Why Futures Typically Do Not Require Price Alignment Interest

Summary

The document asks why futures do not have price alignment interest of the kind associated with cleared swaps, and whether interest received on margin must be repaid to the counterparty. The answer explains the distinction through daily settlement: futures are marked to market each trading day, with gains and losses settled as they accrue. In that framing, each day’s settlement means there is no accumulated value transfer requiring a separate price alignment interest payment.

The explanation is brief and gives no equations, market examples, or detailed treatment of collateral remuneration. It should be read as a basic comparison of daily-settled futures with cleared swaps, rather than a complete account of margin interest arrangements. The specific interest treatment can depend on the contract and clearing setup, which the exchange does not discuss.

Key ideas

• Futures settle gains and losses daily through mark-to-market payments.
• The answer links daily settlement to the absence of a separate price alignment interest payment.
• The document contrasts futures with cleared swaps but does not detail margin remuneration conventions.
• Interest on a margin account and payments between counterparties are distinct issues not fully analyzed here.

Tags

# price alignment interest on future contract


# price alignment interest on future contract












why this is no PAI (price alignment interest) on a future contact like cleared swaps have? Am I right that you may get interest from your margin account, but you do not need to pay the interest back to your counter party.

## Answer by Felix (score 1, accepted)

https://quant.stackexchange.com/a/63914

This blog post might help:

https://theotcspace.com/content/price-alignment-interest-pai#:~:text=PAI%20is%20the%20overnight%20cost,a%20CCP%20such%20as%20SwapClear.

Futures are settled daily, and thus considered "maturued" on each trading day. Hence, no PAI needs to be paid.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.