TL;DRThe official closing price published by the exchange at the end of each trading day. Used for mark-to-market P&L, margin requirements, and the next day's reference price.
The daily settlement price is the official closing price for a futures contract, determined by the exchange at the end of each trading session. It's not simply the last traded price. The exchange uses a methodology that considers trading activity during the final minutes of the session.
This price is the benchmark for all end-of-day calculations: your mark-to-market P&L, margin requirements, and the reference point for the next trading day.
The exact methodology varies by exchange and product. For liquid products like ES and NQ, it's typically based on a volume-weighted average during a closing window.
For less liquid contracts, the exchange may use the bid-ask midpoint, a theoretical model, or manual determination by a settlement committee.
The settlement price is published after the close and is final.
Your daily P&L is calculated as the difference between your entry (or prior settlement) and today's settlement. If you bought ES at 5,200 and today's settlement is 5,210, $500 is credited to your account.
Margin requirements are recalculated against settlement. A large adverse move can trigger a margin call even if the market recovered during the session.
The settlement price matters more than any random intraday price because it's what your broker uses for all official calculations.
Settlement P&L
You bought 2 ES at 5,200. Today's settlement is 5,208.
P&L: 8 points x $50 x 2 contracts = $800 credited at settlement. Tomorrow resets from 5,208.
Settlement vs. last trade
ES trades as high as 5,225 but settles at 5,207.
Your P&L is based on 5,207, not the 5,225 high. The settlement methodology smooths end-of-day noise.
Assuming the last traded price is the settlement price
They can differ, especially in less liquid products. Check the official settlement.
Ignoring settlement because you day trade
Understanding settlement helps you interpret next-day references, gap analysis, and margin calculations.