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Simple English definitions for legal terms
ringing up
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A quick definition of ringing up:
Term: Ringing Up
Definition: Ringing up is a way for traders to settle contracts for future delivery without actually exchanging the physical goods. They do this by cancelling or adjusting the prices of the contracts, which saves them the cost of delivering and taking possession of the commodities. It's like saying "never mind" and undoing a deal before it's too late.
A more thorough explanation:
Definition: Ringing up is a method used by commodities dealers to settle contracts for future delivery in advance. This is done by using offsets, cancellations, and price adjustments, which saves the cost of actual delivery and change of possession. It is also known as ringing out.
Example: Let's say a commodities dealer has a contract to deliver 100 barrels of oil in three months. Instead of actually delivering the oil, the dealer can use ringing up to settle the contract. They can offset the contract by buying another contract for the same amount of oil at a lower price, cancel the contract altogether, or adjust the price to reflect the current market value of the oil.
Explanation: The example illustrates how ringing up works by showing how a commodities dealer can settle a contract without actually delivering the goods. By using offsets, cancellations, and price adjustments, the dealer can save the cost of delivery and change of possession, which can be significant in the commodities market. This method is commonly used by commodities dealers to manage their risk and avoid the costs associated with physical delivery.