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37-768: The Dubai Mercantile Exchange (DME) is a commodity exchange based in Dubai currently listing its flagship futures contract , DME Oman Crude Oil Futures Contract (OQD). Launched in 2007, the DME aims to become the crude oil pricing benchmark for the Asian market with its Oman Crude Oil contract, like the Intercontinental Exchange ’s (ICE) North Sea Brent is to Europe and the New York Mercantile Exchange ’s (NYMEX) West Texas Intermediate

74-412: A direct holding system , participants hold the underlying securities directly. The settlement system does not stand in the chain of ownership, but merely serves as a conduit for communications of participants to issuers. The terms T+1 , T+2 , etc., are a shorthand for "trade date plus one day", "trade date plus two days", etc., indicating how many business days after a security transaction occurs that

111-534: A corresponding payment (sometimes referred to as a free delivery , free of payment or FOP delivery, or in the United States, delivery versus free ). Examples of a delivery without payment are the delivery of securities collateral against a loan of securities, and a delivery made pursuant to a margin call . Prior to modern financial market technologies and methods such as depositories and securities held in electronic form, securities settlement involved

148-573: A major report in 1989 by the Washington-based think tank, the Group of Thirty . This report made nine recommendations with a view to achieving more efficient settlement. This was followed up in 2003 with a report, Clearing and Settlement: A Plan of Action , with 20 recommendations. In an electronic settlement system, electronic settlement takes place between participants. If a non-participant wishes to settle its interests, it must do so through

185-431: A participant acting as a custodian. The interests of participants are recorded by credit entries in securities accounts maintained in their names by the operator of the system. It permits both quick and efficient settlement by removing the need for paperwork, and the simultaneous delivery of securities with the payment of a corresponding cash sum (called delivery versus payment , or DVP) in the agreed upon currency. After

222-722: A regulated and transparent benchmark for the East of Suez market. Commodities exchange A commodities exchange is an exchange , or market, where various commodities are traded. Most commodity markets around the world trade in agricultural products and other raw materials (like wheat , barley , sugar , maize , cotton , cocoa , coffee , milk products, pork bellies , oil , and metals ). Trading includes various types of derivatives contracts based on these commodities, such as forwards , futures and options , as well as spot trades (for immediate delivery). A futures contract provides that an agreed quantity and quality of

259-516: A stake in the DME, which was launched on 1 June of that year. Two major events in 2008 that notably changed the DME’s shareholding structure; several trading firms and international financial institutions, namely Concord Energy , Goldman Sachs , JPMorgan Chase , Morgan Stanley , Shell and Vitol , became shareholders of the DME, and NYMEX was acquired by the CME Group . The acquisition of NYMEX by

296-408: A wide range of international securities are settled through them including many types of sovereign debt and equity securities. Dematerialisation involves dispensing with paper instruments and certificates altogether. Dematerialised securities exist only in the form of electronic records. The legal impact of dematerialisation differs in relation to bearer and registered securities respectively. In

333-572: Is not subject to OPEC production quotas and/or cuts, nor is it subject to destination restrictions. Secondly, the geographical location of the export port Mina al Fahal (operated by Petroleum Development Oman - PDO), in Muscat into the Gulf of Oman, is past the Strait of Hormuz . Other reasons such as the increasing long-term production levels and investments, as well as the quality of the crude, helped tip

370-513: Is to North America. The Dubai Mercantile Exchange announced that it will officially change its name to Gulf Mercantile Exchange (GME) effective September 2, 2024. The choice of the OQD contract as a benchmark was due to several important attributes of the crude oil itself and its infrastructure as opposed to the volume of export in comparison with other Middle East crudes. Firstly, the Omani crude oil

407-575: Is typically made via electronic funds transfer (in the U.S., a bank wire transfer made through the Federal Reserve 's Fedwire system). Physical/paper settlement involves higher risks, inasmuch as paper instruments, certificates, and transfer forms are subject to risks electronic media are not, such as loss, theft, clerical errors, and forgery (see indirect holding system ). The U.S. securities markets experienced what became known as "the paper crunch", as settlement delays threatened to disrupt

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444-525: The Big Bang of 1986 led to an explosion in the volume of trades, and settlement delays became significant. In the market crash of 1987, many investors sought to limit their losses by selling their securities, but found that the failure of timely settlement left them exposed. The electronic settlement system came about largely as a result of Clearance and Settlement Systems in the World's Securities Markets ,

481-592: The 1700s the Amsterdam Stock Exchange had close links with the London Stock Exchange and they would often list each other's stocks. To clear the trades, time was required for the physical stock certificate or cash to move from Amsterdam to London and back. This led to a standard settlement period of 14 days which was the time it usually took for a courier to make the journey on horseback and by ship. Most exchanges continued to use

518-567: The CME Group greatly impacted the DME. Until the DME migration to the electronic trading platform CME Globex in 2009, DME futures used to be traded on DME Direct, an electronic platform designed by NYMEX specifically for the DME. The switch to one of the leading platforms, CME Globex, in February 2009 has helped make the access to the DME contracts easier for market participants, as all three benchmarks (WTI, Brent and DME Oman) can be traded on

555-630: The Dubai Mercantile Exchange through the Oman Crude Oil Futures Contract: * the exchanged opened on 1 June 2007. 1,000 barrels = 1 lot (or contract). Figures are from the DME website With over 144 million barrels delivered through the exchange in 2010 and more than 50 companies trading the contract regularly, it seems that the DME Oman oil benchmark has been accepted by market participants as

592-447: The EU transition to T+1 on October 11, 2027. Under a one-day settlement rule (T+1), settlement occurs on the business day following the transaction date. Saturday, Sunday and public holidays are not market business days. For example, if a transaction occurs on a Friday, the payment or check must arrive at the broker's office by the close of business on Monday, unless a public holiday delays

629-652: The United Kingdom adopted T+2 in October 2014 and the United States adopted T+2 in September 2017. Indian stock exchanges planned a move to T+1 starting in 2022. The US and Canada targeted a transition to T+1 early in 2024. Canada adopted T+1 beginning on May 27, 2024, as did Argentina, Jamaica, Mexico, and the US on the following day. Chile, Colombia, and Peru are slated to move to T+1 in 2025, and ESMA recommended

666-693: The balance in favor of that crude to be used as a benchmark. The DME is located in the Dubai International Financial Center (DIFC), (a financial free zone in Dubai), and is regulated by the Dubai Financial Services Authority . The US Commodity Futures Trading Commission (CFTC) issued a " No Action Letter " in 2007, allowing US customers to trade DME contracts. The DME has received further regulatory approval in 23 jurisdictions. The exchange

703-564: The benchmark. The DME’s flagship contract is the Oman Crude Oil Futures Contract, launched on 1 June 2007, which became the largest physically delivered crude oil contract in the region. The physical settlement of the contract gives it a unique aspect whereby the front trading month is two months forward (e.g.: the March contract is the front month during January trading). Total number of barrels traded per year on

740-602: The buyer from price rises. Speculators and investors also buy and sell these contracts to try to make a profit; they provide liquidity to the system. Some of these exchanges also trade financial derivatives, such as interest rate and foreign exchange futures, as well as other instruments such as ocean freight contracts and environmental instruments. In some cases these are mentioned in the lists below. See List of futures exchanges#Major derivatives exchanges . Main commodity exchanges worldwide: "Cashmere, Wool, Livestock, Grain, Meat, Leather" Settlement (finance) In

777-403: The commodity will be delivered at some agreed future date. A farmer raising corn can sell a futures contract on his corn, which will not be harvested for several months, and gets a guarantee of the price he will be paid when he delivers; a breakfast cereal producer buys the contract and gets a guarantee that the price will not go up when it is delivered. This protects the farmer from price drops and

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814-410: The context of securities, settlement involves their delivery to the beneficiary, usually against ( in simultaneous exchange for ) payment of money, to fulfill contractual obligations, such as those arising under securities trades. Nowadays, settlement typically takes place in a central securities depository . In the United States, the settlement date for marketable stocks is usually 1 business day after

851-406: The late 1960s as brokerage firms became overwhelmed by the massive volume of securities transactions paperwork awaiting settlement. The Black Monday (1987) stock market crash prompted a move to reduce settlement times. Settlement dates in most exchanges reduced to three days (T+3). In 2017, the move by most stock exchanges was towards adoption of T+2 (trade date plus two days). For example,

888-617: The operations of the securities markets which led to the formation of electronic settlement via a central securities depository, specifically the Depository Trust Company (DTC), and ultimately its parent, the Depository Trust & Clearing Corporation . In the United Kingdom , the weakness of paper-based settlement was exposed by a programme of privatisation of nationalised industries in the 1980s, and

925-458: The parties during the settlement interval, which are managed by the process of clearing , which follows trading and precedes settlement. Clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation . Settlement involves the delivery of securities from one party to another. Delivery usually takes place against payment known as delivery versus payment , but some deliveries are made without

962-460: The physical movement of paper instruments, or certificates and transfer forms. Payment was usually made by paper cheque upon receipt by the registrar or transfer agent of properly negotiated certificates and other requisite documents. Physical settlement securities still exist in modern markets today mostly for private (restricted or unregistered) securities as opposed to those of publicly (exchange) traded securities; however, payment of money today

999-517: The risk of the default of their counterparties. Immobilisation and dematerialisation are the two broad goals of electronic settlement. Both were identified by the influential report by the Group of Thirty in 1989. Immobilisation entails the use of securities in paper form and the use of a central securities depository or more than one, which is/are electronically linked to a settlement system. Securities (either constituted by paper instruments or represented by paper certificates) are immobilised in

1036-569: The same electronic platform. Another boost for the DME in 2009 was the announcement by the Dubai Department of Petroleum Affairs (DPA) in switching their pricing formula to the forward public OSP based on the DME contract. That meant that the Dubai crude oil selling price would become: In December 2010, NYMEX announced the launch of six DME Oman-linked contracts to complement the availability of trading instruments so as to help establish

1073-502: The same model over the next few hundred years. Settlement procedures varied considerably across national stock markets. There were two main types of settlement period used by different countries, either a fixed number of days after the transaction known as fixed settlement lag or periodically on a fixed date when all transactions up to that date are settled known as fixed settlement date . In France, Italy, and, to some extent, Switzerland and Belgium, as well as some developing countries,

1110-427: The seller must produce the security's certificate and executed share transfer form in exchange for payment from the purchaser. Many countries now dispense with the requirement that a physical stock certificate be produced, a process known as dematerialization , and have adopted electronic settlement systems. Similarly, T+2 means the previous convention of trade date plus two days, T+3 means three days, etc. During

1147-531: The sense that they are held by the depository at all times. In the historic transition from paper-based to electronic practice, immoblisation often serves as a transitional phase prior to dematerialisation. The Depository Trust Company in New York is the largest immobilizer of securities in the world. Euroclear and Clearstream Banking , Luxembourg are two important examples of international immobilisation systems. Both originally settled eurobonds , but now

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1184-460: The settlement day. The rationale for the delayed settlement is to give time for the seller to get documents to the settlement and for the purchaser to clear the funds required for settlement. The one-day settlement period (T+1) applies to most security transactions, including stocks , bonds , municipal securities , mutual funds traded through a brokerage firm , and limited partnerships that trade on an exchange . Two-day settlement has been

1221-642: The settlement of all transactions took place once a month on a fixed date. This system was instituted by Napoleon . The last day of trading on which all trades are settled was called the liquidation. The liquidation took place on the seventh business day preceding the end of the calendar month. In the United States, the New York Stock Exchange used T+1 in the 1920s, and the American Stock Exchange used T+2 prior to 1953. These settlement periods were gradually extended to T+5 by

1258-464: The trade and before settlement, the rights of the purchaser are contractual and therefore personal . Because they are merely personal, the purchaser's rights are at risk in the event of the insolvency of the vendor. After settlement, the purchaser owns securities and his rights are proprietary . Settlement is the delivery of securities to complete trades. It involves upgrading personal rights into property rights and thus protects market participants from

1295-438: The trade is executed, often referred to as " T+1 ." For listed options and government securities in the US, settlement typically occurs 1 day after trade execution. In Europe, settlement date has been adopted as 2 business days after the trade is executed. As part of performance on the delivery obligations entailed by the trade, settlement involves the delivery of securities and the corresponding payment. A number of risks arise for

1332-418: The trade must be settled. Rules or customs in financial markets for securities transactions provide for this 'settlement period', which is the mandated time for official transfer of securities to the buyer's account and the cash to seller's account. The most common current settlement period for securities transactions is one business day after the day of a transaction, which is abbreviated to T+1. On settlement,

1369-563: Was initially started in 2005, when Tatweer and NYMEX signed a Joint Venture Agreement to launch a commodities exchange in the Middle East. The following year, Oman’s Ministry of Oil and Gas (MOG) announced that the Omani crude oil’s official selling price (OSP) exported through PDO would be set according to the DME Oman Crude Oil Futures contract. In the first half of 2007, Oman Investment Fund (OIF) acquired

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