The Multi Commodity Exchange of India (MCX) offers physical settlement
for certain commodity futures contracts. Physical settlement means that upon
the contract's expiry, the seller must deliver the actual commodity, and the
buyer must take delivery of the commodity. Here's an overview of how physical
settlement works in MCX:
Key Points of Physical Settlement:
Eligible Commodities:
Not all commodities are eligible for physical settlement. Gold, Silver,
MenthaOil, Cotton Candy,Lead, Zinc, Copper, GoldPetal, GoldGuinea, LeadMini,
Zinc Mini, Copper Mini, Nickel , NickelMini, GoldTen, GoldM,SilverM, SilverMic,
Aluminium and Aluminium Mini is only available for Physical Delivery. Rest of
the commodity contracts like Natural Gas, Crudeoil, CrudeOil Mini and
NaturalGas Mini are not eligible for Physical delivery.
Delivery Period:
The delivery period starts a few days before the contract expiry and continues
until the expiry date. During this period, participants must inform the
exchange of their intention to deliver or take delivery.
Intention to Deliver or Take Delivery:
Sellers: Must submit a delivery intention indicating the warehouse where the
commodity will be delivered.
Buyers: Must submit a delivery intention indicating the warehouse where they
intend to take delivery.
Quality and Quantity Specifications:
The commodity delivered must meet the quality and quantity specifications
defined by MCX. These specifications ensure standardisation and fairness in the
delivery process.
Warehouse Receipts:
Commodities must be delivered to approved warehouses, and warehouse receipts
are issued. These receipts are then transferred to the buyer as proof of
delivery.
Marking for Delivery:
On the expiry date, the exchange matches the delivery intentions of buyers and
sellers. The matching process ensures that all delivery obligations are met.
Settlement Price:
The final settlement price is determined based on the closing price on the
expiry date. This price is used to settle any outstanding positions and
determine the final payment amounts.
Payment and Delivery:
The buyer must make the payment to the seller, and the seller must deliver the
commodity to the designated warehouse. The warehouse receipts are then
transferred to the buyer, completing the settlement process.
Note: 5Paisa does not offer physical settlement in MCX Contracts.