Settlement Price

Futures exchanges do not simply use the last trade of the day as the closing benchmark — they calculate a settlement price through a defined methodology, often averaging trades during a brief closing window rather than taking a single transaction. This matters because the settlement price is the number that triggers the daily mark-to-market process: gains and losses are credited or debited to every open account based on the difference between that day's settlement price and the previous day's. The entity that guarantees this process is called a clearinghouse. You can read more about how prices are quoted and recorded in our guide to how market quotes work.

Suppose a trader holds a gold futures contract — standardized at 100 troy ounces on major exchanges — and yesterday's settlement price was $1,900 per ounce. If today's settlement price is $1,920, the holder's account is credited $2,000 (100 ounces × $20 gain) that evening, automatically, regardless of whether the trader has sold anything. This daily cash adjustment is called mark-to-market or "variation margin." It prevents losses from accumulating unnoticed, a key feature of exchange-traded futures contracts.

The settlement price is also the figure used when a contract reaches its final expiration day — at that point it is called the "final settlement price" and is often tied to the spot price of the underlying asset. A common confusion: the settlement price and the closing price shown on a general finance site are sometimes identical but not always, especially in thinly traded markets where the closing trade may not reflect fair value. For commodities, settlement methodologies are published by each exchange and apply uniformly to all open interest held at day's end.