Settlement
Futures settlement process is performed on the next trading day after the transaction date (T + 1), and is made in cash at the Payment Bank. For Clearing Members (CM) or clients who have payment obligations in accordance with DHK, the funds must be readily available in the Futures and Options Collateral Sub Account no later than (T + 1) at 12.00. As for the right to receive cash, funds will be available on (T + 1) no later than 14:30 on Futures and Options Collateral Accouunt for CM or Futures and Options Collateral Sub Account for clients.
If at the time of settlement, CM can not fulfill its obligations, then KPEI is authorized to use the CM-owned Collateral Fund in meeting its obligations to KPEI. However, if the Collateral balance is not sufficient, the CM is declared as default. For CM with default status, but still has open positions, then the positions must be transferred to other CM or be offsetted, so that the risk of the outstanding position becomes smaller. The position transfer is specifically designed for clients whose CM defaults. Offsetting transaction is a transaction conducted by CM to settle contracts with opposite positions, either the sell or buy of futures belonging to CM or clients.
If up to a certain time limit, there are still open positions belonging to defaulting CM, KPEI will liquidate all of the open position. Contract liquidation is the futures open positions performed by KPEI. Forced liquidation is conducted by KPEI on condition that CM has suffered a loss up to 75% or until the end of trading session 2 failing CM have not been able to meet all its obligations. CM affected by the liquidation will be charged and the cash receipt will be awarded to the opponent that was affected by the liquidation. In addition, the contract liquidation by KPEI can also be carried out due to the contract maturity, which is conducted at the end of the trading day the contract matures.
Futures Transaction Clearing and Settlement Illustration:
Further explanation of the futures transaction clearing and settlement is shown on the table below:
| No | Description |
| 1 | AB (AK) who will transact Futures Contracts must have deposited funds in the Security Fund account as a prerequisite for derivative clearing membership. After that, a deposit of funds is made in the Main Securities Account (REU) of Securities Derivative Contract Collateral for the purposes of the AK transaction, while for Customer transactions, customers must also deposit funds in the Sub Securities Account (SRE) of Securities Derivative Contract Collateral. |
| 2 | The funds in the Derivative Contract Collateral account after being reduced by the potential risk of AK and its customers' transactions will result in AK's trading limit value. |
| 3 | AK will receive AK trading limit information through the JATS system which is obtained for Futures Contract transactions. |
| 4 | Based on the existing trading limits, AK can place orders at BEI via the trading engine (JATS) in accordance with the limits provided by KPEI. |
| 5 | BEI sends transaction data (matched orders) to the KPEI Derivatives Clearing System. |
| 6 | Based on match trade data from BEI, at T+0 KPEI carries out the clearing process by calculating the rights and obligations of AK and its customers by netting in the form of a Clearing Results List which is submitted to AK no later than 19.30. |
| 7 | At T+1, KPEI will carry out settlement by sending settlement instructions to KSEI for the process of fulfilling AK's obligations to KPEI or receiving AK's rights from KPEI. |
| 8 | KPEI also calculates the adequacy of the collateral value and risk for transactions carried out by AK through the risk management system. |
KPEI Rule Number III-2 describing Clearing and Guarantee of Settlement of Securities Index Futures Contract Transactions can be accessed here.