A part of the derivative clearing function that involves ending the position in a derivative contract as a result of termination triggering. Triggers include specific actions or events such as 1) cancellation of the original contract with an offsetting position (e.g., equal quantity, notional amount, etc.), 2) giving up or transferring the contract to another market participant, 3) expiration of the contract on maturity, and 4) exercise of the contract by the long (the holder/ buyer).

Amongst these triggers, only exercise would require settlement.