What are the different settlement logic followed by MCX? Where can I get a list of all commodities with their settlement type?

#1

Also, how do I get to know till when I will be allowed to trade in these contracts on Zerodha’s platform?

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#3

MCX has 2 different modes of settlement for its commodity contracts. They are:

  1. Cash Settlement- These contracts are cash settled on the expiry day at the due date rate declared by the exchange.

  2. Physical Delivery Settlement- Delivery of the commodity equal to the lot size is given to the buyer(long position) by the seller of the contract from the exchange defined delivery warehouse. Physical delivery settlement can also be of two types:

  • Staggered- The exchange can mark any of the open contracts as delivery during the delivery intention period. Even if the contract is closed after your contract is marked as delivery, the delivery obligation will remain.

  • Compulsory- All contracts will be compulsorily physically settled by the exchange if the contract is open on the expiry day.

We maintain a list of all MCX contracts with their settlement type in this Google Sheet.

The sheet is regularly updated with the dates until which Zerodha will allow trading in physically settled contracts to avoid physical delivery. Any changes in the settlement mechanism is also updated in the sheet.

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#5

Hello Mohammed,

is there a constant for these commodity settlement cycles. As i can see from the sheet different commodities have different cash settlement dates, like for Gold we would like to cash settle current contracts 5 days ago, for Zinc it would be 3 days and so and so forth. Are these days fixed or change from time to time

#6

I am a little confused here. I hope someone can clarify this doubt.

In an older post on this forum (dating back to 2017), I had read that all commodity futures contracts on Zerodha are cash settled.

And here in this post, it is mentioned that some contracts on MCX are

Compulsorily physically settled by the exchange if the contract is open on the expiry day

In the Google sheet, I see that for (example) GoldGuinea the settlement type is marked as “compulsory physical delivery”.

Does it mean that if one forgets to square-off/exit GoldGuinea position before expiry date, then the trader has to take a compulsory physical delivery?

Or would Zerodha’s Risk Management System automatically close any open position of such contracts before the expiry date to avoid physical settlement?