A delivery notice is a formal notice issued by a clearing member indicating that they agree to deliver an ascertainable quantity of a commodity as a movement to complete a short futures position. Proper documentation and functioning are crucial to both counterparts in the transaction. It may also serve as a confirmation for a short-term position owner.
Short position holders are required to deliver the underlying commodity at the contract expiration date. Delivery Notice is the official notice to the clearing house of the trader’s intention to deliver. It contains important information like the size of the commodity lot, mode of delivery, and other relevant details.
Role for Long Futures Position Holders
For holders of the long position, the Delivery Notice is a guarantee that they will receive the commodity. It offers certainty and due settlement between the two contracting parties to the futures contract. The holder of the long position can rely on the notice to obtain the delivery in terms agreed upon.
Conclusion
The Delivery Notice is critical to futures market trading as an immediate, written agreement that outlines the commodity terms and delivery. It maintains trading system integrity by preventing miscommunication and ensuring effective settlement.
