First Day: Variation margin 15 000 receivable
Initial margin 125 000 payable
Settlement Total Due Next Day (a) 110 000 payable (15 000 VM
receivable 125 000 1 M payable)
(b) 15 000 receivable plus need
to deposit collateral of atleast
125 000
Second Day: Variation margin 37 500 plus 12 500 receivable
Initial margin 125 000 payable
Settlement Total Due Next Day (a) 75 000 payable
(50 000 VM receivable 125 000
1 M payable for new trade)
(b) 50 000 receivable plus need
to deposit another 125 000
collateral
Third Day: Variation margin (7500) (15 000)
Initial margin 150 000 receivable
Settlement Total Due Next Day (a) 127 500 to receive
(return of 1 M 150 000 less
22 500 VM payable)
(b) £25 500 to pay but return of
150 000 collateral
(a) cash settlement of both variation and initial margin
(b) cash settlement of VM and collateral deposited to cover initial
margin
Futures delivery
Futures contracts are designed to go to delivery. As we know, deliv-
ery can be either physical delivery of the underlying or by cash settle-
ment. There can also be an Exchange For Physical (EFP) or Exchange
For Swap (EFS) option on some futures.
The physically delivered futures can be commodities or financial
products like bond futures or some stock futures. The exchange
decides what is deliverable, i.e. the type and grade of commodity or
the bond. A list of deliverable grades or bonds is then published to
members. For example, Figure 4.4 shows the list of deliverable
Bunds against the Eurex Bund future and Figure 4.5 gives the speci-
fication of the contract.
Futures processing 57
58 Clearing and settlement of derivatives
Expiry month Dec 2004
Deliverable Bond ISIN Coupon Rate (%) Maturity Date Conversion Factor
DE0001135234 3.75 04.07.2013 0.852400
DE0001135242 4.25 04.01.2014 0.880175
DE0001135259 4.25 04.07.2014 0.874942
Expiry month Mar 2005
Deliverable Bond ISIN Coupon Rate (%) Maturity Date Conversion Factor
DE0001135242 4.25 04.01.2014 0.882591
DE0001135259 4.25 04.07.2014 0.877455
Expiry month Jun 2005
Deliverable Bond ISIN Coupon Rate (%) Maturity Date Conversion Factor
DE0001135242 4.25 04.01.2014 0.885049
DE0001135259 4.25 04.07.2014 0.880217
Figure 4.4 Deliverable Bond List
Eurex German Bund Future Contract Specifications (Version 03 Mar 2004)
Contract Standard
A notional long-term debt instrument issued by the German Federal Government with a
term of 8
1
⁄
2
to 10
1
⁄
2
years and an interest rate of 6 per cent.
Contract Size
EUR 100,000
Settlement
A delivery obligation arising out of a short position in a Euro-BUND Futures contract may
only be fulfilled by the delivery of specific debt securities – namely, German Federal Bonds
(Bundesanleihen) with a remaining term upon delivery of 8
1
⁄
2
to 10
1
⁄
2
years. The debt secu-
rities must have a minimum issue amount of 2 billion euros.
Quotation
In a percentage of the par value, carried out two decimal places.
Minimum Price Movement
0.01 per cent, representing a value of EUR 10.
Delivery Day
The 10th calendar day of the respective delivery month, if this day is an exchange trading
day; otherwise, the immediately following exchange trading day.
Delivery Months
The three successive months within the cycle March, June, September and December.
Notification
Clearing Members with open short positions must notify Eurex which debt instruments they
will deliver, with such notification being given by the end of the Post-Trading Period on the
last trading day in the delivery month of the futures contract.
Last Trading Day
Two exchange trading days prior to the delivery day of the relevant delivery month. Trading
in the contract for this delivery month ceases at 12:30 CET.
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