# How Does the Daily Settlement Process Differ between Futures and Forwards? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

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## How Does the Daily Settlement Process Differ between Futures and Forwards?

The daily settlement process, known as marking-to-market, is a key feature of futures contracts and is absent in forwards. With futures, the clearing house adjusts the value of each contract to the current market price at the end of every trading day, and funds are transferred between the accounts of the buyer and seller.

This prevents large losses from accumulating. Forward contracts are typically settled only once at maturity.

The entire gain or loss is realized on the settlement date, which increases the total credit exposure between the two parties over the life of the contract.

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- [What Is the Difference between Physical Settlement and Cash Settlement after a Credit Event?](https://learn.greeks.live/path/what-is-the-difference-between-physical-settlement-and-cash-settlement-after-a-credit-event/)

- [Does the Settlement Process for Cash-Settled Options Differ from Physically-Settled Options at Expiration?](https://learn.greeks.live/path/does-the-settlement-process-for-cash-settled-options-differ-from-physically-settled-options-at-expiration/)

- [How Does the Settlement Process Differ between Cash-Settled and Physically-Settled Futures?](https://learn.greeks.live/path/how-does-the-settlement-process-differ-between-cash-settled-and-physically-settled-futures/)

- [What Is the Settlement Process for a Cash-Settled Crypto Futures Contract?](https://learn.greeks.live/path/what-is-the-settlement-process-for-a-cash-settled-crypto-futures-contract/)

- [How Does the Margin Requirement Differ for Physically-Settled versus Cash-Settled Futures?](https://learn.greeks.live/path/how-does-the-margin-requirement-differ-for-physically-settled-versus-cash-settled-futures/)

- [Why Is Variation Margin Typically Settled in Cash, While Initial Margin Can Be Non-Cash Assets?](https://learn.greeks.live/path/why-is-variation-margin-typically-settled-in-cash-while-initial-margin-can-be-non-cash-assets/)

- [Explain the Difference between Physically-Settled and Cash-Settled Futures Contracts](https://learn.greeks.live/path/explain-the-difference-between-physically-settled-and-cash-settled-futures-contracts/)

## Glossar

### [Daily Settlement](https://learn.greeks.live/area/daily-settlement/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Reconciliation ⎊ This procedure mandates the periodic recalculation of profit and loss across open derivative positions, typically occurring at the close of the trading day.

### [Forwards](https://learn.greeks.live/area/forwards/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Mechanism ⎊ Forwards, within cryptocurrency and financial derivatives, represent contractual agreements obligating parties to transact an asset at a predetermined price on a future date, differing from futures through customization and typically trading over-the-counter.

### [Daily Settlement Process](https://learn.greeks.live/area/daily-settlement-process/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Process ⎊ The daily settlement process, within cryptocurrency, options, and derivatives, represents the culmination of trading activity, reconciling positions and transferring ownership of assets or contractual rights.

## Discover More

### [How Does the "Finality" Concept in Other Blockchains Differ from Bitcoin's Confirmation Process?](https://learn.greeks.live/path/how-does-the-finality-concept-in-other-blockchains-differ-from-bitcoins-confirmation-process/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the "Finality" Concept in Other Blockchains Differ from Bitcoin's Confirmation Process?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Micro-Electromechanical-Actuator-Assembly-for-Decentralized-Finance-Derivative-Settlement-Mechanisms.webp)

Bitcoin uses probabilistic finality; many PoS chains use absolute finality, which guarantees irreversibility after a checkpoint.

### [How Does Counterparty Risk Differ between Custodial and Non-Custodial Exchanges?](https://learn.greeks.live/path/how-does-counterparty-risk-differ-between-custodial-and-non-custodial-exchanges/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Counterparty Risk Differ between Custodial and Non-Custodial Exchanges?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Machined-Actuator-Mechanism-Above-Cryptocurrency-Ledger-Circuitry-Platform.webp)

Custodial exchanges concentrate risk on the platform; non-custodial exchanges shift it to smart contracts.

### [Explain the Process of 'Minting' and 'Redeeming' a Wrapped Token](https://learn.greeks.live/path/explain-the-process-of-minting-and-redeeming-a-wrapped-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Process of 'Minting' and 'Redeeming' a Wrapped Token](https://learn.greeks.live/wp-content/uploads/2025/10/Tokenized-Asset-Bifurcation-Visualizing-Synthetic-Option-Hedging-Mechanism-Dynamics.webp)

Minting locks the original asset and issues the wrapped token; redeeming burns the wrapped token and unlocks the original asset.

### [What Is the Process of 'Marking to Market' for a Futures Contract?](https://learn.greeks.live/path/what-is-the-process-of-marking-to-market-for-a-futures-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Process of 'Marking to Market' for a Futures Contract?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Protocol-Governance-Mechanism-Structure-Reflecting-Algorithmic-Trading-Strategy-Execution.webp)

Daily valuation of a futures contract at its current market price, with the resulting gain or loss settled as variation margin to prevent accumulated exposure.

### [What Is a 'Perpetual Contract' and How Does It Differ from a Traditional Futures Contract?](https://learn.greeks.live/path/what-is-a-perpetual-contract-and-how-does-it-differ-from-a-traditional-futures-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is a 'Perpetual Contract' and How Does It Differ from a Traditional Futures Contract?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Geometric-DeFi-Volatility-Instrument-Representing-Perpetual-Swaps-Structure.webp)

Perpetual contracts are like futures but have no expiration date, using a 'funding rate' to anchor the price to the spot market.

### [How Does the Liquidation Process Work for a Leveraged Futures Position?](https://learn.greeks.live/path/how-does-the-liquidation-process-work-for-a-leveraged-futures-position/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Process Work for a Leveraged Futures Position?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Engineered-Hinge-Mechanism-Reflecting-Decentralized-Finance-Protocol-Security-Architecture.webp)

The position is automatically closed when margin falls below the maintenance level, leading to margin loss.

### [How Is the 'Marking-to-Market' Process Performed for Futures Contracts?](https://learn.greeks.live/path/how-is-the-marking-to-market-process-performed-for-futures-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is the 'Marking-to-Market' Process Performed for Futures Contracts?](https://learn.greeks.live/wp-content/uploads/2025/10/Segmented-Modular-Tokenization-Curve-Representing-Volatility-Surface-Contraction-in-Decentralized-Finance-Options.webp)

MTM is the daily adjustment of a futures contract's value to the current market price, with profit/loss credited/debited as variation margin.

### [How Does the Final Settlement Mechanism Enforce Convergence for Cash-Settled Futures?](https://learn.greeks.live/path/how-does-the-final-settlement-mechanism-enforce-convergence-for-cash-settled-futures/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Final Settlement Mechanism Enforce Convergence for Cash-Settled Futures?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetrical-Digital-Asset-Volatility-Topology-Intersecting-Perpetual-Swaps-Grids.webp)

By mandating the final settlement price be the spot price at expiration, it eliminates any final basis difference.

### [Explain the Settlement Process for a Physically-Settled Futures Contract](https://learn.greeks.live/path/explain-the-settlement-process-for-a-physically-settled-futures-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Settlement Process for a Physically-Settled Futures Contract](https://learn.greeks.live/wp-content/uploads/2025/10/Microstructure-Analysis-of-Digital-Asset-Settlement-Mechanisms-Through-Option-Delta-Hedging-Protocols.webp)

Actual Asset Delivery. Seller → Buyer. ≠ Cash Settlement 43.

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