Delivery Process

NYPC’s Locked-In Trade Delivery Mechanism

In today’s futures markets, only a very small percentage of the open interest actually goes to delivery, mainly as a result of the operational burdens placed on the clearing member responsible for making or taking delivery. Through the use of FICC’s Real Time Trade Matching (RTTM®) system, NYPC eliminates these operational burdens and offers Member firms an efficient, straight-through delivery process for U.S. Treasury futures. Contracts remaining open after the close of trading on the last trading day of the delivery month will be automatically submitted as FICC locked-in trades in the underlying U.S. Treasury securities eligible for settlement on a delivery vs. payment (DVP) basis on the next business day.

Benefits

NYPC’s innovative locked-in trade delivery mechanism:

• Allows firms to deliver U.S. Treasuries against expiring U.S. Treasury futures contracts without risking the onerous penalties associated with failing to deliver.

• Eliminates the need to “box” securities prior to physical delivery, reducing financing costs and increasing capital efficiency.

• Enables netting of final delivery cash positions submitted via the NYPC locked-in trade delivery process along with a FICC member’s daily cash trading activity.

• Simplifies processing of final settlement trades on the various futures bookkeeping systems.

How the Service Works

Day 1: Intention Day.—Each Member firm with a short position notifies NYPC that it intends to make delivery on an expiring contract and submits an “intent to deliver” notice into NYPC’s Clearing Processing System by 9:00 P.M. (all times Eastern Time). A “delivered positions” file is produced detailing all short positions for which “intent to deliver” notices have been submitted, as well as all long positions that are to be assigned delivery.

Day 2: Notice Day.—By 3:00 P.M., each Member firm with a short position is required to nominate a bond from the deliverable bonds list in the Liffe Guardian delivery system, which will create the cash trades and send them to FICC’s RTTM® system. FICC, through its netting process, then creates settlement obligations for next business day settle.

Day 3: Delivery Day.— Settlement obligations settle DVP via FICC’s normal settlement processes.

Download a brochure about the Locked-In Trade Delivery Process