Futures Contracts

Single Stock Futures

Single-stock future (SSF) is a type of futures contracts between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to deliver the stock in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties - the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease. Note that the contract itself costs nothing to enter; the buy/sell terminology is a linguistic convenience reflecting the position each party is taking (long or short).

SSFs are usually traded in increments/lots/batches of 100. When purchased, no transmission of share rights or dividends occurs. Being futures contracts they are traded on margin, thus offering leverage, and they are not subject to the short selling limitations that stocks are subjected to. They are traded in various financial markets.

CSDI as a Clearing House in Futures Contracts

The clearing house, a division of CSDI, handles the clearing and settlement of futures contract. The post trade activities for futures contract is based on a broker-oriented system.

The purchase order time in futures contract is the time span that the broker in order to take any action should have initial margin in his operating account, afterwards at the end of the day, the operation account updating based on clearing and settlement price takes place as follows:

  1. Regarding the transferred open position from last trading day, differences between the value of futures contract market on current trading day and the value of futures contract market on previous trading day should be calculated.
  2. Regarding the created open position on current trading day, differences between the value of futures contract market on current trading day and the value of trade should be calculated.
    • The value of futures contract market is set by the volume of futures contract when multiplied by the latest daily settlement price
    • The value of trade is set by the volume of futures contract when multiplied by the futures price

According to the above mentioned points, also concerning related commissions and legal deductions, the brokers' account netting will be taken care of. Also depositing or withdrawing from brokers' operating account is performed based on their account netting.

After the above series operations, if the brokers’ initial margin drops down below the maintenance margin, the clearing house sends the margin call to the broker, so the broker must either pay the required money or close the clients’ open position which has led to issuing the margin call.

Time Maturity:

If a position remains open at the end of the last trading day, it leads to physical delivery and the targets of the position must perform their commitments.

In case of long position at the end of the last trading day, the broker must deposit the value of futures contract market on the last day to the clearing house account until 12 o'clock of the first day of delivery period.

In case of short position at the end of the last trading day, underlying securities mentioned in the contract must exist in sellers' property code in CSDI.

The clearing house at the end of the first day of delivery period performs physical settlement and process among long positions whose contract markets' value have been paid, and short positions whose underlying securities mentioned in futures contract exists in property code in CSDI based on time priority.

Accordingly, CSDI transfers the underlying securities mentioned in futures contract to the buyer and deposits funds to sellers’ account.

Buyers or sellers who do not meet their commitment must handle cash settlement and penalties.