Rollover & basis
What is an Exchange for Physical (EFP) transaction and how do institutional desks transfer risk off-exchange?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
An Exchange for Physical (EFP) transaction, a type of Exchange for Related Position (EFRP) under CME Rule 538, lets two parties privately and simultaneously swap a futures position for an equivalent, economically offsetting physical or cash-market position, executed off the public Globex order book.
How it works
EFPs allow institutions to transfer price risk efficiently without impacting visible market liquidity, but both legs must be reported to the exchange and meet CME Rule 538 requirements (including prohibitions on 'transitory' EFRPs) to avoid being treated as disallowed wash trades.
An example
A bank swaps gold futures for physical bullion via EFP.
Risk & limitations
EFPs must meet strict exchange documentation and reporting rules; non-compliant structures can be deemed prohibited wash trades.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.