How CoinEx contracts are delivered

CoinEx contracts ensure the fulfillment of contractual obligations and the transfer of ownership of the underlying asset from the seller to the buyer through physical delivery.

Nov 28, 2024 at 05:56 am

How CoinEx Contracts Are Delivered

CoinEx contracts are delivered through a process involving the settlement of futures contracts by physical delivery of the underlying asset. This process ensures the fulfillment of contractual obligations and the transfer of ownership of the underlying asset from the seller to the buyer.

1. Conclusion of a Futures Contract

• A futures contract is an agreement between two parties, the buyer and the seller, to exchange a specified quantity of an underlying asset at a predetermined price on a future date.
• The contract specifies the underlying asset, the contract size, the delivery date, and the settlement price.

2. Margin Deposit

• Both the buyer and seller must deposit a margin, which serves as collateral to mitigate the risk of default.
• The margin amount is calculated as a percentage of the contract value and is typically expressed as a fraction of the underlying asset's value.

3. Execution and Settlement

• Once the futures contract is executed, the buyer and seller are obligated to fulfill their contractual obligations.
• On the delivery date, the seller must deliver the specified quantity of the underlying asset to the buyer.
• The buyer, in turn, must pay the contract price to the seller.
• If either party fails to fulfill their obligations, the margin deposit may be used to cover any losses incurred by the other party.

4. Delivery of the Underlying Asset

• The delivery of the underlying asset is typically facilitated through a designated exchange or clearinghouse.
• The exchange or clearinghouse acts as an intermediary, ensuring the secure and efficient transfer of the asset from the seller to the buyer.
• The exchange or clearinghouse may hold the underlying asset in custody or arrange for its transfer to a designated custodian or settlement agent.

5. Settlement of the Contract

• Settlement of the futures contract occurs when the underlying asset is successfully delivered to the buyer and the contract price is paid to the seller.
• The exchange or clearinghouse verifies the delivery and payment, and the contract is considered closed.
• If the underlying asset cannot be delivered for any reason, the contract may be settled through cash settlement, where the difference between the contract price and the market price is paid to the buyer.

Benefits of Physical Delivery

• Transparency and Security: Physical delivery provides transparency and security by ensuring the actual transfer of the underlying asset.
• Risk Mitigation: The use of margin deposits mitigates the risk of default and ensures the fulfillment of contractual obligations.
• Market Stability: Physical delivery helps to stabilize the market by providing a mechanism for the actual exchange of the underlying asset.