Jim,
Please refer to the descriptions of
the Eurodollar settlement procedure below. Because these are cash settled,
there is not physical delivery, but rather your position will be marked to the
final settlement price on the last trading day.
Final Eurodollar Futures
Settlement
Prices
Eurodollar futures settle to the London Interbank
Offered Rate as determined by the 11:00 a.m. daily survey sponsored by the
British Bankers’ Association (BBA). The BBA survey group currently consists of
16 banks, each of which submits its perception
of the interest rates currently available in the
marketplace for deposits ranging in maturity from overnight to one year. From
this 16-rate sample for each maturity, the four high and four low quotes are
eliminated, and the arithmetic mean of the middle eight rates is computed. This
average becomes the day’s LIBOR fixing for that maturity. These rates are
published daily on Dow Jones Markets page 3750, Bloomberg page “BBAM” and
Reuters page “LIBOR01.”
Because this survey is conducted on a daily basis at
11:00 a.m.
Consequently, there is no pit trading of the expiring
futures and quarterly option contracts on expiration day. However, trading can
take place on the last trading day up to the time of the BBA survey via the
GLOBEX electronic trading platform and, for futures only, on the Singapore
Exchange (SGX).
Example
If you were long at 95.00 and the final settlement price
were 94.99, you would “owe” $25.00 per contract that you were long.
The following excerpt is straight
from the CME rulebook:
The final settlement
price shall be 100 minus the British Bankers' Association Interest Settlement
Rate for Three–Month Eurodollar Interbank Time Deposits, rounded to the nearest
1/10000th of a percentage point, on the second London bank business day
immediately preceding the third Wednesday of the contract month. (Decimal
fractions ending in a five (5) are rounded up. For example, an average
rate of 8–21/32% — 8.65625% — would be rounded to 8.6563 and then subtracted
from 100 to determine a final settlement price of 91.3437.) (The 16
reference banks selected by the British Bankers' Association to provide offered
rates are major participants in the London Eurodollar Market.)
45203.B.
Final Settlement[9]
Clearing members
holding open positions in a Eurodollar futures contract at the time of
termination of trading in that contract shall make payment to or receive payment
from the Clearing House in accordance with normal variation performance bond
procedures based on a settlement price equal to the final settlement
price
I hope this helps
explain the settlement process. If you have further questions, please feel
free to call me or my colleague Larry Grannan at
312.454.8312.
Thanks, Craig,
312.648.3839