What Is Pay/Collect?
Pay/collect is an abbreviated reference to the payment or collection of funds—after futures positions have been marked to market—between clearing members and their respective clearing houses.
Pay/collect arises with futures positions, which are marked to market every evening after exchanges are closed for trading. As futures trading is a zero-sum game, in marking to market, one side of the futures position will be in a deficit position while the other in a surplus. This imbalance is offset through the pay/collect transactions executed by the brokers to their clearing organizations.
The “pay” part refers to a payment required—or a loss. The “collect” side is money received—or a gain. A clearinghouse offsets trades against each other at the end of every day to ensure the least amount of money has to change hands. The ultimate payment or money received is the pay/collect.