and physical settlement?
Cash settlement is when a contract is settled in cash. A physical settlement is when the underlying contract has physical delivery. Physical delivery is most relevant for agricultural and energy products, but some financial products are also physically delivered. Saxo Bank does not support physical delivery of any product. If your end-customer's contract is physically settled, FND will be shown on the order ticket.
What is the difference between due date and first notice date (FND)?
The FND indicates the day on which the contract enters the "notification period", after which long positions can be assigned. The expiration date is the day on which the contract expires and is no longer negotiable. Sometimes the two are on the same day.
Why doesn't the futures position disappear on expiration?
This only happens for cash-settled contracts that are held until maturity. On cash-settled futures contracts, positions taken on the expiration date are locked. The position is removed from the portfolio when the final settlement price is available and the manual settlement process has been completed. This can take up to two business days after the expiration date. You can avoid this by rolling or closing your end-customer's position before the contract expires.