Bitcoin Futures Exchange for Physical (EFP) Transactions

What is an EFP?

Exchange for Physical (EFP) transactions are privately negotiated trades between two counterparties allowing them to simultaneously transfer a futures position for an equivalent spot market position or vice versa.

What else do I need know about EFPs?

• Governed by Exchange Rule 538
• No minimum trade size; price increments must be in appropriate tick size, $5 per bitcoin
• Must be executed at commercially reasonable prices that are mutually agreed upon by the parties to the transaction
• The futures leg should be reported as soon as possible but not later than the end of the business day on which the EFP was executed
• Anyone can trade (no eligible party restriction)
• Parties to an EFP are required to prepare and maintain all documents in connection with both the futures and related physical bitcoin position pursuant to CFTC Regulation 1.35
• Participants to an EFP can negotiate directly or can use a broker to help find the other side of the trade

Benefits of an EFP Transaction

• Added convenience of private negotiation
• Risk management with CME Clearing, one of the world’s leading central counterparty clearing providers
• Tried, tested and straightforward trading method for parties with complementary objectives
• Available at all times, including weekends

How would this work for bitcoin?

Clients can use the mechanism to efficiently transfer their bitcoin exposure from a physical to a futures position depending on their specific goals. Working through a broker or directly with each other, two parties agree to trade bitcoin between themselves; the two parties also agree to exchange an equivalent position in CME Bitcoin Futures that is opposite in direction to their, respective, physical bitcoin transaction. The spot market transaction can be bi-laterally negotiated and consummated on an OTC platform while the futures piece is cleared through CME Direct.