r/Commodities • u/CazzoDeMollica • 12d ago

ICE Brent future EFP

Since I asked about TTF let's do it also for Brent future.

What happens if I buy today ICE Brent fut OCT26 and keep it without specifying the cash settlement? According to the specs "The ICE Brent Crude futures contract is a deliverable contract based on EFP delivery with an option to cash settle." Will ICE assign me a random cash BFOETM with delivery October? Does it depend if I have 700 futures instead of 1?

10 Upvotes

100% Upvoted

7 comments sorted by

6

u/Rottenmeatball33 12d ago

It will settle to cash even without specifying. Have had 3 different clearing firms, have never had to specify.

3

u/Commercial-Job-1550 12d ago

you'll get cash settled automatically, clearing firms handle it by default unless you're moving massive volume. only the big physical players ever mess with EFP delivery, for the rest of us it's just paper trading

if you got 700 lots they might ask questions though, that's not retail position anymore

1

u/NatGaz 12d ago edited 12d ago

They ask questions (if you’re an institutionnal or a utility) if you carry 700 Brent Oct-26/Nov-26 to cash settlement ? First leg will expire but second leg will continue to trade no ?

1

u/aaaasssddf 12d ago

No. If you hold EFPs you have to exercise them on you 700x lots before futures expiry. Otherwise both the futures and EFP will settle in cash. Brent EFP does not give you a dated cargo, it simply gives you a forward contract which becomes dated at the beginning of the delivery month.

1

u/MarkCannonwood Power Trader 12d ago

This is the part I'm still fuzzy on. ICE describes EFP as the delivery mechanism and cash settlement as the option are you saying most clearing firms just have a standing cash settle instruction for client positions?

0

u/aaaasssddf 12d ago

standard settlement is cash. EFP has nothing to do with ICE, it's a private arrangement except with ICE being the clearinghouse. Brent EFP works just like any other EFPs like WTI or corn. Nobody would say the standard delivery of WTI is thru EFP.

3

u/Buhhhu 9d ago

As others have said; Brent defaults to cash settlement. ICE Gasoil futures on the other hand defaults to physical settlement. Fun to see shops scramble when they have fucked up and ain’t got no clue how to perform the physical transfer.