Introduction to Futures _ Futures _ Sina Finance

Physical delivery refers to the process that when a futures contract expires, the trading parties settle the outstanding position contract by transferring the ownership of the commodity contained in the futures contract. Commodity futures trading generally adopts the physical delivery system. Although the proportion of futures contracts that are finally delivered in kind is very small, it is the very small number of physical deliveries that connect the futures market with the spot market, providing an important prerequisite for the functioning of the futures market.

In the futures market, physical delivery is the institutional guarantee to promote the consistency of futures prices and spot prices. When the futures price seriously deviates from the spot price due to excessive speculation, traders will carry out arbitrage transactions between the futures and spot markets. When the futures price is too high and the spot price is too low, the traders sell futures contracts in the futures market and buy commodities in the spot market. In this way, the demand for spot goods increases, the price of spot goods increases, the supply of futures contracts increases, the price of futures decreases, and the spread between futures and spot prices narrows; When the futures price is too low and the spot price is too high, traders buy futures contracts in the futures market and sell commodities in the spot market. In this way, the demand for futures increases, the price of futures increases, the supply of spot goods increases, and the price of spot goods decreases, which makes the difference between future and current prices tend to be normal. The above analysis shows that through physical delivery, the futures and spot markets can achieve mutual linkage, and the futures price eventually tends to be consistent with the spot price, so that the futures market can truly play the role of a price barometer.

Some hedgers who are familiar with the spot circulation channel will directly sell or purchase the spot in the futures market to obtain the price difference according to the relevant information of the spot market in actual operation. This method eliminates the risks caused by various non price factors to a certain extent, and objectively plays a role in guiding production and ensuring profits.

2、 Delivery method and settlement price

（1） Delivery method

1. "Centralized" delivery: refers to the one-time centralized delivery of all matured contracts after the last trading day of the delivery month.

2. "Decentralized" delivery: that is, in addition to the paired delivery of all expired contracts after the last trading day of the delivery month, the delivery can also be carried out at the specified time between the first trading day and the last trading day of the delivery month.

（2） Settlement price

The delivery and settlement price of a futures contract in China is usually the settlement price on the delivery matching day of the contract or the settlement price on the last trading day of the futures contract. The valuation of delivered goods is based on the delivery settlement price, plus the premium of different grades of commodity quality and premium of off-site delivery warehouse and benchmark delivery warehouse.

3、 Physical delivery procedure

（1） First delivery date

1. The Buyer declares its intention. The Buyer shall submit the Letter of Intent for the required commodities to the Exchange within the first delivery day. The contents include variety, brand, quantity and the name of the designated delivery warehouse.

2. The seller submits the standard warehouse receipt. The Seller shall, within the first delivery day, deliver to the Exchange the valid standard warehouse receipt for which the storage fees have been paid.

（2） Second delivery date

The exchange allocates standard warehouse receipts. On the second delivery day, the Exchange shall distribute standard warehouse receipts to the buyer according to the existing resources and the principle of "time priority, quantity rounding, nearest matching and overall arrangement".

For standard warehouse receipts that cannot be used for the delivery of the next futures contract, the Exchange shall apportion them to the buyer in proportion to the total delivery amount of the current month.

（3） Third delivery date

1. The buyer makes payment and withdraws documents. The buyer must pay the purchase price and obtain the standard warehouse receipt at the exchange before 14:00 on the third delivery day.

2. The seller receives payment. The Exchange shall pay the payment to the seller before 16:00 on the third delivery day.

（4） Fourth and fifth delivery date

The Seller shall submit VAT special invoice.

The circulation procedure of standard warehouse receipts for physical delivery in the exchange is as follows:

（1） The seller investor shall endorse and deliver it to the seller brokerage member;

（2） The seller member shall endorse and deliver it to the Exchange;

（3） The exchange shall seal and deliver it to the buyer member;

（4） The buyer's brokerage member shall endorse and deliver it to the buyer's investor;

（5） Non brokerage members of the buyer and investors of the buyer shall go through relevant procedures in the warehouse after endorsement;

（6） After the warehouse or its agent seals, the buyer's non brokerage members and the buyer's investors can pick up or transfer the goods.

4、 Handling of delivery default

（1） Determination of delivery default

Any of the following acts by the buyer and seller of a futures contract constitutes a breach of delivery:

1. The seller fails to deliver the valid standard warehouse receipt within the specified delivery period;

2. The buyer fails to pay the purchase price or the payment is insufficient within the specified delivery period

a) The goods delivered by the seller do not meet the specified standards.

（2） Handling of delivery default

If a member breaches the contract in the physical delivery of futures contracts, the Exchange shall perform the contract first. The Exchange may deal with the matters of default by means of purchase and auction, and the defaulting member shall be responsible for the losses and expenses arising therefrom. The Exchange may also impose penalties such as payment of liquidated damages and compensations on the defaulting members.

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