Settlement Price
The official price set by an exchange at the end of each trading day, used to mark all open positions to market and determine daily P&L for futures contracts.
What is Settlement Price?
Settlement price is the official exchange-determined price used to mark all open futures positions to market at the end of each trading day. It’s not necessarily the last printed price — for major contracts like ES, settlement is computed as the volume-weighted average price (VWAP) of trades in the final 30 seconds before regular session close (4:00 PM ET for equity index futures).
The distinction matters: a chart shows the last trade as the “close” — say, 4504.25 with the final tick at 3:59:59 PM. Settlement might be 4504.10 (the 30-second VWAP). Your overnight P&L is calculated against settlement (4504.10), not chart close (4504.25). Small difference per contract, but it adds up across positions.
Settlement also determines the reference price for next session’s daily price limits. The 7%/13%/20% limit-up/limit-down thresholds are calculated as percentages of the previous settlement price, not opening price or chart close.
How Settlement Price works
Settlement calculation methods (CME):
- Equity index futures (ES, NQ, YM, RTY): VWAP of trades in the last 30 seconds of regular trading hours (3:59:30 – 4:00:00 PM ET).
- Energy (CL): VWAP from 2:28-2:30 PM ET (close of regular pit session).
- Treasuries (ZB, ZN, ZF): VWAP from 2:59-3:00 PM ET.
- Metals (GC, SI): VWAP from 1:29-1:30 PM ET.
- Agricultural (ZC, ZS, ZW): VWAP from 1:18-1:20 PM ET.
How settlement is used:
- Daily MTM: All open positions revalued at settlement. P&L credited/debited daily.
- Margin calculation: Initial margin requirements computed against settlement-based equity.
- Price limit reference: Next session’s 7%/13%/20% limit thresholds measured against settlement.
- Tax reporting: Year-end open positions MTM at Dec 31 settlement for Section 1256 reporting.
- Reference for derivatives: Options on futures use settlement prices for ITM/OTM determinations on expiration.
Settlement vs. chart close:
- Chart close: visual end-of-day price (last printed trade)
- Settlement: official exchange-calculated VWAP
- Difference: usually small (0-2 ticks), but always present
- Critical for: margin calls right at session close, drawdown calculations on overnight holds
Prop firm impact: If you carry an overnight position, your account equity at next session open reflects settlement-priced MTM. A position you closed mentally at 4505 (chart close) actually settled at 4504.50 (VWAP), so your overnight P&L per contract is -$25 (1 tick) less than you thought. On 5 contracts, that’s -$125 vs. your mental tally. This can affect drawdown calculations.
Worked example
End-of-day settlement scenario:
- 3:55 PM ET: ES trading at 4505
- 3:58 PM ET: Quick run to 4506.50
- 3:59 PM ET: Pullback to 4504.75
- 3:59:30 PM: VWAP calculation begins
- 4:00 PM: Final tick at 4504.50
- Chart close: 4504.50
- 30-second VWAP (settlement): 4504.10 (slightly below chart close because most volume traded between 4504.00 and 4504.25 in the final seconds)
- Trader holding 1 ES long entered at 4500. Their P&L: +4.10 points × $50 = +$205
- If they used chart close: thought P&L was +4.50 × $50 = +$225. Difference: $20.
Across many positions and many days, settlement vs. chart close adds up. Professional traders use settlement-based P&L exclusively for overnight reconciliation.
Settlement Price vs related concepts
Side-by-side comparison of Settlement Price against the most commonly confused alternatives.
| Concept | Definition | Category |
|---|---|---|
| Settlement Price this term | The official price set by an exchange at the end of each trading day, used to mark all open positions to market and determine daily P&L for futures contracts. | Futures Mechanics |
| Mark-to-Market | The daily process where futures positions are valued at the current settlement price and unrealized P&L is converted to realized cash flow — the operational core of how futures clearing works. | Futures Mechanics |
| Futures Contract | A standardized agreement to buy or sell a specific quantity of an underlying asset at a predetermined price on a specified future date — the foundational instrument of futures markets. | Futures Mechanics |
| Price Limit Rule | A rule restricting trading during exchange-imposed price limit halts (limit-up or limit-down moves) — typically required by firm risk policies during extreme volatility events. | Rules & Risk |
| Expiration | The date a futures contract terminates — at which point all open positions either physically deliver or cash-settle, depending on contract specifications. | Futures Mechanics |
Why traders fail Settlement Price
Using chart close as settlement. They’re different. Chart close = last tick. Settlement = VWAP of final 30 seconds. Difference is usually small but always present.
Forgetting settlement determines next-day price limits. If ES settled at 4500, the 7% limit-down for next session is 4185. Settle at 4520, limit-down is 4203.60. Settlement matters for risk management of next-day positions.
Mental P&L accounting using chart close. If you hold overnight, your actual MTM uses settlement, not chart close. Mental accounting that doesn’t reconcile with broker statement = confusion.
Assuming settlement equals last-traded price. Sometimes they’re identical (illiquid contracts with no trades in the final 30 seconds). For ES, NQ, and other liquid contracts, they almost never match exactly.
Frequently asked questions about Settlement Price
What is the settlement price?
The official exchange-determined price used to mark all open futures positions to market at end of session. For ES, calculated as VWAP of trades in the final 30 seconds before 4:00 PM ET close. Used for daily P&L, margin calculations, and next-session price-limit references.
How is settlement price different from closing price?
Closing price = last printed trade. Settlement = VWAP-based official exchange calculation over the final 30 seconds. The two are usually close but rarely identical. Settlement is the number that matters for accounting, taxes, and overnight P&L.
When is the ES settlement price determined?
CME calculates ES settlement at 4:00 PM ET based on volume-weighted average price of trades from 3:59:30 to 4:00:00 PM. Settlement typically posts within a few minutes after close.
Does settlement price affect prop firm drawdown?
Yes for overnight holds. Your account equity at next-session open reflects settlement-based MTM, not your perceived chart close. If you were close to drawdown floor at chart close, settlement could push you over (or pull you back, depending on direction).
Why isn't settlement just the last traded price?
A single last trade can be unrepresentative — could be a small one-lot trade at an outlier price. VWAP over 30 seconds gives a more accurate reflection of where actual volume traded. The exchange uses this method to prevent manipulation of the settlement.