Eligibility Requirements

There are no specific eligibility requirements for participation in an Exchange for Physical (EFP) transaction. However, for Exchange of Futures Risk (EFR) and Exchange of Option for Option (EOO) transactions, participants must comply with applicable CFTC requirements governing eligibility to transact the related position component of an EFR or EOO.

Trade Structure Requirements

An EFRP involves two legs: an exchange contract (a future or option) and a related position component. This means that: one party to the EFRP must be the buyer of the exchange contract and the seller of the related position and the other party to the EFRP must be the seller of the Exchange contract and the buyer of, or “long”, the related position.

The EFRP must result in the exchange contract and the corresponding related position being executed for accounts with the same beneficial ownership.

However, this requirement does not preclude a third party facilitating, as principal, the related position component of an EFRP on behalf of a customer if the third party can demonstrate that the related position was passed through to the customer who received the exchange contract as part of the EFRP.

EFRP transactions must generally be executed between accounts that have different beneficial ownership. Failure to meet this requirement could mean that the trade constitutes an illegal wash trade.

In certain circumstances, EFRPs may be executed between affiliated accounts, however the rules require that such affiliated accounts be (a) independently controlled accounts with different beneficial ownership; (b) independently controlled accounts of separate legal entities with common beneficial ownership; or (c) independently controlled accounts of the same legal entity, provided that the account controllers operate in separate business units. For EFRP transactions between accounts with common beneficial ownership, the parties to the trade must be able to demonstrate the independent control of the accounts and that the transaction had economic substance for each party to the trade.

This is part of a course on EFRPs. For official regulatory guidance on EFRPs, reference the applicable Market Regulation Advisory Notice.

Test your knowledge


In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.

What did you think of this course?

To help us improve our education materials, please provide your feedback.

Extend your learning

Put your knowledge into practice with the Trading Simulator

Get hands on experience with the latest Trading Challenge

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2022 CME Group Inc. All rights reserved.