Examples of EDSP
The exchange delivery settlement price is calculated in different ways depending on the exchange.
For example, the London Stock Exchange (LSE) attains the EDSP of the FTSE 100 through an intraday auction, which is held on the third Friday of every month. The auction call starts at 11.10am (Swiss time) for each security.
The auction’s main purpose is to concentrate liquidity in the respective securities and create a price for the LSE derivative market’s expiring futures and options contracts.
Instead of holding an auction, other exchanges calculate EDSP by taking the average of a derivative’s traded price over a set period of time.
For instance, the Chicago Mercantile Exchange (CME) calculates the EDSP of EUR/USD futures by taking the exchange rates from 16 leading banks. It then discards the top and bottom three sets of figures, and calculates the average from the remainder of the exchange rates, which becomes the EDSP.