CASH COMMODITY DELIVERY & FUTURES
What are cash deliveries?
Delivery generally refers to the changing of ownership or control of a physical commodity under specific terms and procedures, established by the exchange upon which the contract is traded, and which occurs on or before the Last Trading Day of a futures contract. The delivery payment is based on the contract's final settlement price.
Why take delivery?
Generally, professional traders leave the delivery situation to the commercials and producers. However, some professional traders take delivery intentionally. As an example, consider a metal cash and carry transaction: a trader takes delivery of December Gold, placing a forward hedge in June gold. In this transaction, the professional trader is looking to make a profit by carrying the gold forward from December to June.
What are our delivery policies?
Our margining policy with regard to purchasing deliveries is to require the purchaser to have 100% of the total funds, plus margin for the short hedge (if there is any) in his trading account three days before first notice day. Selling deliveries requires the seller to have the exact specified cash commodity on hand. Proving up usually means showing federal inspection certificates or approved warehouse receipts for the spot commodity. For all other traders who remain in the market beyond the above time limits, we reserve the right to liquidate their position without notice, and at our discretion. The liquidation of positions may or will occur up to one hour before the close on the business day prior to the first notice day (FND) or anytime thereafter.
To Avoid Delivery you must liquidate the deliverable position at least 1 day prior to First Notice Day.
To Take Delivery you must have in your account 3 days prior to first notice day:
1. The full contract value
2. All margins required for any further positions in the account, including any short hedges.
Note, in some New York markets, First Notice day follows Last Trading Day. In these instances, you must be out of the market one business day prior to Last Trading Day or Futures Expiration - Options expiration.
We shall attempt to contact you by phone prior to taking any action. However, if no action is taken on your part, ClearTrade reserves the right to liquidate all deliverable positions, one day prior to first notice day. If you have any questions about this policy, please call Customer Service (773) 561-9777.
RJO DELIVERY POLICY AND PROCEDURES
Activity on the Last Trading Day of contract expiration is restricted to accounts that have received pre-approval from R.J. O’Brien’s Risk Department or accounts that maintain the full contract value. For all other accounts, Last Trading Day activity is for liquidation purposes only. Day trading or the establishment of a new position is prohibited and that activity may be subject to an automatic spread forward.
Automatic Spread Forward
Under this policy, RJO reserves the right to automatically spread forward the spot month position at market on the open of the Last Trading Day, to avoid a delivery that is either unintentional or that RJO is unable to facilitate (due to its clearing status). A spread forward trade may be executed, if full contract value is not posted
in R.J. O’Brien’s bookkeeping system by the following times:
Foreign Products: Close of business 2 days preceding the Last Trading Day
Energies and Soft products: Close of business on the day preceding the Last Trading Day
Currencies and Treasuries: Close of business on the day preceding the Last Trading Day
Grains: Close of business on the day preceding the Last Trading Day
All reasonable efforts will be made to contact the broker before this occurs. However, this communication will be for the purpose of providing notice, not approval. In addition, at this time, RJO may cancel all open GTC orders in the expiring deliverable contract.
Application for Last Trading Day trading Privileges
Hedgers (trading to protect against price fluctuations or to offset investment risk) that have provided RJO with satisfactory evidence of the ability to facilitate an exchange’s physical delivery, will be allowed full Last Trading Day privileges.
Hedgers that cannot provide sufficient delivery capability evidence, but who can show economic justification for the need to trade on the Last Trading day, may apply for approval (required once) from RJO’s Risk Department for extended trading hours on the Last Trading Day of contract expiration. Non-deliverable Hedge accounts will not be allowed to trade within the last ½ hour of trading on contract expiration day.
Please review our complete policy which can be found on our website: www.rjobrien.com under the link “RJO Delivery Policy and Procedures”. Our web page includes additional information regarding Last Trading Day privileges, Exchange for Related Positions, Open Interest, Large Trader Reporting, Speculative Position Limits and examples of the required qualifications for delivery capability.
Delivery Fees
If on or after the first notice date an unintentional delivery occurs, a service fee of $150 per contract, with a cap of $1000, will be assessed. RJO will also charge interest at a rate of LIBOR plus 7% to finance the delivery.
An additional fee may also be imposed for an Alternative Delivery Procedure (ADP) delivery or any unintentional delivery caused by a trading error resulting with a position after contract expiration.