4.9 Defer the Contract Expiry

This topic describes the defer contract expiry.

There is a possibility of the spot rate change during the maturity with respect to the expiry location and the deal can become In the Money (ITM). As a part of EOD batch operation for auto exercise or expiry on maturity, the batch considers the expiry location and the time.

With this the batch considers to skip the deal, whose expiry location and time is not the same as the business or system date and such deals are processed during next EOD batch.

In case of an option deal termination, the system supports the future dated termination as per the present functionality.

The deferred exercise and expiry is applicable for the below scenario(s):

• Depending on the time zone and expiry location time and current time in the option executing branch, the exercise or expiry event is deferred to next EOD if expiry location time condition is yet to be met.
• Processing on the maturity expiry date is not restricted to the expiry of the currency options alone.
• The currency options might be Exercised, if it is In The Money (ITM), even prior to the time of expiry in the expiry location.

Note:

The deferment of exercise or expiry is not expected to be beyond a duration of one business day.

A new event FTER (for Future Termination) is available. There are no accounting entries are allowed or passed for this event.

The time zone of the processing center/branch might be identified with the information in the newly introduced field. The expiry location and time is obtained from the Options Contract Input (OTDTRONL) screen. During EOD batch processing on the maturity date, the automatic exercise or expiry is deferred till the expiry time (as per expiry location) i.e. processed in the following EOD. For details on Options Contract Input screen see the section Maintain Details of OT Contract

In the OTDXCTRM screen (OT Contract Termination) the Termination Date is enabled and editable. Future value date might be entered for termination. There is an inbuilt validation to ensure that the termination date is before the maturity date. For details on Options Contract Termination screen see the section: Terminate Option Contracts