Cash-Settled Futures

With cash-settled futures, there is no transfer of LME warrants or physical metal. Cash-settled futures require the transfer of an amount of cash determined by the difference between the original fixed price of the contract and the floating final settlement price (determined by the published reference price from the PRA). When the final settlement price is higher than the original contract fixed price, the long position holder (buyer) receives cash from the short position holder (seller). If the settlement price is lower, the long position holder (buyer) transfers the difference to the short position holder (seller).

References

https://www.lme.com/Education/Online-resources/LME-Insight/Introduction-to-cash-settled-futures


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