Tender

What is Delivery?

Delivery refers to the process where both parties in a transaction fulfill the terms and conditions of the contract by transferring goods, securities, currency, or other assets to one another upon completion of the deal. It marks the final stage of the transaction, ensuring that both parties meet their obligations as agreed.

The purpose of delivery is to ensure both parties fulfill the contract and complete the transaction. It plays a crucial role in the efficient operation of financial markets by providing trade security and the realization of trader rights. The specific rules and procedures for delivery are usually clarified and stipulated in the transaction contract or market regulations.

Types of Delivery

Depending on the market and the type of transaction, delivery can be categorized into several common types:

1. Physical Delivery: In some markets, delivery is completed in physical form, meaning the buyer receives or the seller delivers the actual goods or commodities. For example, in commodity futures trading, the buyer might demand the delivery of specific agricultural products, energy, or metals.
2. Cash Settlement: In certain transactions, delivery is completed via cash payment, without the physical transfer of goods or commodities. For instance, in options trading, some option contracts may adopt cash settlements based on the price variations of the underlying asset.
3. Securities Delivery: In stock transactions, delivery means the buyer receives or the seller delivers the agreed-upon securities, which may involve the transfer and registration of stocks or other financial securities.
4. Currency Delivery: In the forex market, delivery refers to the process of exchanging one currency for another at the agreed-upon exchange rate and amount. Currency delivery can occur in spot transactions or upon the maturity of forward contracts.
5. Futures Delivery: In the futures market, delivery follows the stipulations of the futures contract, where specific commodities, financial assets, or cash are delivered to the contract buyer or seller on the expiry or delivery date.

Functions of Delivery

Delivery plays a critical role in transactions, ensuring the completion and realization of both parties' rights. Here are the key functions of delivery in financial and commodity trading:

1. Completing the Transaction: Delivery is the final step in completing the transaction, ensuring both parties fulfill their responsibilities as per the contract's terms and conditions.
2. Fulfilling Contractual Obligations: Delivery is the actual execution of the obligations agreed upon in the transaction contract, ensuring both parties transfer assets, goods, securities, or currency to each other as stipulated, conforming to legal and compliance requirements.
3. Providing Transaction Security and Realizing Rights: Delivery offers a security mechanism for transactions, ensuring the legal transfer of ownership for the buyer and payment or equivalent assets for the seller.
4. Price Discovery and Market Efficiency: The execution of delivery helps in the actualization of transaction prices and conditions, aiding in market price discovery and reflection. Smooth delivery processes contribute to market stability, liquidity, efficiency, and transparency.
5. Meeting Legal and Compliance Requirements: Through delivery, both parties fulfill applicable legal and market rules, ensuring the legality and compliance of the transaction.

Delivery Rules

Delivery rules are determined by specific markets and types of transactions. Different markets and exchanges have their own delivery rules and procedures. Some common delivery rules include:

1. Delivery Time: Delivery rules will specify the time when delivery occurs, i.e., the moment when the buyer officially receives the asset or goods and the seller completes the delivery.
2. Delivery Method: Delivery rules define the delivery method of the asset or goods, which may involve physical delivery, cash settlement, or securities transfer.
3. Delivery Location: Delivery rules specify the location where delivery occurs, i.e., the actual place where the buyer receives or the seller delivers the asset or goods. This may include designated warehouses, delivery centers, or specified financial institutions.
4. Delivery Documents: Delivery rules will outline the required delivery documents and proof, which may include qualified delivery notices, delivery instructions, ownership certificates, transfer documents, etc.
5. Clearing and Settlement: Delivery rules are often closely linked with clearing and settlement procedures, involving the preparation and transfer of funds, and the registration and settlement of securities.
6. Delivery Fees and Rates: Delivery rules outline related fees and rates, which may include storage fees, logistics fees, registration fees, handling charges, etc.
7. Delivery Default and Penalty: Delivery rules include penalty provisions for default, such as fines, contract termination, legal liabilities, etc.

Factors Affecting Delivery

The implementation and influencing factors of delivery depend on the specific market and type of transaction. Here are some factors that might affect delivery:

1. Market Rules and Contract Terms: The delivery process is constrained by the rules of the market and the terms of the contract. Different markets and exchanges have varied requirements and stipulations for delivery, including time, method, location, document requirements, etc.
2. Laws and Regulations: The delivery process is subject to the constraints and requirements of applicable laws and regulations. Legal provisions regarding the legal procedures, document requirements, qualifications, etc., may vary across countries and regions.
3. Funds and Clearing: Delivery may involve the transfer and settlement of funds. The availability of funds, and the efficiency and security of the clearing system are critical factors in the delivery process.
4. Logistics and Transportation: In the case of physical delivery, the reliability and efficiency of logistics and transportation are crucial for the smooth conduct of the delivery.
5. Securities and Registration: In the case of securities delivery, the compliant procedures for securities transfer and registration are key for the completion of the delivery.
6. Partners and Third Parties: Delivery may involve the collaboration of multiple partners and third-party institutions. The reliability of partners, and the coordination and communication of partnerships are crucial for the smooth completion of delivery.
7. Market Liquidity and Participants: Liquidity, the number of participants, and the trading activity may also significantly impact delivery.