When trading Equity Index futures, there are two types of settlement: daily and final.
Daily settlement refers to the contract’s settlement price on a daily basis while final settlement represents the final value of the contract at expiration
Futures markets are marked to market every day, a benefit that means every market participant sees the same settlement price at the same time as every other participant.
For most Equity Index futures, daily settlement price for the front month is calculated using a volume weighted average price (VWAP) based on the last 30 seconds of the trading day.
In the case of the E-Mini NASDAQ-100 futures contract, the average would be based on trading activity on CME Globex between 15:14:30 – 15:15:00 Central Time.
Traders, brokers, and others market participants use daily settlement information to manage daily profit and loss, as well as to possibly adjust their margin levels with their clearing firms.
When it comes to final settlement for U.S.-based Equity Index contracts, the value is determined using a Special Opening Quotation, known as the SOQ.
The SOQ is determined by the index provider and is calculated using the actual opening prices for each of the underlying constituent stocks.
In the case of S&P500® futures, the SOQ is determined by the first traded price for each of the 500 companies’ shares that make up the index.
This number is calculated by the Standard and Poors Corporation and generally made available the third Friday of every quarterly futures contract month.
For more information on the daily and final settlement process for each product, refer to the individual contract specifications on cmegroup.com.