What is the purpose of an EFP?

What is the purpose of an EFP?

An exchange of futures for physical (EFP) allows for one party to swap a futures contract for the actual underlying asset. EFPs are traded over-the-counter (OTC) and are often used by commodities producers to hedge positions or regulate production.

What does it mean to offset a futures contract?

An offset involves assuming an opposite position in relation to an original opening position in the securities markets. In the derivatives markets, to offset a futures position a trader enters an equivalent but opposite transaction that eliminates the delivery obligation of the physical underlying.

What is an EFP contract?

An exchange of futures for physical (EFP) is a transaction negotiated off-market in which one party buys physical assets and sells futures contracts while the opposite party sells the physical market products and buys futures contracts.

What are EFP trades?

The Exchange of Futures for Physical (EFP) is an alternative mechanism that is used to price physical crude oil. By transacting an EFP, a physical position is transferred from one participant to another, at the same accepting opposite futures positions.

What is gold EFP?

Exchange For Physical (EFP) allows traders to switch Gold futures positions to and from physical, unallocated accounts. Quoted as dollar basis, relative the current futures prices, EFP is a key component in pricing OTC spot gold.

What are physical futures?

In finance, an exchange of futures for physicals (EFP) is a transaction between two parties in which a futures contract on a commodity is exchanged for the actual physical good. This transaction involves a privately negotiated exchange of a futures position for a corresponding position in the underlying physical.

What is an example of offset?

Offsets have stout and runners like horizontal stems. Examples of offsets are Pistia and Eichhornia. Cynodon dactylon, also called Bermuda grass, Dhoob, or durva grass. They are native to most of the eastern hemisphere.

How is EFP calculated?

EFP is calculated as a function of: The number of days between spot and futures delivery. Metals and currency interest rates. Transportation costs.

What is an EFS trade?

An exchange of futures for swaps (EFS) is a transaction negotiated privately in which a futures contract for a physical item is exchanged for a cash settled swap contract. It is similar to an EFP except that it involves a cash contract rather than a physicals contract.

How are futures settled?

Futures contracts have expiration dates as opposed to stocks that trade in perpetuity. They are rolled over to a different month to avoid the costs and obligations associated with settlement of the contracts. Futures contracts are most often settled by physical settlement or cash settlement.

What is an offset amount?

The amount of my federal payment (e.g., income tax refund) has been reduced (“offset”). If an individual owes money to the federal government because of a delinquent debt, the Treasury Department can offset that individual’s federal payment or withhold the entire amount to satisfy the debt.

Are the exchange-traded and over-the-counter marketplaces in competition?

Many have commented in recent years about a conflict between the exchange-traded and over-the-counter (OTC) marketplaces for equity derivatives. However, the reality is that these two trading environments frequently overlap and therefore they should not necessarily be seen as being in competition.

Is the OTC market the best for end users?

The exchange has recognised that many end users will always trade in the OTC market because it is easier to book transactions. However, after extensive consultations with equity end users and a thorough analysis of the OTC market, we believe that we can introduce significant efficiencies to this process.

What is the difference between on-exchange and OTC?

The reality is that volume growth has been greater off- rather than on-exchange. The OTC market in Europe is now three-times the size of the exchange business. The exchange has recognised that many end users will always trade in the OTC market because it is easier to book transactions.