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Delivery & Assignment
Let’s learn more about delivery & assignment. A seller of commodity futures has the option to give notice of delivery. This option is given during a period identified as `delivery notice period’. This concept is not applicable on equity futures.
Whenever these delivery notices are given by the seller, the clearinghouse of the Exchange identifies the buyer to whom this notice has been assigned. The process for the buyer and seller regarding the physical settlement for different types of contracts is specified by the Exchange. It stipulates the time period available between which the buyer (or the authorized representative) can take the physical delivery of the commodity in the presence of seller (or a representative) takes the physical stocks against the delivery order.
After the delivery and pick-up, the clearing house is intimated with the proof of physical delivery and the invoice amount is credited to the seller’s account.
Delivery rate, which is decided by the clearinghouse, depends on the spot rate of the underlying adjusted for any sort of discount/ premium for quality and freight costs. The discount/ premium for quality and freight costs are published by the clearing house before introduction of the contract. The most active spot market is the benchmark for deciding spot prices.
