The cash settlement via Commodity Murabahah exercise is meant to settle the Sale Price of Leg 1 transaction which was deferred as well as preservation of investment value to Approved Supplier due to inability of Approved User to perform Leg 2. Therefore, the settlement process is to ensure neither Approved Supplier nor Approved User will be adversely affected by the non-event of Leg 2.
The settlement which takes into account the movement of market price of the securities (Δ MP), total fee (MI) and total dividend (D) needs to be undertaken. As there is no exchange of securities, it would be appropriate for Approved Supplier and Approved User to undertake a Commodity Murabahah transaction to reflect the above cash settlement.
The settlement via Commodity Murabahah has no direct relationship with Leg 1 because it is a separate transaction of selling and buying a commodity at an agreed price. There will be no securities involved in this transaction.
Here are some links to samples of calculation and mechanism of the settlement:
· Sample Calculation: Scenario 1
· Sample Calculation: Scenario 2