A settlement price is the official daily price established for an exchange-traded futures contract and used to mark open positions, calculate daily gains and losses, and support margin and clearing processes. It is often described as the market’s daily close, but that shorthand can mislead: the settlement price is determined under an exchange’s stated methodology and therefore need not equal the last transaction price of the session. In this entry, the term is used in its futures-market sense across commodity and financial futures, including physically delivered and cash-settled contracts; settlement conventions for options and bilateral OTC derivatives are outside its scope.
Why settlement can differ from the last trade
For many contracts, the daily settlement price is determined from activity during a defined settlement window. Depending on the product and its liquidity, the methodology may use qualifying trades, a volume-weighted average price, bids and offers, spread relationships between contract months, or other prescribed market inputs. If a contract is thinly traded, the exchange may rely on related contracts, spreads, quotes, or other fallback procedures rather than copy a single late trade. Settlement is therefore a rule-based clearing reference, not simply the final print on the screen.
The timing creates an important research trap. For some contracts, the settlement window ends before trading ends for the session. A data vendor’s end-of-session “close” may therefore incorporate trades that occurred after the information window used to determine the official settlement. Substituting close for settle—or settle for close—can change daily returns, marked profit and loss, volatility estimates, rolling signals, and continuous-futures construction. Researchers should identify which field their data set actually contains and align it with the applicable contract’s settlement procedure and timestamp.
Daily settlement and final settlement are not the same concept
Daily settlement is the recurring mark used through the life of the contract. At expiration, a contract may instead be assigned a final settlement price under a separate rule. Cash-settled futures can reference an index fixing, special quotation, average benchmark rate, or another contract-specific calculation; physically settled futures can use settlement values in delivery or invoice mechanics according to their rules. The last daily settlement and the final settlement may coincide for some products, but this should not be assumed. When expiry, delivery, backtesting, or historical profit and loss matters, the contract’s settlement methodology—not a generic “closing price” field—is the authoritative reference.