The term EFRP is an acronym for Exchange for Related Position. An EFRP is a transaction that involves a privately negotiated, off-exchange execution of an exchange futures or options contract and, on the opposite side of the market, the simultaneous execution of an equivalent quantity of the cash product, by-product, related product or OTC derivative instrument corresponding to the asset underlying the exchange contract.
Futures and options on futures, must be executed openly and competitively on the exchange. EFRPs are one of the permitted exceptions to this general requirement, as they are privately negotiated away from the exchange and subsequently submitted to CME Clearing for clearing purposes.
Types of Exchange for Related Position Transactions
Exchange of Futures for Physical, or EFPs, involve the simultaneous execution of an exchange futures contract and a corresponding physical transaction or a forward contract on a physical transaction.
For example, long COMEX Gold futures and short physical gold.
Exchange of Futures for Risk, or EFRs involve the simultaneous execution of an exchange futures contract and a corresponding OTC swap or other OTC derivative transaction.
For example, long 5-year Treasury Note futures, short (i.e., pay fixed) an equivalent quantity and maturity of an interest rate swap (e.g., SOFR overnight indexed swap).
Exchange of Option for Option, or EOOs involve the simultaneous execution of an exchange option contract and a corresponding transaction in an OTC option.
For example, long CME WTI Crude option, short an OTC LLS Crude option.
EFRPs may be executed for any futures or options contracts on any CME Group exchange, provided that all exchange and CFTC regulatory requirements are met. Notwithstanding the foregoing, CBOT Soybean Crush Spread Options are not able to be submitted to CME Clearing through CME ClearPort or CME Direct, and are therefore ineligible to be executed as EFRPs.
EFRPs may also be executed at any time up to the relevant exchange contract’s expiry. In some exchange contracts, EFRP transactions may be executed for a defined period of time following the termination of trading, provided it results in the liquidation of the exchange position. Participants should check the product Chapter in the applicable exchange’s Rulebook to determine if the product is eligible for the post-expiry execution of an EFRP.
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