Physical delivery of futures refers to the process that when a futures contract expires, both parties to the transaction settle the expired open contract by transferring the ownership of the goods contained in the futures contract.
Commodity futures trading generally adopts the physical delivery system. Although the proportion of final physical delivery of futures contracts is very small, it is this very small amount of physical delivery that connects the futures market with the spot market and provides an important prerequisite for the function of the futures market. In the futures market, physical delivery is an institutional guarantee to make futures prices and spot prices tend to be consistent.
Futures physical delivery process:
(1) First delivery date
1. The buyer declares its intention. Within the first delivery date, the buyer submits a letter of intent for the required goods to the exchange. The contents include variety, brand, quantity and the name of the designated delivery warehouse.
2. The seller shall submit the standard warehouse receipt. The seller shall submit to the exchange a valid standard warehouse receipt that has paid the storage fee within the first delivery day.
(2) the second delivery date
Exchange allocates standard warehouse receipts. On the second delivery day, the exchange will issue the standard warehouse receipt to the buyer according to the existing resources and the principle of "time first, quantity rounding, nearest matching and overall arrangement".
For the standard warehouse receipt that cannot be used for the delivery of the next futures contract, the exchange will distribute it to the buyer according to the proportion of the total delivery in the current month.
(3) the third delivery date
1. Buyer's payment and receipt. The buyer must deliver the payment to the exchange and obtain the standard warehouse receipt before the third delivery date 14:00.
2. The seller collects money. The exchange shall pay the payment to the seller before the third delivery date 16:00.
(4) Delivery on the fourth and fifth days
The seller pays the special invoice for VAT.