Mark-to-market — The daily settlement process that credits or debits open futures positions at the session's settlement price.
How mark-to-market works in prop trading
Futures settle daily. At the close, every open position is revalued at the settlement price and the difference is moved in cash between accounts — gains credited, losses debited — and the position's cost basis resets to the settle. There is no accumulating unrealised P&L in the way there is for a stock held for months.
For prop traders the mechanism explains why end-of-day drawdown rules are defined the way they are. The settlement price is the market's official daily mark, so a firm computing your drawdown from the closing balance is using the same reference the clearing house does. It is also why a position held across the settle can change the account balance overnight without any trade being placed.
Key points
- Open positions are revalued and cash-settled at the end of each session.
- The settlement price is the official daily mark used by the clearing house.
- End-of-day drawdown rules key off this same daily settlement reference.
- Holding through the settle moves the account balance without a trade being placed.
Also known as
- daily settlement
- MTM
- daily mark
Frequently asked questions
What does mark-to-market mean in futures?
That open positions are revalued at the daily settlement price and the profit or loss is settled in cash each day, rather than accruing until you close. Your cost basis resets to the settlement price for the next session.
How does mark-to-market affect a prop account?
Mainly through the drawdown calculation. Firms using end-of-day drawdown measure against the closing balance, which is the marked value. It is also why a position held across the settle can change your balance overnight.
Mark-to-market is described here as a plain-language educational definition. Firms, platforms, and account programs may apply different conditions or calculations. Verify the current official terms before using this definition to make an account decision.