What are delivery instructions?

Delivery instructions are specific instructions that a buyer or a seller of a futures contract gives to their broker or clearing member regarding the delivery or receipt of the underlying asset. Delivery instructions are required when a futures contract reaches its expiration date and the parties intend to settle the contract by physical delivery rather than by cash settlement.

Delivery instructions typically include the following information:

• The name and account number of the buyer or the seller.

• The name and symbol of the futures contract.

• The quantity and quality of the underlying asset.

• The delivery location and date.

• The name, address, and contact details of the delivery agent or the receiving agent.

• The payment method and amount.

Delivery instructions may vary depending on the type of the underlying asset, the rules and regulations of the futures exchange, and the delivery procedures of the clearing house. For example, some futures contracts, such as those on commodities, currencies, indices, and stocks, require physical delivery through the CLS (Continuous Linked Settlement) Bank System, which is a real-time global settlement process that allows for simultaneous delivery versus payment of both sides of a currency transaction. Other futures contracts, such as those on interest rates, are cash-settled and do not require delivery instructions.

Delivery instructions are important for ensuring a fair and orderly delivery process, as well as for protecting the interests and obligations of the buyers and sellers of futures contracts. Delivery instructions must be submitted to the broker or the clearing member before the deadline specified by the futures exchange, which is usually one or two business days before the delivery date. Failure to submit delivery instructions on time may result in penalties, fines, or default.