Approved Delivery Facility
The term approved delivery facility refers to a location authorized to receive the underlying commodity specified in a futures contract. The commodity exchange approves delivery facilities, which can include a diverse set of locations such as banks, depository institutions, warehouses, stockyards, operating plants, and grain mills.
If a futures contract is closed out before delivery, there is no need to exchange the underlying commodity. However, if the counterparties to a futures contract wish to exchange the underlying asset, the buyer will deliver those assets to the seller at a facility approved by the futures exchange. The approved delivery facilities are published and maintained by the exchange so traders have a good understanding of these locations, and the costs associated with delivery can be readily determined. Typically, a notice of intent to deliver is provided by the holder of the short position, informing the clearing house the commodity will be physically delivered to the buyer.