Futures settlement process is performed on the next trading day after the transaction date (T + 1), and is made in cash at the Payment Bank. For Clearing Members (CM) or clients who have payment obligations in accordance with DHK, the funds must be readily available in the Futures and Options Collateral Sub Account no later than (T + 1) at 12.00. As for the right to receive cash, funds will be available on (T + 1) no later than 14:30 on Futures and Options Collateral Accouunt for CM or Futures and Options Collateral Sub Account for clients.
If at the time of settlement, CM can not fulfill its obligations, then KPEI is authorized to use the CM-owned Collateral Fund in meeting its obligations to KPEI. However, if the Collateral balance is not sufficient, the CM is declared as default. For CM with default status, but still has open positions, then the positions must be transferred to other CM or be offsetted, so that the risk of the outstanding position becomes smaller. The position transfer is specifically designed for clients whose CM defaults. Offsetting transaction is a transaction conducted by CM to settle contracts with opposite positions, either the sell or buy of futures belonging to CM or clients.
If up to a certain time limit, there are still open positions belonging to defaulting CM, KPEI will liquidate all of the open position. Contract liquidation is the futures open positions performed by KPEI. Forced liquidation is conducted by KPEI on condition that CM has suffered a loss up to 75% or until the end of trading session 2 failing CM have not been able to meet all its obligations. CM affected by the liquidation will be charged and the cash receipt will be awarded to the opponent that was affected by the liquidation. In addition, the contract liquidation by KPEI can also be carried out due to the contract maturity, which is conducted at the end of the trading day the contract matures.
Futures Transaction Clearing and Settlement Illustration:
Further explanation of the futures transaction clearing and settlement is shown on the table below:
KPEI Rule Number III-2 describing Clearing and Guarantee of Settlement of Securities Index Futures Contract Transactions can be accessed here.