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How Does the Standardization of a Commodity Aid Physical Settlement?

Standardization ensures that the quality, quantity, and location of the underlying commodity are clearly and uniformly defined in the futures contract. This removes ambiguity and allows the contract to be fungible and tradable.

Without standardization, every delivery would require individual inspection and negotiation, making the settlement process prohibitively complex and inefficient.

What Is the Concept of ‘Deliverable Grade’ in Futures Contracts?
What Is the Primary Difference between Fungible and Non-Fungible Tokens?
What Is the Significance of the “Quality” of Reserve Assets (E.g. T-Bills Vs. Commercial Paper)?
What Is the Fundamental Difference between Fungible and Non-Fungible Token Standards?