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Pay-Collect in Futures

What does Pay-Collect in Futures mean?

A shorthand term which refers to the payment or collection of funds between clearing members and their respective clearing houses. This is done after futures positions have been marked to market.

Futures Knowledge Explains Pay-Collect in Futures

The term Pay/Collect for stands payment and collection. Futures positions are marked to market daily after close of trading hour.  As futures trading is a zero-sum game, in marking to market, one side of the futures position will be in a deficit position while the other in a surplus. Pay/ Collect takes place traders after all transactions have been marked to market and netted by a clearing house. This imbalance is offset through the pay/collect transactions executed by clearing members to the clearing organizations. Payment or collection is done on daily basis to cover variation margin. Pay/ Collect is calculated separately for customer and proprietary positions.

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