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Whats the difference between the settlement mechanism for cash and physical delivery ?

April 26, 2017cash DELIVERY difference mechanism physical

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Whats the difference between the settlement mechanism for cash and physical delivery ?

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In case it is not possible or practical to give physical delivery. Open positions, (open long positions always being equal to open short positions) are closed out on the last day of trading at a price determined by the spot “cash” market of the underlying asset. This price is called “Exchange Delivery Settlement Price” or EDSP. In case of physical settlement short side delivers to the specified location while long side takes delivery from the specified location of the specified quantity / quality of the underlying asset. In case of physical settlement short side delivers to the specified location while long side takes delivery from the specified location of the specified quantity / quality of the underlying asset. The long side pays the EDSP to the clearing house/corporation which in turn is received by the short side.